FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date: For the period ending 24 November 2006
TELSTRA CORPORATION LIMITED
ACN 051 775 556
242 Exhibition Street
Melbourne Victoria 3000
Australia
Indicate by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Indicate by check mark whether the registrant by furnishing the information contained in this
Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934
If Yes is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
INDEX
BigPond marks 10th Anniversary with launch of national High
Speed Broadband
Appendix 3Y Change in Directors interest Notice John Zeglis
Chairman, Chief Executive Officer and Remuneration Chair presentations
Results of Annual General Meeting
Appendix 3B New issue announcement, application for quotation of additional securities and
agreement
Appendix 3X
Initial Directors Interest Notices
Telstra 3 Share Offer Allocation Details
Telstra 3 Share Offer Instalment Receipt Foreign Ownership Rules
Telstra 3 Share Offer Final Institutional Offering Memorandum
Telstra 3 Share Offer Final Canadian Offering Memorandum
Appendix 3Y Change in directors interest notices
Telstra Foreign Ownership Regulations
SEC deregistration
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10 November 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street |
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SYDNEY NSW 2000
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
BigPond marks 10th Anniversary with launch of national High Speed Broadband
Attached is a copy of an announcement for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
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Media Release
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10 November 2006
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214/2006 |
BigPond marks 10th Anniversary with launch of
national High Speed Broadband
Telstra today delivered another important instalment in its Plan for Australia as BigPond
unveiled its upgraded national high-speed broadband network, offering fixed-line ADSL speeds
amongst the fastest in the world.
The unveiling also marked the 10th anniversary of the launch of BigPond in November
1996.
BigPonds Group Managing Director, Mr Justin Milne, said BigPond High Speed Broadband would deliver
network speeds of either up to eight megabits per second (Mbps) or up to 20Mbps from exchanges
offering ADSL2+ services. Because of regulatory constraints, the up to 20Mbps service would be
limited to exchanges where competitors are also offering those higher speeds.
Telstras commitment to delivering national high-speed broadband services is demonstrated by how
we are investing our money. Because weve invested shareholder funds heavily in building out our
high-speed network, we are now able to offer BigPond customers, across Australia, higher speed ADSL
broadband services Mr Milne said.
Additionally, we have introduced new 1.5Mbps BigPond plans, which are up to $30 per month cheaper.
A customer on a 512kbps BigPond plan can elect to switch to an equivalent 1.5Mbps BigPond plan at
no extra charge and benefit from a speed increase of around 300 per cent.
This is the biggest news in Australian fixed-line broadband in years and complements the launch of
the Telstras Next GTM network, Australias fastest and largest mobile wireless
broadband network one month ago.
BigPonds new high-speed plans are not just for a few prime inner city exchanges. Weve upgraded
our ADSL-enabled exchanges nationally, to offer more speed in more places, so that customers in
cities, regional centres and country towns can reap the productivity, entertainment, education, and
health care benefits of high-speed broadband, Mr Milne said.
It means faster downloads, better quality video streaming, lightning-quick web surfing and the
ability to send and receive large files quickly and conveniently, he said. The new national
high-speed broadband network includes more than 2,400 ADSL-enabled exchanges that reach around 91
per cent percent of the population.
BigPond Movie Downloads, BigPond TV On Demand and BigPond Games Shop downloads will take only
minutes. For example, downloading Casablanca, a one gigabyte download which would take more than
nine hours at 256kbps, can now be fully downloaded in as little as seven and a half minutes with
our high-speed plans.
Well be able to offer high quality video from our sports sites, and students will be able to
explore and learn from the encyclopaedic educational resources of the internet, Mr Milne said.
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:
www.telstra.com.au/abouttelstra/media
For news, views and discussion on telecommunications in Australia see
www.nowwearetalking.com.au
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Telstra Corporation Limited |
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ABN 33 051 775 556 |
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Media Release
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New customers with two eligible Telstra services, who sign up online, can get one of our new
BigPond Broadband high-speed ADSL plans from as little as $29.97 per month for the first 12 months
on a two year contract.
For customers with a Telstra full service phone, pricing for the new ADSL high-speed services
starts at $59.95 with a 600MB download limit, a 12GB shaped plan for $89.95 and 25GB and 60GB plans
for heavy users priced at $119.95 and $149.95 respectively.
Entry level 256kbps plan prices remain unchanged, starting at $29.95 per month.
Customers can check what speed may be available from their local exchange by entering their address
at https://www.bigpond.com/internet-plans/broadband/availability/default.asp. Speeds
may vary due to factors including network configuration, line quality & length, exchange type,
customer premises interference, internet traffic and equipment.
Existing BigPond members on 512 kbps and 1.5Mbps plans can take advantage of the new speeds and
pricing by visiting My BigPond at www.bigpond.com and, in some cases, they may also need to
upgrade their existing modem.
Telstra Media Contact:
Craig Middleton
Tel: 02 82364372
craig.middleton@team.telstra.com
BigPond ADSL Pricing effective 10 November 2006
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Access speed / MB Allowance |
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Preselect Price |
256kbps / 200MB |
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29.95 |
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256pbps / BigPond Liberty1 |
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$ |
59.95 |
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1500 kbps / 400MB |
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$ |
39.95 |
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1500 kbps / BigPond Liberty1 |
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$ |
69.95 |
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1500 kbps / 25GB |
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$ |
99.95 |
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High speed2 / 600MB |
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$ |
59.95 |
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High speed2 / BigPond Liberty1 |
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$ |
89.95 |
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High speed2 / 25GB |
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$ |
119.95 |
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High speed2 / 60GB |
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$ |
149.95 |
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Shaped download limit of 12GB |
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Up to 8Mbps for ADSL1 and up to 20Mbps for ADSL2+ |
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:
www.telstra.com.au/abouttelstra/media
For news, views and discussion on telecommunications in Australia see
www.nowwearetalking.com.au
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Telstra Corporation Limited |
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ABN 33 051 775 556 |
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10 November 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street |
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SYDNEY NSW 2000
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Appendix 3Y Change in Directors interest Notice John Zeglis
In accordance with the listing rules, I attach an announcement for release to the
market.
Yours sincerely
Douglas Gration
Company Secretary
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Telstra Corporation Limited |
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ACN 051 775 556 |
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ABN 33 051 775 556 |
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent
for the director for the purposes of section 205G of the Corporations Act.
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Name of Director
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JOHN ZEGLIS |
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Date of last notice
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24 AUGUST 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
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Direct or indirect interest
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CHANGE TO DIRECT INTERESTS ONLY |
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Nature of indirect interest
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PURCHASE OF ADRS ON THE NEW YORK |
(including registered holder)
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STOCK EXCHANGE |
Note: Provide details of the circumstances
giving rise to the
relevant interest. |
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Date of change
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3 NOVEMBER 2006 |
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No. of securities held prior to change
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DIRECT NIL |
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INDIRECT 1,897 |
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Class
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ORDINARY |
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Number acquired
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3,300 ADRS (EQUIVALENT TO 16,500 TLS
SHARES) |
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Number disposed
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NIL |
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Value/Consideration
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US$ 50,353.05 |
Note: If consideration is non-cash, provide
details and estimated
valuation |
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No. of securities held after change
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DIRECT 16,500 |
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INDIRECT 1,897 |
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Nature of change
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ON MARKET TRADE OF ADRS |
Example: on-market trade, off-market trade,
exercise of options,
issue of securities under dividend reinvestment
plan, participation in buy-back |
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Part 2 Change of directors interests in contracts
NIL
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14 November 2006
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Office of the Company Secretary |
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The Manager
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian Stock Exchange
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AUSTRALIA |
4th Floor, 20 Bridge Street
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Telephone 03 9634 6400 |
SYDNEY NSW 2000
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Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Chairman, Chief Executive Officer and Remuneration Chair presentations
In accordance with Listing Rule 3.13.3, I enclose the presentations of the Chairman, CEO and
Remuneration Chair, which will be delivered today at the Telstra Corporation Limited 2006 Annual
General Meeting.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
TELSTRA ANNUAL GENERAL MEETING 2006
MR DONALD McGAUCHIE, CHAIRMAN, ADDRESS TO SHAREHOLDERS
Introduction
Good morning ladies and gentlemen, Im Donald McGauchie, the Chairman of your
company.
I welcome you to the 2006 Annual General Meeting. I also welcome shareholders viewing
todays proceedings on our Investor Relations website.
A quorum is present and I declare this Meeting open.
Let me start by introducing the Board members, senior executives and the companys auditor.
As with previous years our aim is to achieve a less formal approach, so we have only four
people on stage with the rest of the directors in the front row.
Directors have been available to meet with you before the meeting and, those who can,
will do so afterwards.
Joining me on the stage are:
John Stanhope, our Chief Financial
Officer
Sol Trujillo, our CEO
Douglas Gration, our Company Secretary.
In the front row, we have my fellow directors:
Belinda Hutchinson,
Catherine Livingstone,
Charles Macek
John Stocker ...and I would like to welcome to their first annual general meeting
Peter Willcox and
John Zeglis who joined us during the year.
I would also like to thank John Fletcher who retired as a director on 30 June this year for
his very significant contribution to the Board and the company.
I would also like to mention and welcome Telstras Senior Leadership Team who are seated in
the front row. Welcome also to Michael Watson and Mark Maloney from the Australian National
Audit Office our external auditors.
I also thank our Telstra Friends staff volunteers who greeted many of you when you
arrived today.
Ill
now outline the procedure for todays meeting.
There are five items of business on todays
agenda:
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Item 1 Chairman and CEO presentations. Following my address, Sol will report on his
first full year as CEO of your Company, including comments on the implementation of the
transformation strategy. |
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Item 2 Adoption of the remuneration report for the year ended 30 June 2006. Charles
Macek, Chairman of the Board Remuneration Committee, will present the remuneration report
for your consideration. |
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Item 3 Discussion of Telstras financial statements and reports for the year ended
30 June 2006, which I now lay before the meeting. |
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Item 4 Election and re-election of directors; and |
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Chairmans speech final
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1 |
Item 5 Adoption of the new constitution, a copy of which I now table.
Following Charles address I will move to answer questions submitted by shareholders in
advance of the meeting before taking questions from the floor on the operations and
performance of the company, the remuneration report and each of the other items of
business before the meeting.
So that we can represent the views of all shareholders including those who have lodged proxies,
I will call a poll in relation to Items 2, 4 and 5. No resolution is required in relation to
Item 3.
I will open the poll now so that shareholders who need to leave the meeting early have the
opportunity to vote on these items by completing the voting section on the reverse of your
yellow shareholder card and placing it in one of the ballot boxes near the exits to this room.
This annual meeting is our forum the shareholders forum to discuss the performance and
future of your company.
In the interests of the comfort of shareholders, we will take a short 20 minute break around
12 noon. Youre very welcome to enjoy the light refreshments served in the foyer at that
time.
We invite
your comments on improvements for future Annual General Meetings. Shareholders received a questionnaire at registration. I invite you to complete it and place
it in the questionnaire boxes when you leave. To mark the launch of our exciting Next G
network, later in the day well be drawing out the names of 5 shareholders who have completed
their questionnaires. Well be giving each of them a Next G handset to experience first-hand
the full potential of our new network.
Board Overview
This time last year I stood before you and foreshadowed the reshaping and transformation of
your company, and I quote in the 04/05 financial year your board made decisions to begin
reshaping Telstra for the years ahead. We knew that just keeping on doing what we were doing
and cutting costs were not going to get us where we need and want to go.
Further I said Telstra is now embarked on a strategy to connect with its customers like never
before. We will move towards full privatisation of the company with renewed vigour and
enthusiasm and a clear strategic path forward.
We knew that we had to have a long-term vision for the corporation and that we had to act
decisively and with discipline.
In simple terms we had to deal with:
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Rising costs |
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Revenue pressures |
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Inefficient operating processes |
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External pressures regulatory uncertainty and rapidly
changing technology |
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Aging infrastructure requiring re-invigoration and renewal |
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People inside and outside the company thinking about it as being part of the public
sector |
Performance decline in our competitors here and globally in the last year has very much shown
that we were right to tackle these issues head on. Others have been slower to respond and
have paid a very high price.
Last year we drew a line in the sand and gave you a commitment to turn around this
company and drive its performance.
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Chairmans speech final
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2 |
We began the fight-back fully understanding the way to tackle what could only be
described as an enormous task, was with new thinking and very significant investment. To
enable us to deliver a growth strategy growth in revenues and in margins the hard work and
tough medicine had to include...
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cutting costs but the right costs |
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fundamentally changing the way we do business pricing, services and service
delivery |
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investing in new technology platforms, infrastructure and processes |
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in short a new business model... |
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and very critically major cultural change |
I am pleased to be able to stand before you today one year later and say we are well and
truly delivering on those commitments. We are on track, we are on budget and we are ahead of
our delivery schedule. We still have a massive amount work ahead of us. But we have a
coherent and aggressive plan and we are driving its implementation.
We are doing what has had to be done...
Are we
pleased with the share price today? No.
Did we have a choice about tackling the systemic issues confronting the telco industry
globally? No.
Have regulatory decisions, particularly on ULL pricing had an impact? Undoubtedly and
indisputably. Uncertainty about future regulatory decisions weigh on ours and the markets
minds.
Are we investing in the future? Yes.
And are we beginning to see the results of that investment of resources, efforts and human
capital? Yes
We have fully informed the market of the actions we have been taking to ensure the long term
strength and value creation in your company. In the last twelve months we have made two major
presentations:
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November 15 last year announcing the Transformation Strategy; and |
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last month, on October 6 we reported on the achievements we are making in the
implementation of that strategy, including the launch of Next G. |
In short, we are keeping you our shareholders and the wider market fully informed every
step along the way.
It has been an extraordinary year of action and progress. We are turning the corner and the
New Telstra is becoming visible. And this year we will continue our forward momentum.
We are forging ahead with the transformation and of course in a matter of days the
Governments sell down and transfer of its remaining stake in Telstra will be complete. By
any measure this will be another extraordinary year in the history of your company.
I will not dwell on the details of the implementation of the transformation strategy,
the operational change and achievements to date that is for Sol.
But I would like to spend some time talking about the achievements of your management team.
Never before in the history of Telstra or any other telco anywhere in the world have we seen
a network comparable to Next G, covering some 98% of Australians, built in 10 months. It is
a world-class achievement.
Many of us in the room are using the network and it is a great step forward for our
customers and your company.
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Chairmans speech final
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3 |
Never before in the history of this company have we seen such orchestrated and
positive change across every part of the business happening successfully happening
simultaneously happening on or ahead of time and on budget. Once again, world class.
People have commented on the number of international executives that have joined the
Company. It is worthwhile considering this for a moment. I for one consider it to be a
great positive now and for our collective future.
Sol and his management team many, many Australians and others from Europe, the US and
Asia-Pacific are delivering tried and tested world-class leadership and know-how.
We have recruited leaders from telcos and other industries both globally and in Australia. We
have made internal promotions based on merit, ability and performance. For example:
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We have quadrupled the number of women on the CEOs senior leadership team on
merit. |
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We have recruited senior executives from the airline, automobile and other industries
to bring fresh perspectives and know-how. |
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We are working hard to develop the future leaders of your Company from within the
Company. |
The mix of existing and new people is driving new thinking and adding strength to our team.
The sharing of know-how comes in many forms from intensive training to day-to-day
collaboration across the business. It enriches the entire Telstra team.
Performance and meeting commitments, exceeding expectations, delivering ahead of
schedule and on or ahead of budget these are the hallmarks of the New Telstra.
Telstra staff and employees are proud to be part of this rapidly transforming business.
As is, Telstra is the best performing telco in Australia. We are best in our local market.
But we want to be better, we want to be world class so we must bring in the best and
brightest people we can find.
And make no mistake Telstra must stand in the global market competing for the services of
senior executives. We must offer competitive salaries to get and retain the best. As news of
Telstras transformation is becoming known offshore, our executives are becoming attractive to
competitors here and internationally.
But as Charles Macek will outline in his Remuneration Report, all executive salaries must be
well earned the performance delivered must be world class and must meet clearly understood
business objectives.
The Board has set management very specific objectives with respect to the transformation of
your company. Payment of executives short term incentives is directly linked to meeting these
objectives. But executives will only receive their full long term incentives if they meet both
the transformation objectives and deliver superior returns to you, our shareholders. As you
would expect, over the next few years as management complete the transformation, the long term
incentives will be weighted more and more heavily to measures of shareholder return.
Between the short-term and long term incentives, the majority of the remuneration of our
top people is at risk. Some 70 per cent of the CEOs package is at risk, while for our
Group Managing Directors the percentage at risk ranges from 62 to 67 per cent.
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Chairmans speech final
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4 |
As I have said before your Company is turning the corner. This time last year I said
your Board had made decisions that would lead to the reshaping of Telstra. Well not only have
we begun we are well on the way.
Sol you and the management team have delivered an exceptional first year in difficult and
challenging circumstances.
Since your arrival we are more customer-focussed, we are behaving and performing to the one
factory model and our culture has been energised.
Just last week I was talking with a long term and senior Telstra staff member and he said to
me and I quote I have never seen the company more aligned and energised in all my years
here. We know what needs to be done and we know how we are going to do it.
I would like to make some comments on the T3 sale process that is currently underway.
I very much look forward to welcoming new T3 investors to the company.
As I believe you know, we wholeheartedly welcomed the T3 share offer. We are committed to the
success of the offer and the sale and transfer of the Governments remaining shareholding in
Telstra.
As the Federal Government has repeatedly said T3 should once and for all bring to an end the
massive conflict of interest being the owner, seller and industry regulator.
I would like to make a few comments about Corporate Governance...
Telstra has received wide recognition for the quality of its corporate governance. We
welcome these accolades, but governance at Telstra is about much more than this.
Governance at Telstra is an unwavering commitment to protecting the interests of all
shareholders and the creation of long-term shareholder value. Governance at Telstra means
doing the right thing, in the right way.
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It means only investing our capital in projects that are capable of delivering the
returns you are entitled to expect. This is why we decided not to proceed with our
proposed fibre-to-the-node network when it became clear the regulators would not accept an
access regime that would ensure full compensation to our shareholders rather than
permitting our competitors to have a free-ride on your investment. |
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It means, continuing to contest all aspects of the regulatory regime that stand in
the way of our delivering outstanding service to our customers while earning fair returns
to our shareholders. We will continue to use every appropriate means available to us to
ensure that decisions made are in the interests of shareholders. |
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It means, insisting on procedural integrity in all that we do including proper and
transparent processes at board level. |
Let there be no doubt, your board and management are 100% committed to delivering an
optimal performance and outcome for all our shareholders.
We are committed to ensuring all our shareholders interests are protected and advanced. We
are committed to ensuring that Telstra performs to its full potential and that you, our
shareholders and the nation, benefit from that performance.
In closing...
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We have a strategy we believe it is the right strategy and we are committed to
it. |
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Chairmans speech final
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5 |
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We are sparing no effort to deliver the performance improvement we all require. |
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We are committed to delivering long-term value to our shareholders. |
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We are committed to building the value of your company and having that value
reflected in the share price |
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We are driving revenue growth and margins and taking out the right costs. |
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In Sol and our management team we have world class experience and the proven
performance necessary to drive world-class operational and financial performance from
your company |
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We want to be more than just the best communications company in Australia we want
to be world class. |
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The assurance that I give you is that every director and every executive will be 100%
focussed on running this company in the interests of our customers and 100% of our
shareholders. |
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We are full speed ahead, building a new world-class media communications company
the New Telstra. |
Thank you.
And now the CEOs presentation.
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Chairmans speech final
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6 |
TELSTRA ANNUAL GENERAL MEETING 2006
MR SOLOMON D TRUJILLO CEO, ADDRESS TO SHAREHOLDERS
14 November 2006
Getting Results Delivering on Strategy
A big part of life is about relationships...and relationships are about sharing...sharing time
and experiences with people. Sharing family ups and downs, sharing knowledge at work and
sharing life with close friends.
Here at Telstra we have a pro-investment, pro-relationship Plan for Australia that works for
you, our shareholders.
A Plan that makes sharing a much richer and more immediate experience for people across the
country;
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Along the coast, |
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In the bush, |
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In cities and suburbs, and |
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For those travelling along our major highways. |
Six weeks ago Australia got a taste of how hard weve been working and what an exciting
future Telstra is shaping for everyone, no matter where they live.
On 6 October the way we live, work and play began to change forever. We turned on our Next
G wireless broadband network. Next G gives 98 per cent of Australias population the
ability to share experiences over their mobile phones and through their computers using Next
G turbo cards.
Last Friday we took a step further by unveiling our upgraded Telstra BigPond high-speed
broadband service. BigPond Broadband gives more than 9-out-of-10
Australians actually 91 per cent the ability to connect to high-speed broadband on our
fixed-line network.
These were the first two planks in our Plan for Australia, milestones in our strategy to lead
the market and serve our customers with services that are faster, better and more customized
to meet their needs. I will talk in more detail about them later.
We are transforming Telstra for our customers, we are doing it for our shareholders and we are
doing it for Australia. Because creating customer value creates shareholder value.
We are also transforming Telstra to restore its role as the nations technology leader,
the company that serves everyone, both urban and country-wide.
Take Bob Andrews. He runs Jetset travel service in Mildura. Bob is also a very proud
grandfather. He hasnt managed to get over to Perth yet to see his 12 month old
granddaughter. So Bob recently used a Next G phone to speak to his daughter AND see his
grand-daughter for the first time LIVE. Bob said his grand-daughters got a big happy
smile and takes after her mother. Now he cant keep the smile off his face
Page 1 of 8
Now, today, I will outline:
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What we said wed do a year ago; |
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What weve done in that year; |
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Where were heading; and |
And how Australia is changing, with the New Telstra.
WHAT WE SAID WED DO STRATEGY TO TRANSFORM TELSTRA
But before I go further I need to step back a little and restate why Telstras transformation
was so necessary and why it was so urgent.
This is the situation we were facing last year:
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Ongoing loss of market share; |
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Declining revenues, with an accelerating decline in fixed line revenue; |
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Eroding margins; |
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Increasing costs; |
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Falling productivity; |
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No market leadership; and |
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A share price which had declined from the year 2000. |
That is why on November 15 2005 we outlined a five year transformation strategy:
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To rebuild Telstra; |
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To make investments for the long term future of Telstra, not temporary fixes for the
next quarter or two; and |
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To drive a turnaround which will affect our financials, our valuation and ultimately
our share price. |
Because you cant declare or wish for improved share value. You rebuild a company brick by
brick. And thats what we are doing.
In the end:
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We must be better than our competitors; |
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We must be more innovative; |
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We must streamline the business; and |
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We must meet the needs of our customers today and tomorrow. |
We will only do that if:
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We take costs out; |
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We accelerate revenue growth; |
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Improve productivity; |
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Improve earnings; and ultimately |
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Improve cash flow; |
Because these are the drivers of share price.
Twelve months ago tomorrow, I outlined a vision and a strategy to reach it a Plan
to Transform Telstra.
Page 2 of 8
Our vision is to create a world of 1-click, 1-touch, 1-button, 1-screen, 1-step solutions
that are simple, easy and valued by individuals, businesses, enterprises and government.
The transformation to a New Operating Model for Telstra is underpinned by three key
strategies:
First, understanding customers needs better than any of our competitors. By using Market
Based Management and the most comprehensive research undertaken in Australias corporate
history, we are gaining a deeper understanding of customers needs.
By doing this, we are able to convince more customers to use more Telstra products,
increasing customer loyalty, decreasing churn and increasing Telstras revenues.
Second, transforming Telstra using the One Factory approach. This approach in our
Operations area is guided by four principles:
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do it once; |
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do it right for the customer; |
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do it in an integrated way; and, |
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do it at a low unit cost. |
The net result is to remove duplication, reduce complexity, and cut costs. The One Factory
approach in our operations includes:
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Operations support systems (such as inventory databases and truck fleet management) |
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Business support systems such as billing systems. |
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Smarter procurement. |
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Network modernisation such as more fibre, more high speed broadband. |
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Faster product development such as our new Next G handsets. |
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Improved customer service as shown by recent customer satisfaction surveys. |
Third, we have a Plan for Australia that involves integrating our platforms to deliver
integrated content and services in order to win in the marketplace by differentiating our
services from those of our competitors.
This is where Telstra really comes into its own leveraging our scale and scope for
competitive advantage to be the number one choice for customers throughout the nation.
Through the integration of FOXTEL, Sensis and BigPond services, Telstra will be THE
media-comms company Australians turn to for simple 1-click access to everything they need
to live, work and play.
Page 3 of 8
WHAT WE HAVE DONE
Weve been working hard in the past year in our transformation, meeting our commitments.
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We are on track, |
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We are on budget and |
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We are ahead of our delivery schedule. |
And let me be clear, in the second half of this fiscal year, we are turning the corner to
profitable growth.
Our Next G network is proof that our transformation strategy is firing on all cylinders. This
$1 billion investment in nation-wide broadband made with shareholders funds is all about
driving increased sales, new revenues and higher margins.
Our Next G 850 network is Australias fastest, largest and most advanced mobile
broadband network, built in a record ten months.
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No one in the world has built a nationwide network of this size in less than three
years. We did it because we wanted to be first to deliver advanced high-speed wireless
broadband not just to those in the capital cities, but to everyone. |
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In about 10 months, we designed, constructed, upgraded and turned on around
5,000 mobile towers. |
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Thats the equivalent of one tower every 75 minutes. In the busiest weeks of the
rollout a new base station was completed every 25 minutes. |
Thats an example of the new competitive intensity at Telstra, delivering unequalled customer
reach and speed using a spectrum that is globally acknowledged as superior for breadth and
depth of coverage.
Because our Next G network runs on the 850MHz spectrum it offers better depth of coverage
through obstacles, which will mean superior reception and fewer drop-outs in car-parks, in
elevators and most importantly, inside buildings.
But increased penetration means more than convenience. It also means that small and
mid-sized enterprises can now use the Next G wireless platform to do business with their
large business suppliers or customers who are already using the broadband platforms.
The Next G turbo-charged network is up to 50 times faster than dial-up internet access and
up to five times faster than some competitors 3G networks. The World Wide Wait is officially
over if youre a Telstra customer. Telstra is now the only company in the world that can
deliver a network speed of up to 3.6 megabits per second to a nationwide footprint.
And network speeds will increase to 14.4 megabits per second early in 2007 and to 40
megabits per second no later than March 2009.
Telstra worked with handset manufacturers to build an innovative Telstra button into the
Next G handsets. Its a unique and simple My Place menu. This 1-click button gives our
customers easy 1-touch access to nine services and applications including FOXTEL, Sensis and
Telstra BigPond content, music, email, photos, downloads, maps and personal account
information.
Page 4 of 8
As people increasingly move to follow job opportunities, family members are more often apart.
At this time of year, with school finishing and Christmas approaching, our Next G network
offers a way to connect by making a live video call on the spot, anywhere, anytime, from
your own Next G phone.
The stories that are coming in from Next G users are heart-warming and diverse.
When Kim MacGowan was named Tasmanias Telstra Business Woman of the Year in Hobart, her son
was having medical treatment in Sydney. With Kim was David Moffatt, our Group Managing
Director of Consumer Marketing and Channels. David gave his Next G mobile phone to Kim and
quickly organised another phone for her son in Sydney. So he could share the moment with his
mother over a video call.
In another story, one of our Sydney staff, Ray Miller, was Best Man at a friends wedding.
Guess what hed forgotten his speech. Using his Next G phone, he avoided embarrassment
because he could retrieve his speech from his BigPond email account.
In Australias top end, the mining company Rio Tinto is using our Next G mobile broadband
network to get clear voice calls at locations throughout its operations including at the
bottom of a pit 95 metres underground.
In South Australia, the Limestone Coast Tourism Authority used our Next G network to
stage a successful webcast from a cave 50 metres below ground.
But the Next G story doesnt end there. Its not just about phones its also about
laptop computers. Customers are also able install a Next G turbo card into their
laptop, providing high-speed access to the Internet for business, entertainment, or
personal applications, such as browsing the web or email.
High speed broadband turbo cards are especially useful for business customers such as:
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Architects and engineers; |
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software developers; |
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product sales; |
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construction project managers; |
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farmers; |
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trucking companies; and, |
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real estate agents ...wherever they are. |
As I said earlier, last Friday Telstra delivered the second plank of our Plan for Australia
when we unveiled our upgraded Telstra BigPond high-speed broadband service.
The new BigPond Broadband delivers fixed-line broadband access to more than 90 percent of
Australians up to 20 Mbps from about 360 ADSL 2+ enabled exchanges and up to 8Mbps from
the rest of the 2,400 ADSL-enabled exchanges.
These two important broadband initiatives Next G and BigPond Broadband complement
the broadband services we continue to deliver on our existing HFC network.
Page 5 of 8
Why is this all important? Its important because Next G services and high-speed broadband
are about raising the productivity and competitiveness of individual businesses and
advancing the diversification of the nations economy.
Its about driving innovation and helping Australia to compete more effectively everywhere in
the world. Thats good for business; thats good for Australia and thats good for our
business and our shareholders.
Telstras high-speed broadband networks are revolutionising patient care. Health professionals
such as dentists, speech therapists, obstetricians, rheumatologists, cardiologists,
pathologists, paediatricians and physicians can receive patient records electronically and
conduct a consultation over video conference. This saves travel time, reduces the delay for
diagnosis and most importantly gives patients timely advice about improving their health and
well-being.
Now, in education, our high speed broadband networks are opening opportunities for
Australians, young and old, regardless of their location.
For example, Queenslands Momentum Technologies Group quickly adopted Telstras Next G
turbo-charged pc card in a laptop to stream live video of environmental projects to schools
around the country. And the Next G network can provide huge new opportunities for
Isolated Schools to make better use of School of Air and other online learning resources.
In terms of improving customer service, the New Telstra understands that no matter how many
features a new phone or digital service may have, it is the customer experience that will
make or break future success.
Since our last meeting, we have seen substantial improvements in our business productivity
while, at the same time, achieving dramatically improved service levels.
In fact, our service levels are some of the best they have ever been.
The New Telstra is getting there on time our reschedules are down 40 to 50 per cent.
We are getting it right the first time
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Our re-visits are down 15%. |
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The New Telstra is reducing the need for a technician to physically attend a customer
premise to fix a fault 7% more residential faults are now cleared without a truck
leaving Telstra. |
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We are reducing the response time to those reporting a problem 9 per cent more
fault calls are now answered within 20 seconds. |
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The New Telstra is improving technician productivity which is up 15 per cent. |
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We are reducing labour costs overtime hours are down 62%. |
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The New Telstra is reducing its Government penalty liability the costs of the
Customer Service Guarantee payments are down 25%. |
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We are reducing the time it takes to get a service for example unsatisfied ADSL
orders are down 74%. |
Page 6 of 8
In addition to the 1-touch vision, we now aspire to 1-call, 1-order, 1-appointment to
increase customer satisfaction and we are making progress.
For example, customers now can have both fixed phone lines and ADSL Telstra services from
their old premises connected simultaneously at their new premises with only one call to
Telstra. This cuts our combined new PSTN/ADSL BigPond service delivery timeframe by three
working days!
For Telstra, the benefits are improved customer satisfaction, lowered churn, increased
revenue and decreased costs.
In addition, we have:
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Reduced our workforce by around 5,000 full-time equivalents since July of last year
at the same time as we have improved our service and workforce training. |
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Achieved capital expenditure savings of ~$500m in FY06 and |
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Achieved additional savings by exiting 36 office sites in Melbourne and other
locations around the country. |
As I said earlier, we are turning the corner and this will be reflected in our
financials in the coming year.
In the second half of fiscal year 2007 we will move to earnings growth and we expect to
continue this improvement, and increase market leadership as we compete harder and win.
This is a significant transformation that your company is undertaking and we are just over one
year into it. The transformation has required increased capital and operating expenditures to
roll out new networks and implement our planned system and operational changes, resulting in
significant reductions to our earnings and cash flow.
We are expecting fiscal year 2007 to be the year of the largest transformation spending for
operating and capital expenditure. As a result, we expect our first half EBIT to fall by 17
to 20 per cent.
However, we expect EBIT to grow in the second half in the range of 37 to 40 per cent.
Provided there are no further material adverse regulatory outcomes and we continue to be
successful in implementing our transformation strategy, we expect our free cash flow to improve
in fiscal 2008 compared with fiscal 2007.
On the T3 roadshow that we have just completed, institutional investors have shown enormous
interest in the transformation we are undertaking in this company. I believe that this is
having a positive impact on the T3 sale process.
WHERE WE ARE GOING:
So, where are we going? We are one year into the five year transformation plan. As you have
heard we have achieved a lot in that year.
Page 7 of 8
We are sticking to our 15 November 2005 Strategy. We are creating a company based on fast,
scalable, industrial-strength platforms with world-class partners.
We are providing high value services with extraordinary reliability and low unit costs to
increase the value of this company. The management team is proud of the performance of our
people who are more productive and who have embraced the change to serve our customers better
and to compete harder.
Only Telstra has a Plan for Australia. Only Telstra is delivering high-speed services across
Australia, at a reasonable price so that this nations families, communities and businesses
can connect with each other and the outside world on networks that are simple, fast and
everywhere, allowing everyone to benefit from and take advantage of the global information
economy.
In short, we have a transformation plan for our company that we are confident is going to be
as good for you, our shareholders, as it is for our customers and the nation.
In closing, let me reiterate, in order to deliver share price performance, we must:
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take market share; |
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take costs out where they dont add value; and |
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accelerate revenue growth to replace the declining portions of our business which
requires innovation. |
We must improve margins, earnings and cash flow which as I said before drive valuations of
the business which ultimately drive share price performance.
We are rebuilding your company brick by brick, step by step, so you can get the total
returns over time that you deserve.
This team has you at the centre of our priorities and is literally working 7 days a week,
24 hours a day to make it happen it is happening as shown by our significant
acceleration of earnings growth second half of this year. But it is only the beginning.
Australias Telstra will be the leader delivering services to all Australians like no other
anywhere in the country or even in the world.
Thank you for time, your patience and your interest......and support.
Page 8 of 8
TELSTRA ANNUAL GENERAL MEETING 2006
MR CHARLES MACEK, CHAIRMAN REMUNERATION COMMITTEE
REMUNERATION REPORT
Introduction
Ladies and gentlemen, my name is Charles Macek and I am Chairman of the Boards
Remuneration Committee. I am presenting the Remuneration Report prepared in accordance with
the Corporations Act for the Telstra Group for the financial year ended 30 June 2006.
Each year, as required by the Act, we prepare a remuneration report describing the remuneration
of the directors and our most senior executives and ask you, as our shareholders, to consider
and adopt the report.
Under the legislation, the vote on this item is advisory only and does not bind Telstra or
the directors. However, we take the outcome of the vote very seriously and it will be given
serious consideration when reviewing our remuneration practices and policies each year.
The Remuneration Committee is responsible for reviewing and recommending to the Board the
remuneration policy, strategy and structure for Telstras Board, the CEO and senior
executives.
We understand that when shareholders see the significant salary packages of senior executives
they expect them to be justified, both by sound underlying policy and by matching executive
performance. After all, it is your money we are spending and you have the right to expect
transparency and accountability particularly when the companys profit and share price have
declined.
That is why, in carrying out its functions, the Committee seeks external expert
advice independent of management.
It is also why we prepare the very detailed Remuneration Report you can find in your Annual
Review and Annual Report.
I recognise that such detailed disclosure creates complex reading, so I will take you through
the main features of the Remuneration Report as they relate to:
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senior executive remuneration generally; |
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the CEO, Sol Trujillo, specifically; and |
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Telstras non-executive directors. |
In doing so, I will give you the facts and at the same time I hope dispel a few myths
and misunderstandings.
Senior
Executive Remuneration
For some years our senior executives and CEOs remuneration has been made up of three
complementary elements aligning reward to the achievement of short and long term business
objectives:
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fixed remuneration that is, cash based salary; |
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a Short Term Incentive (STI) cash payment which is at risk and delivers reward on
achievement of pre-determined annual business objectives and individual targets; and |
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Remuneration Speech final
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a Long Term Incentive (LTI) which is also at risk. It is delivered as performance
rights which can be converted into shares, but only if the company meets certain long-term
objectives. |
Between the short-term and long term incentives, the majority of the remuneration of our top
people is at risk. Some 70 per cent of the CEOs package is at risk, while for our Group
Managing Directors the percentage at risk ranges from 62 to 67 per cent.
Last year, new Short Term and Long Term Incentive performance measures were introduced that
link CEO and senior executive incentives to the delivery of important elements of the new
business strategy, and link the successful delivery of the transformation to shareholder wealth
creation in the longer term.
Over the next four years, the remuneration strategy will be based on rigorous performance
measures set by the board that are stapled to delivering specific transformation goals as well
as on other traditional business measures, because we need not only to drive change, but to
drive it quickly.
The specific objectives and weighting of the short term and the long term performance measures
will be updated from one year to the next. They will also be tailored to recognize the
differing time horizons of the various members of the executive team, some of whom have joined
the company to deliver specific short-term outcomes, while others are contemplating longer term
careers with the company.
If you look at Figure 2 of the Remuneration Report, on the screen behind me, you can
see an indication of how the emphasis on transformation measures will diminish
progressively as milestones are achieved.
Over time the incentive measures will shift from an initial emphasis on transformation
measures towards operational measures for the STI, and growth and return measures for the LTI.
This year the Short Term Incentive was determined by corporate performance against targets
relating to Earnings Before Interest Tax Depreciation and Amortisation, cost reduction, the
rollout of our new Next GTM mobile network and increased broadband market share,
as well as individual accountabilities.
Take two examples of STI measures this year. A key short term transformation measure was the
rollout of the Next G TM network. The incentive for this element was almost paid in
full. Another short term measure was to increase retail broadband market share from 41 per
cent to 47 per cent. The actual market share achieved was 44 per cent so a much lower
proportion of the incentive was paid.
A number of shareholders have expressed concern that a healthy short term incentive has been
paid for a year when our profit and share price declined. That reaction is understandable. The
key is having a clarity of understanding that the basis of the payment of this incentive was
delivering on the key platform of the transformation strategy and that the transformation
strategy is based on delivering long-term sustainable value.
When Sol launched the transformation strategy last November, he announced plans to transform
the company that would take three to five years. And our plan was widely recognised as very
ambitious. There was a marked scepticism about our ability to deliver.
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Remuneration Speech final
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Contrary to many peoples expectations, our transformation is as the Chairman has told
you on track, on budget and ahead of our delivery schedule. The Next G TM network
has been built in record time.
The board and management are committed to fixing Telstra so that shareholders can grow value,
not just next quarter or next year but on into the future. We believe it is important to reward
executives for creating long-term sustainable value for shareholders.
The Short Term incentive is delivered in cash which is a common approach in corporate Australia
and, contrary to some media reports, has been our practice every year except fiscal 2005. We
reverted to our pre-2005 practice because with Long Term Incentives already totally
equity-based, it was unbalanced to also deliver a substantial proportion of Short Term
Incentives in equity form.
Key personnel were also allocated performance rights under the Long Term Incentive plan for
fiscal 2006, the allocation being calculated as a percentage of their fixed remuneration and
based on the five day Volume Weighted Average Share price after our annual results. For last
year that was $4.78 and for this year it will be $3.67.
These performance rights can only be converted into shares and therefore will only deliver
any value to the executive if the company over a three to five year period achieves
performance targets relating to revenue, operating expense, our IT and network transformations,
as well as return on investment and total shareholder return.
This approach ensures that any rewards delivered from the LTI plan are consistent with the
successful execution of transformation initiatives over a number of years which, in turn,
should drive sustainable increases in shareholder wealth. So if they do get the shares, it
will only be because they have enhanced Telstras capacity to deliver shareholder returns.
There are no easy targets and if you refer to figure 16 in this years Remuneration Report
it provides an update on the status of the Long Term Incentive plans since 2001. You can
see, for example, that performance rights allocated to executives in fiscal 2001 did not
meet the performance hurdle and lapsed this year.
I should also add that the values shown for the executives LTIs in Figure 19 of the
Remuneration Report are accounting values only. Accounting standards require us to show the
current year amortised value for performance rights issued, even though those performance
rights have not vested and may never do so. To reiterate the point, if the performance hurdles
are not met then the performance rights dont vest and the executives receive no benefit from
the LTI.
A number of proxy adviser organizations, such as the Australian Shareholders Association and
CGI Glass Lewis, have recommended voting in support of the Remuneration Report. In doing so
they have identified areas for improvement so we thank them for their support and for their
constructive feedback.
However, another major proxy organization, ISS, has chosen to recommend voting against the
Remuneration Report. As a result of this, you will see when the Chairman shows you the proxies
later in the meeting that a substantial number of votes have been cast against it.
As many of you will have seen in the press, one key concern of ISS is that many companies -
including Telstra purchase on-market the underlying shares to support executive compensation
plans and therefore have not been required to seek shareholder approval for these plans.
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Remuneration Speech final
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Telstra has been purchasing shares on market since introducing an equity-based Long Term
Incentive plan in 1999. Indeed Telstra was commended for the practice of purchasing these shares
on-market at a time when other companies were criticised for failing to properly recognise the
cost of equity based compensation plans supported by the issue of new shares.
The requirements of the ASX have been very clear share-based incentive plans that involve an
issue of new shares are potentially dilutionary for other shareholders and therefore require
shareholder approval. Share-based incentive plans that involve on-market purchases of the
underlying shares are from a shareholder stand point economically equivalent to cash
remuneration and do not require shareholder approval. Telstras practices have been completely
in accordance with these requirements.
While on the subject of Long Term Incentives, you may have seen in the press an argument that
the sale by the Government of its shareholding in Telstra might constitute a change of control
that triggers vesting of the CEO and senior executives long-term incentives. Let me say
clearly, that claim is wrong.
Similarly, some papers recently reported that long term incentives of the CEO and senior
executives would automatically be triggered if a cornerstone investor buys a stake of more than
15 per cent of Telstra from the Future Fund after May 2007.
This too is wrong. The incentives could not vest without specific prior approval from the
board, and this has been the position ever since the long term incentives were introduced in
1999. Its not a new provision introduced in the past year. The board would only consider
exercising this discretion in unusual circumstances.
The papers also named a range of foreign companies that might establish a cornerstone holding
of 15 or more percent. These reports overlooked the fact that the current Telstra Act prevents
a foreign owned company holding more than 5 per cent of Telstra.
I note that the 15 per cent threshold was set in 1999 at a time when the company was majority
owned by the Commonwealth and it appeared a very remote possibility that an investor could
acquire such a holding. In light of the imminent full privatisation of the company, the Board
Remuneration Committee will reconsider this threshold when it reviews the LongTerm Incentive
plan for fiscal 2007.
CEO
Sols salary package has been the subject of significant interest and reportage, including some
to the effect that his remuneration had not been adequately disclosed or explained.
The facts are these.
When we announced Sols appointment back on 9 June 2005, his remuneration package was noted in
our media release. His full contract was also lodged with the Australian Stock Exchange that
day, and has been publicly available on Telstras corporate website ever since.
His potential remuneration was described extensively in the Directors Report lodged with our
annual results in August 2005, and in our 2005 Annual Review and Annual Report issued in
September. At our AGM last year I devoted part of my speech to explaining Sols remuneration
just as I am this year.
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Remuneration Speech final
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This year
his remuneration was again described extensively in our August annual
results lodgements, and in the 2006 Annual Review and Annual Report.
From the moment of his appointment, his remuneration has been the subject of media interest.
We expect scrutiny. But criticism that we have not provided enough information about his
remuneration is simply not true... Im not aware of any chief executive officer in this
country whose remuneration has been more widely and repeatedly published and analysed than
Sols.
For the record, Sol was engaged on a remuneration package of up to $10 million annually
comprising:
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fixed remuneration of $3 million , together with; |
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up to $3 million under the Short Term Incentive plan. As disclosed last year, half of this
was guaranteed for delivery of the transformation strategy, with the balance paid at 72
per cent of his potential maximum for achievement against operational and
transformation measures during fiscal 2006; and |
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up to $4 million for achieving maximum performance milestones under the Long Term
Incentive plan, as determined by the Board. Payment of this part of Sols package will
require significant multi-year performance by the company. |
Given the recent publicity, it is worth noting that the $8.7 million remuneration beside Sols
name in this years remuneration report includes several one-offs totalling $2.3 million
primarily a $1 million sign-on fee and approximately $1.3 million tax equalization payments
which is no longer required due to legislative change. Both these payments have been fully
disclosed.
None of which is to suggest that Sol is not well remunerated...
although you will be well aware
there are other Australian CEOs who earn as much or more in some cases much more.
We will continue to pay what is required to attract and retain an executive of this calibre.
And I think the benefits of that decision are apparent not only in our transformation
strategy but more importantly in our achievements delivering against it.
Non-executive Directors
All non-executive directors that is all directors other than the CEO receive a total
package of fees. They are required to take a minimum of 20 per cent of fees in the form of
Telstra shares. This aligns their interests with the interests of our shareholders. The shares
are purchased on-market, allocated at market price and held in trust for five years unable to
be dealt with unless the director ceases to be a director.
The total fee pool divided among all non-executive directors, including the value of any
shares allocated, is $2 million.
The level of fees paid out of that pool is set in light of independent expert advice. In the
past year, less than $1.4 million of the fee pool was provided as remuneration to our
non-executive directors, reflecting the reduced size of the board for much of the year.
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Remuneration Speech final
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Conclusion
I hope I have managed to shed some light on what is, unavoidably, a complex topic, and shown
how the interests of both our senior executives and directors are aligned with those of you
our shareholders.
I close by assuring you that we will be taking into consideration the outcome of this vote and
other feedback from shareholders when reviewing our remuneration policy. As a Board, we take
our shareholders views on these matters very seriously.
Thank you.
|
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Remuneration Speech final
|
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6 |
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|
|
14 November 2006
|
|
Office of the Company Secretary |
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|
|
The Manager
|
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Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Results of Annual General Meeting
In accordance with Listing Rule 3.13.2 and Section 251AA (2) of the Corporations Act, I advise that
the following resolutions were passed by the required majority at the Telstra Corporation Limited
2006 Annual General Meeting.
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1: Adoption of the remuneration report |
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Passed by Poll |
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2: Election and re-election of directors |
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The following persons were elected or re-elected as directors. |
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1. |
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Mr Charles Macek
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Passed by Poll |
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2. |
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Dr John Stocker
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Passed by Poll |
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3. |
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Mr Geoffrey Cousins
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Passed by Poll |
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4. |
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Mr Peter Willcox
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Passed by Poll |
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5. |
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Mr John Zeglis
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Passed by Poll |
The other candidates were not elected.
3: New Constitution
The following special resolution was passed by Poll:
that the constitution tabled at the meeting, and signed by the Chairman of the meeting for
the purpose of identification, be adopted as the constitution of the Company in place of the
present constitution, with effect from the close of the meeting
The proxy and poll position is attached.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
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|
TELSTRA CORPORATION LIMITED
TELSTRA AGM 2006
Tuesday, 14 November, 2006
|
|
RESULTS OF MEETING |
As required by section 251AA(2) of the Corporations Act 2001 (Commonwealth) the following
statistics are provided in respect of each resolution on the agenda.
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Manner in which the securityholder directed the proxy vote |
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Manner in which votes were cast in person or by |
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(as at proxy close): |
|
proxy on a poll (where applicable) |
|
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|
|
Votes |
|
Votes |
|
Votes |
|
Votes |
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|
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|
Resolution |
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For |
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Against |
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Discretionary |
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Abstain |
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For |
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Against |
|
Abstain ** |
2 |
|
REMUNERATION REPORT |
|
|
900,262,915 |
|
|
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1,038,979,630 |
|
|
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101,697,433 |
|
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35,494,423 |
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7,450,556,567 |
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1,039,955,395 |
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35,850,114 |
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4A |
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ELECT MERVYN VOGT AS A DIRECTOR |
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138,997,479 |
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1,804,143,290 |
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116,558,313 |
|
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14,557,576 |
|
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140,049,298 |
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8,368,683,706 |
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15,131,956 |
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4B |
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RE-ELECT CHARLES MACEK AS A DIRECTOR |
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1,876,357,663 |
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81,400,218 |
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104,099,174 |
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8,152,476 |
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8,429,275,702 |
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82,018,417 |
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8,422,261 |
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4C |
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RE-ELECT JOHN STOCKER AS A DIRECTOR |
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1,907,833,562 |
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31,799,368 |
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104,335,036 |
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|
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26,048,867 |
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8,460,905,956 |
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32,467,035 |
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26,361,680 |
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4D |
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ELECT LEONARD COOPER AS A DIRECTOR |
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150,234,250 |
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1,793,795,832 |
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116,708,228 |
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13,494,015 |
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151,545,559 |
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8,358,036,075 |
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14,135,486 |
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4E |
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ELECT ANGE KENOS AS A DIRECTOR |
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143,183,039 |
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1,799,347,187 |
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118,240,271 |
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13,485,931 |
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144,472,919 |
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8,364,916,932 |
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14,334,256 |
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4F |
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ELECT GEOFFREY COUSINS AS A DIRECTOR |
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239,797,256 |
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1,729,788,275 |
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98,053,611 |
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6,474,967 |
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6,686,600,543 |
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1,830,233,920 |
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6,773,736 |
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4G |
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ELECT PETER WILLCOX AS A DIRECTOR |
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1,925,240,366 |
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30,582,408 |
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105,892,836 |
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8,354,610 |
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8,479,984,658 |
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31,151,303 |
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8,657,785 |
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** |
|
- Note that votes relating to a person who abstains on an item are not counted in
determining whether or not the required majority of votes were cast for or against that item |
Page 1 of 2
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|
|
TELSTRA CORPORATION LIMITED
TELSTRA AGM 2006
Tuesday, 14 November, 2006
|
|
RESULTS OF MEETING |
As required by section 251AA(2) of the Corporations Act 2001 (Commonwealth) the following
statistics are provided in respect of each resolution on the agenda.
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
Manner in which the securityholder directed the proxy vote |
|
Manner in which votes were cast in person or by |
|
|
|
|
(as at proxy close): |
|
proxy on a poll (where applicable) |
|
|
|
|
Votes |
|
Votes |
|
Votes |
|
Votes |
|
|
|
|
|
|
Resolution |
|
For |
|
Against |
|
Discretionary |
|
Abstain |
|
For |
|
Against |
|
Abstain ** |
4H |
|
ELECT JOHN ZEGLIS AS A DIRECTOR |
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|
1,916,652,831 |
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|
|
36,295,916 |
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107,472,583 |
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9,581,511 |
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8,472,920,058 |
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36,869,381 |
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9,876,511 |
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4I |
|
ELECT STEPHEN MAYNE AS A DIRECTOR |
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186,115,329 |
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1,764,377,064 |
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113,197,337 |
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10,579,307 |
|
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187,770,735 |
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8,324,717,623 |
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11,214,167 |
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5 |
|
NEW CONSTITUTION |
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1,905,872,589 |
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23,261,629 |
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113,018,918 |
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19,785,128 |
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8,468,022,924 |
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23,702,885 |
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20,242,056 |
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** |
|
- Note that votes relating to a person who abstains on an item are not counted in
determining whether or not the required majority of votes were cast for or against that item |
Page 2 of 2
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|
17 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
Company Announcements Office
|
|
Level 41
242 Exhibition Street
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Appendix 3B New issue announcement, application for quotation of additional securities and
agreement
In accordance with the listing rules, I attach an announcement for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Appendix 3B
New
issue announcement
Rule 2.7, 3.10.3, 3.10.4, 3.10.5
Appendix 3B
New issue announcement,
application for quotation of additional securities
and agreement
Information
or documents not available now must be given to ASX as soon as
available. Information and documents given to ASX become ASXs property and may
be made public.
Introduced 1/7/96. Origin: Appendix 5. Amended 1/7/98, 1/9/99, 1/7/2000, 30/9/2001,
11/3/2002, 1/1/2003, 24/10/2005.
Name of entity
Telstra Corporation Limited
ABN
33 051 775 556
We (the entity) give ASX the following information.
Part 1 All issues
You must complete the relevant sections (attach sheets if there is not enough space).
|
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1
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+Class of +securities issued or to be issued
|
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Ordinary shares |
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2
|
|
Number of Securities issued or to be issued (if known) or maximum
number which may be issued
|
|
2.15 billion shares
underlying an equal
number of
instalment receipts
(subject to
upsizing and the
ability to
over-allocate as
described in
section 2.2.2 of
the T3 prospectus) |
|
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|
|
3
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|
Principal terms of the +securities (eg, if options, exercise price
and expiry date; if partly paid +securities, the amount
outstanding and due dates for payment; if +convertible
securities, the conversion price and dates for conversion)
|
|
Ordinary shares |
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|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 1
Appendix 3B
New issue announcement
|
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|
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|
4 |
|
Do the +securities
rank equally in all respects from the
date of allotment with an existing
+class of quoted
+securities? |
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Yes. |
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|
If the additional securities do
not rank equally, please state: |
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|
the date from which they do |
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the extent to which
they participate for the next
dividend, (in the case
of a trust, distribution)
or interest payment |
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|
the
extent to which they do not rank
equally, other than in
relation to the next
dividend, distribution or
interest payment |
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5 |
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Issue price or consideration |
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N/A |
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6 |
|
Purpose of the issue (If issued
as consideration for the acquisition of
assets, clearly identify those assets) |
|
Sell down of the
Commonwealths remaining
interest in Telstra. |
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7 |
|
Dates of entering
+securities into
uncertificated holdings or despatch of
certificates |
|
Subject to the issue of instalment receipts to applicants. The
transfer of shares
will be completed at
the same time. |
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|
Number |
+Class |
8
|
|
Number and
+class of
all
+securities
quoted on ASX
(including the
securities in clause
2 if applicable)
|
|
8,147,078,863 (subject
to upsizing and the
ability to over-allocate
as described in section
2.2.2 of the T3
prospectus)
|
|
FPO |
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 2
Appendix 3B
New issue announcement
|
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|
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|
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|
|
Number |
+Class |
9
|
|
Number and
+class
of all +securities
not quoted on ASX
(including the
securities in clause 2
if applicable)
|
|
4,295,995,494
(subject to
upsizing and the
ability to
over-allocate as
described in
section 2.2.2 of
the T3 prospectus)
|
|
FPO |
|
|
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|
|
10
|
|
Dividend
policy (in the
case of a trust,
distribution
policy) on the
increased capital
(interests)
|
|
The Telstra Board currently intends to declare a 28 cents
per share fully franked dividend for financial year 2007
subject to continuing to be successful in implementing
the transformation strategy and no further
material adverse regulatory outcomes during the
course of financial year 2007. |
|
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|
|
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|
|
The Telstra Board is unable to give guidance on ordinary
dividends for financial year 2008 owing to the
continuing uncertainty attached to regulatory
outcomes and the impact on Telstras business as well as
transformation and market place risks. |
Part 2 Bonus issue or pro rata issue
|
|
|
|
|
11
|
|
Is security holder approval
required?
|
|
N/A |
|
|
|
|
|
12
|
|
Is the issue renounceable or
non-renounceable?
|
|
N/A |
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13
|
|
Ratio in which the
+securities will be offered
|
|
N/A |
|
|
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|
14
|
|
+Class of
+securities to which the
offer relates
|
|
N/A |
|
|
|
|
|
15
|
|
+Record date to
determine entitlements
|
|
N/A |
|
|
|
|
|
16
|
|
Will holdings on different
registers (or subregisters) be
aggregated for calculating
entitlements?
|
|
N/A |
|
|
|
|
|
17
|
|
Policy for deciding entitlements in
relation to fractions
|
|
N/A |
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 3
Appendix 3B
New issue announcement
|
|
|
|
|
18
|
|
Names of countries in which the entity has
+security
holders who will not be sent
new issue documents
|
|
N/A |
|
|
|
|
|
|
|
Note: Security holders must be told how their
entitlements are to be dealt with. |
|
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|
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|
Cross reference: rule 7.7. |
|
|
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|
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|
|
19
|
|
Closing date for receipt of acceptances or
renunciations
|
|
N/A |
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 4
Appendix 3B
New issue announcement
|
|
|
|
|
20
|
|
Names of any underwriters
|
|
N/A |
|
|
|
|
|
21
|
|
Amount of any underwriting fee or commission
|
|
N/A |
|
|
|
|
|
22
|
|
Names of any brokers to the issue
|
|
N/A |
|
|
|
|
|
23
|
|
Fee or commission payable to the broker to the issue
|
|
N/A |
|
|
|
|
|
24
|
|
Amount of any handling fee payable to brokers who
lodge acceptances or renunciations on behalf of
+security holders
|
|
N/A |
|
|
|
|
|
25
|
|
If the issue is contingent on +security
holders approval, the date of the meeting
|
|
N/A |
|
|
|
|
|
26
|
|
Date entitlement and acceptance form and prospectus
or Product Disclosure Statement will be sent to
persons entitled
|
|
N/A |
|
|
|
|
|
27
|
|
If the entity has issued options, and the terms
entitle option holders to participate on exercise,
the date on which notices will be sent to option
holders
|
|
N/A |
|
|
|
|
|
28
|
|
Date rights trading will begin (if applicable)
|
|
N/A |
|
|
|
|
|
29
|
|
Date rights trading will end (if applicable)
|
|
N/A |
|
|
|
|
|
30
|
|
How do +security holders sell their
entitlements in full through a broker?
|
|
N/A |
|
|
|
|
|
31
|
|
How do +security holders sell part of
their entitlements through a broker and accept for
the balance?
|
|
N/A |
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 5
Appendix 3B
New issue announcement
|
|
|
|
|
32
|
|
How do +security holders dispose of their
entitlements (except by sale through a broker)?
|
|
N/A |
|
|
|
|
|
33
|
|
+Despatch date
|
|
N/A |
Part 3 Quotation of securities
You need only complete this section if you are applying for quotation of securities
|
|
|
|
|
34 |
|
Type of securities |
|
|
(tick one) |
|
|
|
|
|
(a)
|
|
þ
|
|
Securities described in Part 1 |
|
|
|
|
|
(b)
|
|
o
|
|
All other securities |
|
|
|
|
|
|
|
|
|
Example: restricted securities at the end
of the escrowed period, partly paid
securities that become fully paid, employee
incentive share securities when restriction
ends, securities issued on expiry or
conversion of convertible securities |
Entities that have ticked box 34(a)
Additional securities forming a new class of securities
Tick to indicate you are providing the information or documents
|
|
|
|
|
35
|
|
o
|
|
If the +securities are +equity securities,
the names of the 20 largest holders of the additional
+securities, and the number and percentage of
additional +securities held by those holders |
|
|
|
|
|
36
|
|
o
|
|
If the +securities are +equity securities,
a distribution schedule of the additional +securities setting out
the number of holders in the categories |
|
|
|
|
1 1,000 |
|
|
|
|
1,001 5,000 |
|
|
|
|
5,001 10,000 |
|
|
|
|
10,001 100,000 |
|
|
|
|
100,001 and over |
|
|
|
|
|
37
|
|
þ
|
|
A copy of any trust deed for the additional +securities |
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 6
Appendix 3B
New issue announcement
Entities that have ticked box 34(b)
|
|
|
|
|
|
|
38 |
|
Number of securities for which
+quotation is sought |
|
N/A |
|
|
|
|
|
|
|
39 |
|
Class of +securities for which
quotation is sought |
|
N/A |
|
|
|
|
|
|
|
40 |
|
Do the +securities rank equally in all respects
from the date of allotment with an existing
+class of quoted +securities?
If the additional securities do not rank equally, please
state: |
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
the date from which they do |
|
|
|
|
|
|
|
|
|
|
|
|
|
the extent to which they participate for
the next dividend, (in the case of a trust,
distribution) or interest payment |
|
|
|
|
|
|
|
|
|
|
|
|
|
the extent to which they do not rank equally,
other than in relation to the next dividend,
distribution or interest payment |
|
|
|
|
|
|
|
|
|
41 |
|
Reason for request for quotation now |
|
N/A |
|
|
|
|
|
|
|
|
|
Example: In the case of restricted securities, end of
restriction period |
|
|
|
|
|
|
|
|
|
|
|
(if issued upon conversion of another security,
clearly identify that other security) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
+Class |
42
|
|
Number and
+class
of all
+securities
quoted on
ASX (including
the securities in
clause 38)
|
|
N/A
|
|
N/A |
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 7
Appendix 3B
New issue announcement
Quotation agreement
1 |
|
+Quotation of our additional +securities is in ASXs absolute discretion. ASX may
quote the +securities on any conditions it decides. |
|
2 |
|
We warrant the following to ASX. |
|
|
|
The issue of the +securities to be quoted complies with the law and is not for
an illegal purpose. |
|
|
|
|
There is no reason why those +securities should not be granted +quotation. |
|
|
|
|
An offer of the +securities for sale within 12 months after their issue will
not require disclosure under section 707(3) or section 1012C(6) of the
Corporations Act. |
|
|
|
|
Note: An entity may need to obtain appropriate warranties from subscribers for the
securities in order to be able to give this warranty |
|
|
|
|
Section 724 or section 1016E of the Corporations Act does not apply to any
applications received by us in relation to any +securities to be quoted and
that no-one has any right to return any +securities to be quoted under
sections 737, 738 or 1016F of the Corporations Act at the time that we
request that the +securities be quoted. |
|
|
|
|
If we are a trust, we warrant that no person has the right to return the
+securities to be quoted under section 1019B of the Corporations Act at
the time that we request that the +securities be quoted. |
3 |
|
We will indemnify ASX to the fullest extent permitted by law in respect of any
claim, action or expense arising from or connected with any breach of the warranties
in this agreement. |
|
4 |
|
We give ASX the information and documents required by this form. If any
information or document not available now, will give it to ASX before +quotation of
the +securities begins. We acknowledge that ASX is relying on the information and
documents. We warrant that they are (will be) true and complete. |
|
|
|
|
|
|
|
Sign here:
|
|
/s/ Douglas Gration
|
|
|
|
Date: 17 November 2006 |
|
|
Company secretary
|
|
|
|
|
|
|
|
|
|
|
|
Print name:
|
|
Douglas Gration |
|
|
|
|
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3B Page 8
|
|
|
17 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Appendix 3X-Initial Directors Interest Notices
In accordance with the listing rules I enclose an Appendix 3X Initial Directors
Interest Notice for Mr Geoffrey Cousins.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Appendix 3X
Initial Directors Interest Notice
Rule 3.19A.1
Appendix 3X
Initial Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
|
|
|
Name of entity
|
|
Telstra Corporation Limited |
ABN
|
|
33 051 775 556 |
We (the entity) give ASX the following information under listing rule 3.19A.1 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
GEOFFREY COUSINS |
|
|
|
Date of appointment
|
|
14 November 2006 |
Part 1 Directors relevant interests in securities of which the director is the registered
holder
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
Note: In the case of a company, interests which come within paragraph (i) of the
definition of notifiable interest of a director should be disclosed in this part.
Number & class of securities
NIL
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3X Page 1
Appendix 3X
Initial Directors Interest Notice
Part 2 Directors relevant interests in securities of which the director is not the
registered holder
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Name of holder & nature of
interest
|
|
Number & class of Securities |
|
Note: Provide details of the circumstances giving rise to
the relevant interest. |
|
|
|
|
|
|
|
NIL |
Part 3 Directors interests in contracts
Note: In the case of a company, interests which come within paragraph (ii) of the
definition of notifiable interest of a director should be disclosed in this part.
|
|
|
Detail of contract
|
|
NIL |
|
|
|
Nature of interest
|
|
NIL |
|
|
|
Name of registered holder
(if issued securities)
|
|
NIL |
|
|
|
No. and class of securities to
which interest relates
|
|
NIL |
|
|
|
+ |
|
See chapter 19 for defined terms. |
Appendix 3X Page 2
|
|
|
19 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra 3 Share Offer Allocation Details
In accordance with the listing rules, I attach an announcement for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
ASX release
TELSTRA 3 SHARE OFFER
ALLOCATION DETAILS RELEASED
Retail Offer
|
|
Final price details for Retail Investors applying under the Australian Retail Offer
(comprising the General Public Offer, the Shareholder Entitlement Offer and the Firm Offer) at
the Retail Investor price are: |
|
o |
|
Final price $3.60 per share |
|
|
o |
|
First instalment $2.00 per share |
|
|
o |
|
Final instalment $1.60 per share |
|
|
Final price details for Retail Investors applying under the New Zealand Offer are: |
|
o |
|
Final price $3.70 per share |
|
|
o |
|
First instalment $2.10 per share |
|
|
o |
|
Final instalment $1.60 per share |
Institutional Offer
|
|
Final price details of Institutional Investors applying under the Institutional Offer (and non
Australian resident applicants and Retail Investors applying under the Firm Offer at the
Institutional Offer price) are: |
|
o |
|
Final price $3.70 per share |
|
|
o |
|
First instalment $2.10 per share |
|
|
o |
|
Final instalment $1.60 per share |
ALLOCATION DETAILS
|
|
Approximately 2,423 million shares (representing 57% of the Offer) have been allocated
under the Australian and New Zealand Retail Offer, comprising: |
|
o |
|
Approximately 12% under the General Public Offer. |
|
|
o |
|
Approximately 42% under the Shareholder Entitlement Offer. |
|
|
o |
|
Approximately 46% under the Firm Offer. |
|
|
Approximately 1,825 million shares (representing 43% of the Offer) have been allocated
under the Institutional Offer, including shares allocated to Japanese retail investors under
the Public Offer Without Listing (POWL). |
|
|
|
DIVAOZ\Retail Marketing Committee\Media Release Final Offer Price |
|
|
|
|
page 1 |
ALLOCATION BASIS
Shareholder Entitlement Offer
All Retail Investors who applied under the Shareholder Entitlement Offer for their entitlement
or less have been allocated those shares in full.
Retail Investors who applied under the Shareholder Entitlement Offer for more than their
entitlement have received allocations as follows:
|
|
|
Shareholder Entitlement Offer -
applicants who applied for up to
10,000 shares
|
|
Receive
The number of shares they have applied for |
|
|
|
|
|
Shareholder Entitlement Offer - |
|
|
applicants who applied for more |
|
|
than 10,000 shares, and: |
|
Receive |
1.
|
|
Whose entitlement is less than or
equal to 10,000 shares
|
|
10,000 shares plus 75% of any additional shares applied
for above 10,000 shares, up to a maximum allocation of
100,000 shares |
|
|
|
|
|
2.
|
|
Whose entitlement is greater
than 10,000 shares but less than
100,000 shares
|
|
Their entitlement plus 75% of any additional shares applied
for above their entitlement, up to a maximum allocation of
100,000 shares |
|
|
|
|
|
3.
|
|
Whose entitlement is greater
than or equal to 100,000 shares
|
|
Their entitlement with no additional shares |
General Public Offer
Eligible Retail Investors who applied under the General Public Offer have received allocations as
follows:
|
|
|
General Public Offer applicants |
|
|
who applied for |
|
Receive |
Up to 5,000 shares
|
|
The number of shares they have applied for |
|
|
|
Above 5,000 shares
|
|
5,000 shares plus 75% of any additional shares applied for
above 5,000 shares up to a maximum allocation of 100,000
shares |
Firm Offer
Valid applications by broker firm applicants have been accepted in full.
Details of the pricing and allocation were published in major newspapers on 20 November 2006.
INSTALMENT RECEIPT TRADING
|
|
Trading in Telstra instalment receipts on the ASX is expected to commence on a
conditional and deferred settlement basis at 11.30am, Sydney time today. The code for
Telstra instalment receipts on the ASX is TLSCA. |
|
|
|
Trading in Telstra instalment receipts on the ASX is expected to commence on a
conditional basis because such trading is conditional on settlement under the
International Purchase Agreement relating to the Telstra 3 Share Offer and issue of
instalment receipts to successful applicants under the Offer. If these conditions are not
satisfied within 10 business days after commencement of conditional trading: |
|
|
|
Telstra instalment receipts will not be issued; |
|
|
|
DIVAOZ\Retail Marketing Committee\Media Release Final Offer Price |
|
|
|
|
page 2 |
|
|
|
the contract formed on acceptance by the Commonwealth of an application for
shares in Telstra will be cancelled; |
|
|
|
|
all conditional trades in Telstra instalment receipts that have occurred on the
ASX since conditional trading commenced, will be cancelled. |
|
|
After the end of conditional trading, there will be a further period of deferred
settlement trading of instalment receipts on the ASX until dispatch of transaction
confirmation statements which is expected to occur by 30 November 2006. |
ISSUE OF SECURITIES AND TRANSACTION CONFIRMATION STATEMENTS
|
|
Instalment receipts are expected to be issued on 24 November 2006. |
|
|
|
Transaction confirmation statements to successful applicants and refunds to applicants
who have applied and paid for shares in excess of their allocation are expected to be
dispatched by 30 November 2006. |
QUESTIONS REGARDING ALLOCATIONS
|
|
Investors who wish to obtain details of their allocations prior to receiving their
transaction confirmation statements may either access the Telstra 3 Share Offer website at
www.t3shareoffer.com.au or contact the Telstra 3 Telephone Information Centre (TIC) on
1800 18 18 18 and quote their reference number. Information about all allocations will be
available from www.t3shareoffer.com.au or the TIC from 7am today. The TICs normal
operating hours are 8am to 10pm (Sydney time) Monday to Friday. |
|
|
|
It is the responsibility of applicants to determine their allocations prior to trading in
Telstra instalment receipts to avoid the risk of selling instalment receipts they do not
own. Applicants selling instalment receipts before they receive confirmation of their
allocation do so at their own risk. |
OTHER INFORMATION
Prepayments
|
|
Instalment receipt holders may prepay the final instalment for some (in minimum parcels of
2,000) or all of their registered holding on or before 31 March 2008, and will receive a
Prepayment Discount (to the final instalment) if they do so. Instalment receipt holders
with a New Zealand registered address will not receive a Prepayment Discount. Prepayment
may be made on or by 28 February 2007 and on or by the last day of every month thereafter
up until 31 March 2008. To prepay, instalment receipt holders will need to contact the
Instalment Receipt and Share Registrar on 1800 18 18 18. If applicants under the Retail
Offer elect to prepay the final instalment, they will not receive Bonus Loyalty Shares on
the instalment receipts for which they have prepaid the final instalment. |
Bonus Loyalty Shares
|
|
Those that purchase instalment receipts under the Australian Retail Offer at the Retail
Investor price, hold those instalment receipts in the same registered name until 15 May
2008 and pay the final instalment on or by 29 May 2008, will receive one Bonus Loyalty
Share for every 25 applicable instalment receipts. However, those that prepay the final
instalment will not receive Bonus Loyalty Shares on those instalment receipts in relation
to which a prepayment is made. |
|
|
Media enquiries can be made to Ian Smith of Gavin Anderson on 0418 814 611. |
|
|
|
DIVAOZ\Retail Marketing Committee\Media Release Final Offer Price |
|
|
|
|
page 3 |
|
|
|
19 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra 3 Share Offer Instalment Receipt Foreign Ownership Rules
In accordance with the listing rules, I attach a copy of the Foreign Ownership rules relating
to instalment receipts, for release to the market.
Telstra Corporation Limited will lodge new Foreign Ownership rules similar to those for
Instalment receipts shortly.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
As approved by the board of Telstra Sale Company
Limited on 17 November 2006
IR Foreign Ownership Rules
|
|
|
Instalment Receipts -
Foreign Ownership Rules |
Contents
|
|
|
|
|
|
|
|
|
Table of contents |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Definitions |
|
|
2 |
|
|
|
1.1 Definitions |
|
|
2 |
|
|
|
1.2 IR Holders who will be deemed Foreign IR Holders |
|
|
4 |
|
|
|
|
|
|
|
|
2 |
|
Foreign IR Register |
|
|
5 |
|
|
|
2.1 Establishment of Foreign IR Register |
|
|
5 |
|
|
|
2.2 New Zealand branch IR register and ADR program |
|
|
5 |
|
|
|
2.3 Reliance on information provided by IR Holders and in Foreign IR Register |
|
|
6 |
|
|
|
2.4 Telstras Foreign Register |
|
|
6 |
|
|
|
2.5 Joint Foreign Register |
|
|
6 |
|
|
|
2.6 Transfer of IR Register information to Company |
|
|
7 |
|
|
|
|
|
|
|
|
3 |
|
Obligations of IR Holders to notify Trustee of Foreign IR Holding |
|
|
7 |
|
|
|
3.1 IR Holders to provide information regarding foreign ownership of IRs |
|
|
7 |
|
|
|
3.2 Initial notification obligations acquisitions through CHESS |
|
|
7 |
|
|
|
3.3 Initial notification obligations acquisitions other than through CHESS |
|
|
7 |
|
|
|
3.4 Continuing notification obligations |
|
|
8 |
|
|
|
3.5 Consequences of a failure to notify |
|
|
9 |
|
|
|
3.6 Number of IRs deemed to be in an IR Holders Foreign IR Holding |
|
|
9 |
|
|
|
|
|
|
|
|
4 |
|
Mixed IR Holders to endeavour to use different HINs or SRNs |
|
|
10 |
|
|
|
|
|
|
|
|
5 |
|
Procedures for Unacceptable Individual Foreign-Ownership Situation |
|
|
10 |
|
|
|
5.1 Trustees power to dispose of IRs |
|
|
10 |
|
|
|
5.2 Treatment of proceeds of sale |
|
|
11 |
|
|
|
|
|
|
|
|
6 |
|
Procedures for Unacceptable Aggregate Foreign-Ownership Situation |
|
|
11 |
|
|
|
6.1 Procedures when Aggregate Foreign Ownership Limit exceeded |
|
|
11 |
|
|
|
6.2 Foreign IR Holders must dispose of Breach IRs |
|
|
11 |
|
|
|
6.3 Trustees power to dispose of Breach IRs |
|
|
12 |
|
|
|
6.4 Determining priority among Foreign IR Holders date on which IRs considered registered |
|
|
12 |
|
|
|
6.5 Treatment of foreign to foreign transactions |
|
|
14 |
|
|
|
|
|
|
|
|
7 |
|
Procedures when Individual Foreign-Ownership Limit exceeded |
|
|
14 |
|
|
|
|
|
|
|
|
8 |
|
Telstras obligations to notify the Exchange |
|
|
14 |
|
|
|
8.1 Obligation to notify Exchange on exceeding certain limit |
|
|
14 |
|
|
|
8.2 Obligation to notify Exchange when cease to exceed certain limit |
|
|
15 |
|
|
|
|
|
|
|
|
9 |
|
Co-operation with Company |
|
|
15 |
|
|
|
|
|
|
|
|
10 |
|
IR Registrar may act on the Trustees behalf |
|
|
15 |
|
|
|
|
|
|
|
|
11 |
|
Operation of IR Foreign Ownership Rules |
|
|
15 |
|
IR Foreign Ownership Rules page 1
1 |
|
Definitions |
|
1.1 |
|
Definitions |
|
|
|
Capitalised terms used but not defined below have the meaning given in the IR Trust
Deed, or, if the term is not defined in the IR Trust Deed, the meaning given in the
Companys constitution or the Telstra Foreign Ownership Regulations, as the context
requires. The meanings of the terms used in this document are set out below. |
|
|
|
Term |
|
Meaning |
|
ADRs
|
|
American Depository Receipts |
|
|
|
Aggregate Foreign
|
|
the meaning in rule 8.1(b) |
Ownership Limit |
|
|
|
|
|
Application Form
|
|
the meaning given in the IR Trust Deed |
|
|
|
Breach IRs
|
|
the meaning given in rules 6.1(b) and rule 7 |
|
|
|
Breach Shares
|
|
the meaning given in Telstra Foreign Ownership Regulations 6.1(b) and 7 |
|
|
|
CHESS
|
|
the Clearing House Electronic Subregister System |
|
|
|
CHESS participant
|
|
a participant in CHESS |
|
|
|
Company
|
|
Telstra Corporation Limited (ACN 051 775 556) |
|
|
|
Disposal Notice
|
|
a notice issued by the Trustee to a Foreign IR Holder under rule 5.1(a) or 6.1(b)
containing the information set out in rule 5.1(c) |
|
|
|
Divestment Date
|
|
the last day of a period specified in a Disposal Notice as the date by which IRs
must be disposed or the date determined under rule 6.2, as the case may be |
|
|
|
Domestic IR Holder
|
|
an IR Holder who in relation to a HIN or SRN holds only Domestic IRs. Such an
IR Holder is to be considered a Domestic IR Holder in relation to that HIN or
SRN only |
|
|
|
Domestic IRs
|
|
the meaning given in the IR Trust Deed |
IR Foreign Ownership Rules page 2
|
|
|
Term |
|
Meaning |
|
Final Instalment
|
|
the meaning given in the IR Trust Deed |
|
|
|
Final Instalment Due
|
|
the meaning given in the IR Trust Deed |
Date |
|
|
|
|
|
Foreign IR Holder |
|
|
|
|
(a) the meaning given in the IR Trust Deed; and |
|
|
(b) any person who is deemed a Foreign IR Holder under rule 1.2 |
|
|
|
Foreign IR Holding
|
|
the meaning given in the IR Trust Deed |
|
|
|
Foreign IR Register
|
|
the meaning given in rule 2.1(a) |
|
|
|
Foreign Member
|
|
the meaning given in the Telstra Foreign Ownership Regulations |
|
|
|
Foreign Ownership
|
|
the form required to be lodged by certain new IR Holders upon initially acquiring |
Notification Form
|
|
IRs under rule 3.3 |
|
|
|
Initial IR Holder
|
|
the meaning given in the IR Trust Deed |
|
|
|
Initial Trustee
|
|
Telstra Sale Company Limited (ACN 121 986 187) |
|
|
|
International Offering
|
|
the meaning given in the IR Trust Deed |
|
|
|
IR Trust Deed
|
|
the Trust Deed dated 8 October 2006 between the Commonwealth of Australia
and the Initial Trustee under which the Trustee holds shares in the Company |
|
|
|
IRs
|
|
the meaning given in the IR Trust Deed |
|
|
|
Joint Foreign Register
|
|
the meaning given in rule 2.5 |
|
|
|
level of foreign
|
|
the meaning given in rule 8.1(b) |
ownership |
|
|
|
|
|
Mixed IR Holder
|
|
the meaning given in the IR Trust Deed |
|
|
|
Non-Commonwealth
Shares
|
|
the total number of shares in the Company held by persons other than the
Commonwealth |
IR Foreign Ownership Rules page 3
|
|
|
Term |
|
Meaning |
|
Notification Date
|
|
the meaning given in rule 6.4(a) |
|
|
|
Offer
|
|
the meaning given in the IR Trust Deed |
|
|
|
Special SRNs
|
|
the meaning given in rule 6.1(a) |
|
|
|
Specified Day
|
|
the meaning given in rule 6.1(a) |
|
|
|
Telstras Foreign
|
|
the regulations relating to foreign ownership of the Companys shares adopted |
Ownership Regulations
|
|
by the Company under rule 11.2 of its constitution |
|
|
|
Telstras Foreign
|
|
the meaning given in rule 2.4 |
Register |
|
|
|
|
|
Trustee
|
|
the meaning given in the IR Trust Deed |
|
|
|
Warning Notice
|
|
a notice issued by the Trustee to a Foreign IR Holder under rule 5.1(a) informing
the Foreign IR Holder that the Foreign IR Holder may be required to dispose of
IRs |
1.2 |
|
IR Holders who will be deemed Foreign IR Holders |
|
(a) |
|
For the purposes of these rules, the following persons shall be deemed a Foreign IR Holder: |
|
(1) |
|
the depository for the ADRs or its custodian or nominee; |
|
|
(2) |
|
those persons holding an interest in IRs represented by ADRs; |
|
|
(3) |
|
IR Holders holding IRs registered on any New Zealand branch IR register, in
respect of those IRs only; |
|
|
(4) |
|
Mixed IR Holders in respect of their Foreign IR Holding only (unless the Trustee
determines otherwise); |
|
|
(5) |
|
IR Holders: |
|
(A) |
|
whose registered address is not in Australia; and |
|
|
(B) |
|
who the Trustee elects to treat as a Foreign IR Holder because the IR
Holder is required, but fails to return a Foreign Ownership Notification
Form within the time period specified in rule 3.3(a) or 3.4(c), as the
case may be; and |
|
(6) |
|
IR Holders who the Trustee elects to treat as a Foreign IR Holder because a
response has not been received from the IR Holder under rule 3.4 (other than
rule 3.4(c)) within 30 days after the date the response was required by that rule. |
IR Foreign Ownership Rules page 4
(b) |
|
Where a person has given notice (whether physically or electronically through CHESS)
that it is (or where the person is deemed by the Telstra Foreign Ownership Regulations to
be): |
|
(1) |
|
a Foreign Member; |
|
|
(2) |
|
not a Foreign Member; or |
|
|
(3) |
|
a Mixed Member, |
in respect of any shares held in a particular HIN or SRN, the Trustee and the Company
may, notwithstanding anything else in these regulations, also treat the person as being,
respectively:
|
(4) |
|
a Foreign IR Holder; |
|
|
(5) |
|
not a Foreign IR Holder; or |
|
|
(6) |
|
a Mixed IR Holder, |
|
|
in respect of any IRs held in that HIN or SRN. |
(c) |
|
Where a person has given notice (whether physically or electronically through CHESS)
that it is (or where the person is deemed by the these rules to be): |
|
(1) |
|
a Foreign IR Holder; |
|
|
(2) |
|
not a Foreign IR Holder; or |
|
|
(3) |
|
a Mixed IR Holder, |
in respect of any IRs held in a particular HIN or SRN, the Trustee and the Company may,
notwithstanding anything else in these regulations, also treat the person as being,
respectively:
|
(4) |
|
a Foreign Member; |
|
|
(5) |
|
not a Foreign Member; or |
|
|
(6) |
|
a Mixed Member, |
in respect of any shares held in that HIN or SRN.
2 |
|
Foreign IR Register |
|
2.1 |
|
Establishment of Foreign IR Register |
|
(a) |
|
The Trustee may establish and maintain a register (Foreign IR Register) which will
record, amongst other things, those IR Holders who are Foreign IR Holders and the
number of IRs in the Foreign IR Holding of each Foreign IR Holder. |
|
(b) |
|
The Foreign IR Register does not form part of the IR Register. |
|
(c) |
|
The Foreign IR Register may be prepared or kept by recording or storing the information
by means of a mechanical, electronic or other device. |
|
2.2 |
|
New Zealand branch IR register and ADR program |
|
(a) |
|
The Trustee may determine that only IRs which are not, and may not become, subject to
a Warning Notice or a Disposal Notice under rule 5.1(a) may be: |
|
(1) |
|
recorded or remain on any New Zealand branch IR register; or |
|
|
(2) |
|
transferred into the ADR program, |
IR Foreign Ownership Rules page 5
and may:
|
(3) |
|
decline to record on the New Zealand branch IR register or transfer into the
ADR program; or |
|
|
(4) |
|
in the case of IRs already recorded on the New Zealand branch IR register,
remove to the IR Register, |
IRs which it believes, or is concerned, may become, subject to a Warning Notice or a
Disposal Notice.
(b) |
|
Notwithstanding rule 2.2(a), IRs may only be transferred onto the New Zealand branch IR
register or into the ADR program if: |
|
(1) |
|
Disposal Notices have not been issued and are not able to be issued in relation
to the relevant IRs; or |
|
|
(2) |
|
the transfer would not result in the IRs being placed in a Special SRN in
accordance with rule 6.1. |
2.3 |
|
Reliance on information provided by IR Holders and in Foreign IR
Register |
|
(a) |
|
The information in the Foreign IR Register is to be taken as correct unless proven
otherwise. |
|
(b) |
|
The Trustee may rely on information in the Foreign IR Register when forming a belief as
to whether an Unacceptable Foreign Ownership Situation exists. |
|
(c) |
|
For the purposes of the Foreign IR Register, the directors of the Trustee and the Trustee
will be entitled to rely on information provided by CHESS participants, IR Holders and
persons acting or purporting to act on their behalf, the Company and the IR Registrar
under these regulations or otherwise. |
|
2.4 |
|
Telstras Foreign Register |
|
(a) |
|
The Company has established and maintains a foreign register (Telstras Foreign
Register) of holders of shares in the Company (excluding shares held by the Trustee)
and the Telstra Foreign Ownership Regulations. |
|
(b) |
|
The Company has agreed, for so long as any IRs remain outstanding, that the Telstra
Foreign Ownership Regulations will parallel these Rules. |
|
(c) |
|
The Company may include in Telstras Foreign Register information relating to foreign
ownership recorded in the Foreign IR Register. |
|
2.5 |
|
Joint Foreign Register |
|
(a) |
|
The Company and the Trustee have agreed that the Foreign IR Register will be
maintained jointly (in such manner as the Trustee and the Company may agree from time
to time) with Telstras Foreign Register. These jointly maintained registers (together the
Joint Foreign Register) will contain the information required to be kept by the Trustee in
respect of Foreign IR Holders and by the Company in respect of Foreign Members. |
|
(b) |
|
The Joint Foreign Register will also, where relevant, contain an aggregation of the
numbers of IRs and shares held by each Foreign IR Holder and each Foreign Member.
If, for any reason, the Company determines that this is not practicable, the Companys
share registrar will perform this aggregation each day for the 200 Foreign IR Holders
having the largest IR Holdings on the Joint Foreign Register and the 200 Foreign
Members having the largest share holdings on the Joint Foreign Register (and this daily
aggregation will become part of the information comprising the Joint Foreign Register). |
IR
Foreign Ownership Rules page 6
2.6 |
|
Transfer of IR Register information to Company |
|
(a) |
|
At and after the Final Instalment Due Date, the information contained in the IR Register
maintained by the Trustee will be transferred to the Companys share register, as will
information on holdings of IRs by Foreign Persons and any other information relating to
foreign ownership incorporated in the Foreign IR Register. This information will
supplement information already contained in Telstras Foreign Register. |
|
(b) |
|
After the Trustee has transferred information to the Company under rule 2.6(a), the
Company will give the Trustee access to that information during office hours to the extent
the Trustee needs the information to perform its obligations to the Commonwealth under
the IR Trust Deed in respect of the sale of shares where the Final Instalment is not paid
on the Final Instalment Due Date. |
|
3 |
|
Obligations of IR Holders to notify Trustee of Foreign IR Holding |
|
3.1 |
|
IR Holders to provide information regarding foreign ownership of IRs |
|
|
|
IR Holders must provide the Trustee with information regarding the foreign ownership of
their IRs at the times and in the manner set out in this rule 3. |
|
3.2 |
|
Initial notification obligations acquisitions through CHESS |
|
|
|
If IRs are initially acquired through CHESS, the CHESS participant must provide the
information required by the ASTC Settlement Rules to ensure that the Trustee is notified
whether the CHESS participant will be a Foreign IR Holder or a Mixed IR Holder. |
|
3.3 |
|
Initial notification obligations acquisitions other than through
CHESS |
|
(a) |
|
If, for any reason, IRs are initially acquired other than through CHESS and the acquirer
will be a Foreign IR Holder or a Mixed IR Holder, the IR Holder (on its own behalf or
through an agent) must complete and return a Foreign Ownership Notification Form
within 5 business days after the registration of the acquisition of the IRs, except that: |
|
(1) |
|
acquirers of IRs to be registered on the New Zealand branch IR register; |
|
|
(2) |
|
the depository for the ADRs (or its custodian or nominee); and |
|
|
(3) |
|
acquirers of IRs under a transfer from (or from a nominee of)
an underwriter of the International Offering on closing of the
International Offering (unless the Trustee determines otherwise), |
do not need to return a Foreign Ownership Notification Form.
(b) |
|
For the avoidance of doubt: |
|
(1) |
|
a Foreign Ownership Notification Form is only required in respect of an IR
Holders initial acquisition of IRs and not in relation to each acquisition of IRs by
an IR Holder unless the IRs are to be registered in a different HIN or SRN; and |
|
|
(2) |
|
an Application Form lodged by an Initial IR Holder, containing the information
required by the Trustee, will satisfy the requirements of rule 3.3(a). |
(c) |
|
Foreign Ownership Notification Forms are available from brokers, the Exchange, the
Trustee and the IR Registrar. |
IR Foreign Ownership Rules page 7
(d) |
|
A Foreign Ownership Notification Form requires each new IR Holder to indicate if they
are a Foreign IR Holder or a Mixed IR Holder. A Foreign Ownership Notification Form is
only valid if the relevant HIN or SRN is quoted. |
3.4 |
|
Continuing notification obligations |
|
(a) |
|
Ongoing obligations of IR Holders |
|
|
|
IR Holders must notify the Trustee: |
|
(1) |
|
within 5 business days if they become, or cease to be, a Foreign IR Holder or a
Mixed IR Holder; |
|
|
(2) |
|
within 5 business days if there is a change to their Foreign IR Holding; |
|
|
(3) |
|
as soon as practicable if they become aware that an Unacceptable Individual
Foreign-Ownership Situation exists in relation to any of the IRs held by them; |
|
|
(4) |
|
as soon as practicable if they become aware that an Unacceptable Individual
Foreign-Ownership situation exists in relation to any person who has an interest
in any IRs held by the IR Holder (and, if so, the name of the relevant person and
total number of IRs in which that person has an interest). |
(b) |
|
Annual audit |
|
|
|
Each year (or at such other intervals as the Company determines from time to time or to
coincide with corresponding enquiries made by the Company of its shareholders from
time to time), each IR Holder registered as holding IRs representing more than 0.05% of
the Non-Commonwealth Shares will be requested to state in relation to each of their HINs
or SRNs: |
|
(1) |
|
whether they are a Foreign IR Holder or a Mixed IR Holder; |
|
|
(2) |
|
the number of IRs (if any) in the IR Holders Foreign IR Holding; |
|
|
(3) |
|
to the knowledge of the IR Holder: |
|
(A) |
|
the identity of each Foreign Person or Associate of a Foreign Person
who has an interest in the IRs registered in the name of the IR Holder; |
|
|
(B) |
|
the total number of IRs in which that person has an interest; and |
|
|
(C) |
|
if that person is an Associate of a Foreign Person, the name of the
relevant Foreign Person; and |
|
(4) |
|
whether the IR Holder is aware of an Unacceptable Individual Foreign-Ownership Situation of the type referred to in rules 3.4(a)(3) and 3.4(a)(4) (and,
if so, details of that situation). |
|
|
IR Holders must respond to a request under this rule 3.4(b) within 5 business days after
receipt of the request. |
|
(c) |
|
Occasional request for information |
|
|
|
The Trustee may, at any time, send to an IR Holder who: |
|
(1) |
|
has an address which is not in Australia; |
|
|
(2) |
|
has notified the Trustee that they are a Foreign IR Holder or Mixed IR Holder; |
|
|
(3) |
|
has not provided a notification required to be provided under this regulation 3; |
|
|
(4) |
|
holds an interest representing more than 0.05% of the Non-Commonwealth
Shares; |
|
|
(5) |
|
the Trustee has reason to believe, or is concerned, may be a Foreign IR Holder;
or |
IR Foreign Ownership Rules page 8
|
(6) |
|
the Minister or the Company has requested be sent such a request, |
a request for information in a form approved by the Trustee which requires the IR Holder
to inform the Trustee of any (or all) of the information set out in rules 3.4(b)(1) to 3.4(b)(4)
and any other information relating to foreign ownership as determined by the Trustee.
The request may specify a time by which the IR Holder must provide the information and
the penalty, if any, for failure to comply with the request.
(d) |
|
Reconciliation with Telstras Foreign Register |
|
(1) |
|
The Company and the Trustee have agreed that if the Company makes a
request under regulation 3.4(b) or 3.4(c) of the Telstra Foreign Ownership
Regulations, such request also will be made to IR Holders jointly by the Trustee
and the Company under these rules and the request will relate to both shares
(in accordance with the Telstra Foreign Ownership Regulations) and to IRs (in
accordance with rule 3.4(b) or 3.4(c) of these rules) held by the IR Holders, and
that the answers to such requests (both as regards IRs and shares) will be
provided to both the Company and the Trustee. |
|
|
(2) |
|
The results of any enquiry made under rule 3.4(b), 3.4(c) or 3.4(d)(1) will be
reconciled with the Foreign IR Register and Telstras Foreign Register may be
updated for any information provided as a result of the enquiry (unless the
Trustee, the Company or the IR Registrar considers there is a significant risk
such information is unreliable) within 5 business days of receipt of such
information. |
3.5 |
|
Consequences of a failure to notify |
|
(a) |
|
Subject to any penalty determined by the Trustee under rule 3.4(c), no penalty will be
imposed for a failure to provide a Foreign Ownership Notification Form or to otherwise
comply with the notification obligations in this rule 3 except that: |
|
(1) |
|
a Foreign IR Holder may lose priority in the Foreign IR Register for the
purposes of rule 6.4; and |
|
|
(2) |
|
the Trustee may treat all the IRs registered in the IR Holders relevant HIN or
SRN as constituting a Foreign IR Holding. |
(b) |
|
The Trustee is not required to follow-up any IR Holders who have not complied with the
notification obligations in this rule 3. |
|
3.6 |
|
Number of IRs deemed to be in an IR Holders Foreign IR Holding |
|
(a) |
|
An IR Holder who in relation to a HIN or SRN is, or is deemed to be, a Foreign IR Holder
will remain a Foreign IR Holder in relation to that HIN or SRN until notice is received
under this rule 3 that the IR Holder is no longer a Foreign IR Holder in relation to all or
part of the holding in that HIN or SRN. |
|
(b) |
|
The number of IRs in a Foreign IR Holders Foreign IR Holding at any time shall be the
lower of the number of IRs: |
|
(1) |
|
deemed to constitute an IR Holders Foreign IR Holding under rule 3.5(a)(2); |
|
|
(2) |
|
registered in the HIN or SRN containing the Foreign IR Holding; and |
|
|
(3) |
|
notified by the IR Holder under regulations 3.2, 3.3 or 3.4 as constituting the
Foreign Holding for that HIN or SRN. |
(c) |
|
Notwithstanding any other rule of these rules, a Mixed IR Holder may be treated by the
Trustee, for the purposes of these rules, as if the IR Holder were two separate IR
Holders, one with Domestic IRs and the other with a Foreign IR Holding, whether or not
the Mixed IR Holder has been allocated different HINs or SRNs in relation to their
Domestic IRs and their Foreign IR Holding. |
IR Foreign Ownership Rules page 9
4 |
|
Mixed IR Holders to endeavour to use different HINs or SRNs |
|
(a) |
|
Where possible, a Mixed IR Holder should maintain two separate HINs or SRNs, with all
Domestic IRs held in one of the HINs or SRNs and all IRs constituting the Foreign IR
Holding held in the other HIN or SRN. |
|
(b) |
|
Where a Mixed IR Holder has been allocated different HINs or SRNs under rule 4(a), the
Mixed IR Holder must ensure that only Domestic IRs are recorded in the HIN or SRN
allocated to hold the Domestic IRs. |
|
5 |
|
Procedures for Unacceptable Individual Foreign-Ownership
Situation |
|
5.1 |
|
Trustees power to dispose of IRs |
|
(a) |
|
If the Trustee believes that an Unacceptable Individual Foreign-Ownership Situation
exists, the Trustee may (but is not obliged to) issue: |
|
(1) |
|
a Warning Notice; or |
|
|
(2) |
|
a Disposal Notice, |
|
|
to the relevant IR Holder in any form approved by the Trustee from time to time.
|
|
(b) |
|
For the avoidance of doubt, nothing in these rules require the Trustee to issue a Warning
Notice to an IR Holder before issuing that IR Holder with a Disposal Notice. |
|
(c) |
|
The Disposal Notice may: |
|
(1) |
|
require the IR Holder to dispose of all or any of the IR Holders IRs as specified
in the Disposal Notice; |
|
|
(2) |
|
require disposal to take place by the Divestment Date; and |
|
|
(3) |
|
specify circumstances, consistent with these rules, in which the IR Holder need
not dispose of all or any of the IRs the subject of a Disposal Notice if certain
events happen. |
(d) |
|
If the terms of a Disposal Notice are not complied with by an IR Holder, the Trustee may,
at any time, sell all or any of the IR Holders IRs specified in the Disposal Notice in
accordance with rule 5.1(e). |
|
(e) |
|
For the purposes of rule 5.1(d): |
|
(1) |
|
the Trustee may sell the IR Holders IRs at the best price reasonably obtainable
at the relevant time and any sale of IRs by the Trustee on the Exchange will be
regarded as discharging this obligation; |
|
|
(2) |
|
each IR Holder appoints the Trustee and each of the directors of the Trustee
jointly and severally as its attorney (with power to appoint sub-attorneys) in the
name of the IR Holder and on behalf of the IR Holder to execute any documents
and implement any procedures as may be necessary or desirable in the opinion
of the attorney to procure the sale and transfer of IRs on behalf of the IR Holder;
and |
|
|
(3) |
|
the title of the transferee to any IRs sold under rule 5.1(d) and 5.1(e) is not
affected by any irregularity or invalidity in connection with the sale and transfer
of the IRs to the transferee (but nothing in this rule 5.1 prevents the exercise by
the Trustee of its powers under these rules if the transferee is a Foreign IR
Holder). |
IR Foreign Ownership Rules page 10
5.2 |
|
Treatment of proceeds of sale |
|
(a) |
|
The proceeds of any sale of IRs under rule 5.1 will be dealt with in accordance with rule
50.5 of the IR Trust Deed. |
|
(b) |
|
The net amount payable to the IR Holder may be paid in any manner determined by the
Trustee under rule 50.5 of the IR Trust Deed. |
|
6 |
|
Procedures for Unacceptable Aggregate Foreign-Ownership
Situation |
|
6.1 |
|
Procedures when Aggregate Foreign Ownership Limit exceeded |
|
(a) |
|
If, as a result of a days (Specified Day) registrations, the Aggregate Foreign Ownership
Limit is exceeded, all IRs registered in the names of Foreign IR Holders as a result of that
days registrations (including those IRs which are deemed registered on that day under
rule 6.4) will be registered in separate SRNs (one for each affected Foreign IR Holder) in
the Trustees issuer sponsored sub-register (Special SRNs). |
|
(b) |
|
The IRs registered in the Special SRNs (Breach IRs) must be divested and the Trustee
will send a Disposal Notice to all Foreign IR Holders holding Breach IRs. |
|
(c) |
|
No Warning Notices will be issued in relation to Breach IRs. |
|
(d) |
|
The Company has agreed that similar steps will be taken by the Company in respect of
shares registered in the names of Foreign Members as a result of that days registrations
or deemed registrations under the Telstra Foreign Ownership Regulations. |
|
(e) |
|
Notwithstanding rules 6.1(a) and 6.1(b), IRs registered in the names of Initial IR Holders
on settlement of the Offer (Offer Registrations) shall not be registered in Special SRNs
or treated as Breach IRs. |
|
(f) |
|
Rule 6.1(e) does not affect the treatment of other registrations and deemed registrations
occurring on the same day as the Offer Registrations, which will be dealt with in
accordance with this rule 6. |
|
(g) |
|
If, even after the Breach IRs have been dealt with in accordance with this rule 6, the
Companys level of foreign ownership still exceeds the Aggregate Foreign Ownership
Limit, the limit shall be treated as also having been exceeded on the day preceding the
Specified Day, and so on until the Companys level of foreign ownership does not exceed
the Aggregate Foreign Ownership Limit. |
|
6.2 |
|
Foreign IR Holders must dispose of Breach IRs |
|
(a) |
|
Subject to rule 6.2(b), Foreign IR Holders must dispose of Breach IRs and register a
transfer to give effect to that disposal prior to the 5th business day of the month following
the month in which the Disposal Notice was issued (also a Divestment Date). However,
if that 5th business day is less than 30 calendar days after the date the Disposal Notice
was issued, the Foreign IR Holder must dispose of the Breach IRs and register a transfer
to give effect to that disposal prior to the 5th business day of the next month (also a
Divestment Date)1. |
|
|
|
1 |
|
These examples assume the registration or deemed registration which led to the
issue of the Disposal Notice occurred more than 30 days after the IRs were first traded on the
Exchange and, therefore, rule 6.2(b) does not apply. |
IR Foreign Ownership Rules page 11
|
Example 1: |
|
If a Disposal Notice is issued to a Foreign IR Holder on 6 August, the
Breach IRs must be disposed of and the transfer registered prior to
the 5th business day of September. |
|
|
Example 2: |
|
If a Disposal Notice is issued to a Foreign IR Holder on 20 August, the
Breach IRs must be disposed of and the transfer registered prior to
the 5th business day of October. |
(b) |
|
This rule 6.2(b) applies if the registration (or deemed registration) which led to the issue
of the Disposal Notice occurred:
(1) on or after the day IRs were first traded on the Exchange; and
(2) on or before the day 30 after the day IRs were first traded on the Exchange.
If this regulation 6.2(b) applies, Foreign IR Holders must dispose of Breach IRs and
register a transfer to give effect to that disposal prior to the day 6 months after the day
IRs were first traded on the Exchange (also a Divestment Date). |
|
6.3 |
|
Trustees power to dispose of Breach IRs |
|
(a) |
|
If a transfer of Breach IRs has not been registered before the relevant Divestment Date,
the Trustee may sell all or any of the Breach IRs. |
|
(b) |
|
For the purposes of rule 6.3(a), the Trustee may transfer the relevant Breach IRs from the
Special SRN to another holding for the purposes of sale by the Trustee so that the
Foreign IR Holder will not be able to settle any transaction involving the Breach IRs (and
this will apply to prevent settlement, even if a transaction has been entered into, but not
settled before the relevant Divestment Date). |
|
(c) |
|
The timing and manner of the sale of Breach IRs will be solely within the discretion of the
Trustee but may not be more than 20 business days after the relevant Divestment Date. |
|
(d) |
|
The proceeds of any funds required to be remitted to the relevant IR Holder under this
rule 6.3 will be dealt with in accordance with rule 50.5 of the IR Trust Deed. |
|
(e) |
|
Disposal Notices issued in relation to Breach IRs will not be withdrawn prior to the
relevant Divestment Date. However, Breach IRs will not be divested if, on the relevant
Divestment Date, the level of foreign ownership is at or below the Aggregate Foreign
Ownership Limit. In this event, an announcement will be made to the Exchange and
notices will be sent to the holders of the relevant Breach IRs informing them that the
Disposal Notices previously issued have been withdrawn. |
|
(f) |
|
The Trustee and the directors of the Trustee will be under no liability to any IR Holder for
any loss or disadvantage suffered by the IR Holders as a result, whether directly or
indirectly, of any divestment (including the timing of the divestment). |
|
6.4 |
|
Determining priority among Foreign IR Holders date on which IRs
considered registered |
|
(a) |
|
For the purposes of these rules, regardless of the date of registration of an IR in the
name of an IR Holder, the date of registration of an IR in the name of an IR Holder shall
be the notification date as determined under rule 6.4(b) (Notification Date). |
|
(b) |
|
For the purposes of rule 6.4(a): |
|
(1) |
|
Initial notifications of the status of an IR Holder (ie. Foreign IR Holder or Mixed
IR Holder) in relation to a HIN or SRN will be treated as if the Notification Date
for that HIN or SRN by the IR Registrar was the date of registration of all the IRs
then held by that IR Holder in that HIN or SRN; |
IR Foreign Ownership Rules page 12
|
(2) |
|
Notifications of a change of status of an IR Holder (eg. Foreign IR Holder to
Domestic IR Holder or Domestic IR Holder to Mixed IR Holder) in relation to a
HIN or SRN will be treated as follows: |
|
(A) |
|
notification of a change of status from domestic to foreign will be
treated as if the Notification Date was the date of registration of all of
the IRs then held by that IR Holder in that HIN or SRN; |
|
|
(B) |
|
notification of a change of status from domestic to mixed will be
treated as if the Notification Date was the date of registration of that
portion of the IRs held by that IR Holder in that HIN or SRN which,
upon notification, will constitute a Foreign IR Holding; |
|
|
(C) |
|
notification of a change of status from mixed to foreign will be treated
as if the Notification Date was the date of registration of that portion of
the IRs held by that IR Holder in that HIN or SRN which immediately
prior to notification constituted Domestic IRs; and |
|
|
(D) |
|
notification of a change of status from foreign to domestic, foreign to
mixed or mixed to domestic will not increase the level of foreign
ownership and the IRs the subject of such a notification will, following
registration of the change and receipt of any supporting material
requested, not be liable to be divested. |
|
(3) |
|
The Notification Date for a response by a Mixed IR Holder to a notice given by
the Trustee under rules 3.4(b) or 3.4(c) will be treated as if it were the date of
registration of that portion of the IRs held by that IR Holder which equals the
increase (if any) in the number of IRs notified in the relevant notice as
constituting that IR Holders Foreign IR Holding over the number of IRs then
treated as being in that IR Holders Foreign IR Holding under rule 3.6. |
|
|
(4) |
|
The date on which the Trustee elects to treat an IR Holder as a Foreign IR
Holder in relation to a HIN or SRN in accordance with rules 1.2(a)(5) or
1.2(a)(6) or rule 1.2(b) will be treated as the date of registration of all the IRs
then held by that IR Holder in that HIN or SRN. |
(c) |
|
For the purposes of rule 6.4(b), the Notification Date means: |
|
(1) |
|
in relation to notifications given through CHESS, the date an electronic
notification received through CHESS is processed in accordance with the
scheduled times specified in the ASTC Settlement Rules; and |
|
|
(2) |
|
in relation to notification not given through CHESS (including, but not limited to,
Foreign Ownership Notification Forms) the date of processing of the Foreign
Ownership Notification Form or other notification, such date being within 5
business days of the receipt of the notification. |
(d) |
|
For the purposes of these divestment procedures: |
|
(1) |
|
a notification (including, without limitation, a Foreign Ownership Notification
Form) will only be valid if the relevant HIN or SRN is quoted; |
|
|
(2) |
|
for the purposes of non-CHESS transactions, Foreign Ownership Notification
Forms and other notifications will be treated as being processed on the date the
IR Registrar matches the Foreign Ownership Notification Form or other
notification with the relevant transfer or transmission application, and in any
event no earlier than the date of registration of that transfer or transmission
application; and |
|
|
(3) |
|
both notifications given through CHESS and otherwise may be treated by the
Trustee as being given in relation to both IRs and shares in the relevant HIN or
SRN, even if not so expressed. |
IR Foreign Ownership Rules page 13
6.5 |
|
Treatment of foreign to foreign transactions |
|
(a) |
|
For transactions other than through CHESS, there will be no special facility through which
foreign to foreign transfers may be quarantined from the divestment procedures in this
rule 6. |
|
(b) |
|
Transfers of IRs not held in a Special SRN, and which are traded through the special
CHESS foreign to foreign allocation system, will not be recorded in a Special SRN and,
therefore, will not potentially be liable to divestment. These purchases will be recorded in
the normal CHESS HINs or SRNs. |
|
(c) |
|
Disposal Notices will not be issued in relation to IRs registered on the New Zealand
branch IR register or represented by ADRs (except pursuant to rule 5). |
|
7 |
|
Procedures when Individual Foreign-Ownership Limit exceeded |
|
(a) |
|
The Company and the Trustee have agreed that if the directors of the Company, as a
result of the enquiries and notifications described in the Telstra Foreign Ownership
Regulations and these rules, and having regard to the information recorded in the Joint
Foreign Register in relation to both shares and IRs, believe that an Unacceptable
Individual Foreign-Ownership Situation exists, the directors of the Company: |
|
(1) |
|
will identify the number of IRs in which they believe the Foreign Person and its
Associates have an interest and which are in excess of the individual foreign
ownership limit (Breach IRs) and inform the Trustee of their determination; |
|
|
(2) |
|
may direct the Trustee to register any Breach IRs in a separate SRN in the
Trustees issuer sponsored sub-register under rule 6.1(a); |
|
|
(3) |
|
direct the Trustee to issue a Disposal Notice to the Foreign IR Holder in respect
of the Breach IRs under rule 6.1(b); and |
|
|
(4) |
|
if such disposal does not occur within 30 days of the date of the Disposal
Notice, will direct the Trustee to sell the relevant number of IRs and rule 6.3 will
apply. |
(b) |
|
The Trustee has agreed that, upon being informed by the Company that IRs are Breach
IRs, it will follow the Companys directions under rule 7(a) in respect of Breach IRs. |
|
8 |
|
Telstras obligations to notify the Exchange |
|
8.1 |
|
Obligation to notify Exchange on exceeding certain limit |
|
(a) |
|
By 9.00 am each day, the Company will determine, by reference to the Joint Foreign
Register: |
|
(1) |
|
the total number of shares held or treated as being held by Foreign Members
(excluding shares held by the Trustee) (the share level of foreign ownership);
and |
|
|
(2) |
|
the total number of IRs held or treated as being held by Foreign IR Holders (the
IR level of foreign ownership). |
(b) |
|
The Company will aggregate the share level of foreign ownership with the IR level of
foreign ownership (together, the level of foreign ownership) and will, in accordance with
the Listing Rules, inform the Exchange (and the market) when it becomes aware that the
level of foreign ownership: |
IR Foreign Ownership Rules page 14
|
(1) |
|
is equal to or exceeds a number of shares and/or IRs representing a
percentage of Non-Commonwealth Shares which is 5 percentage points below
the Aggregate Foreign Ownership Limit and, thereafter, where it has changed
by a number of shares and/or IRs representing more than 1% of Non-Commonwealth Shares; or |
|
|
(2) |
|
equals or exceeds a number of shares and/or IRs representing the percentage
of shares which is 35% of all Non-Commonwealth Shares (the Aggregate Foreign Ownership Limit). |
8.2 |
|
Obligation to notify Exchange when cease to exceed certain limit
The Company will, on its own behalf, and on behalf of the Trustee, in accordance with the
Listing Rules, inform the Exchange (and the market) when the level of foreign ownership
has ceased to equal or exceed a number of shares and/or IRs representing the
Aggregate Foreign Ownership Limit of Non-Commonwealth Shares or falls to less than
5% below that limit. |
|
9 |
|
Co-operation with Company |
|
(a) |
|
The Company and the Trustee have agreed to cooperate in respect of the
implementation of these rules and the Telstra Foreign Ownership Regulations. |
|
(b) |
|
Anything required or permitted to be done by the Trustee under these rules may be done
by the Company or by the Companys share registrar on its behalf. |
|
(c) |
|
The Company may direct the Trustee in respect of anything to be done by the Trustee
under the Telstra Foreign Ownership Regulations or these rules. The Trustee has
agreed that it will act on the Companys instructions. |
|
(d) |
|
Information provided to the Trustee under these rules will be made available to the
Company, and the Company has agreed to make information provided to it under the
Telstra Foreign Ownership Regulations or these rules available to the Trustee. |
|
10 |
|
IR Registrar may act on the Trustees behalf
Anything required or permitted to be done by the Trustee under these rules may be done
by the Trustee or by the IR Registrar on its behalf. |
|
11 |
|
Operation of IR Foreign Ownership Rules
These rules become operative on the date on which IRs are first traded on the Exchange,
then remain operative as long as IRs are on issue. |
IR Foreign Ownership Rules page 15
|
|
|
20 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
|
4th Floor, 20 Bridge Street
|
|
Telephone 03 9634 6400 |
SYDNEY NSW 2000
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra 3 Share Offer Final Institutional Offering Memorandum
In accordance with the listing rules, I attach a copy of an announcement for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
INSTITUTIONAL OFFERING MEMORANDUM
Telstra Corporation Limited
(A.B.N. 33 051 775 556)
467,785,111 ordinary shares
in the form of instalment receipts
The Commonwealth of Australia (the Commonwealth) is offering 3,693,955,817 shares of
Telstra Corporation Limited (Telstra) in a global offering (the Global Offering). This
Institutional Offering Memorandum relates to an offering of shares to qualified institutional
buyers in the United States in reliance on the exemption from registration under the US Securities
Act of 1933, as amended (the Securities Act) afforded by Rule 144A (Rule 144A) thereunder (the
US Offering), and to institutional investors in the rest of the world (excluding Australia, New
Zealand and Japan) in reliance on Regulation S under the Securities Act (Regulation S) (the ROW
Offering and, together with the US Offering, the International Offering). The ROW Offering also
includes an offer to investors in Japan via a public offering without listing, or POWL, under a
Japanese Prospectus. The Global Offering includes an offering by the Commonwealth of 3,226,170,706
shares by way of a general public offering to retail and institutional investors in Australia and
New Zealand (the Australian Offering). The retail component of the Australian Offering is
referred to as the Retail Offering, the institutional component of the Australian Offering is
referred to as the Australian Institutional Offering and the International Offering and the
Australian Institutional Offering are referred to collectively as the Institutional Offering.
Purchasers of the shares must pay for them in two instalments. Payment of the shares will be
in Australian dollars. The first instalment is due on or before closing of the Global Offering and
the final instalment is due on or before 29 May 2008 (Sydney time). Purchasers may prepay the final
instalment before its due date. After payment of the first instalment, purchasers will receive
instalment receipts. After payment of the final instalment, purchasers will receive shares.
Telstra is admitted to the official list of the Australian Stock Exchange (ASX) and the
ordinary shares of Telstra are quoted on the ASX and the New Zealand Stock Exchange (NZSX). On 17
November 2006, the closing sale price of the shares on the ASX was A$3.75 per share. The trading
symbol for shares quoted on the ASX and the NZSX is TLS. Application has been made for the
instalment receipts and shares to be approved for official quotation on the ASX. Application has
been made for the instalment receipts and shares to be approved for official quotation on the NZSX.
The Commonwealth has granted an option to the Joint Global Coordinators to purchase up to an
additional 554,093,373 shares, representing up to 15% of the offer size, to cover over-allotments,
if any (the Over-allotment Option). The Over-allotment Option is exercisable within 30 days from
the commencement of trading of the instalment receipts on the ASX.
Read the risk factors beginning on page 18 of this Institutional Offering Memorandum to
learn about certain factors you should consider before buying shares.
First instalment: A$2.10 per share
Final instalment: A$1.60 per share
Final price: A$3.70 per share
Neither the instalment receipts nor the shares have been or will be registered under the
Securities Act, or with any securities regulatory authority of any state or other jurisdiction of
the United States. The instalment receipts and shares may only be offered and sold (1) within the
United States to persons reasonably believed to be qualified institutional buyers in reliance on
the exemption from registration under the Securities Act afforded by Rule 144A and (2) outside the
United States in offshore transactions to non-US persons (as such terms are defined in Regulation
S) in reliance on Regulation S. Investors in the United States are hereby notified that the sellers
of the instalment receipts and shares may be relying on the exemption from the provisions of
Section 5 of the Securities Act afforded by Rule 144A. For further details about eligible offerees,
deemed representations and transfer and resale restrictions, please refer to the sections of this
Institutional Offering Memorandum titled Important Notices, Notice to Investors and Plan of
Distribution.
It is expected that delivery of the instalment receipts will be made in Australia in book
entry form on or about 24 November 2006 against payment of the first instalment.
Joint Global Coordinators
|
|
|
|
|
ABN AMRO Rothschild
|
|
Goldman Sachs JBWere
|
|
UBS Investment Bank |
Co-lead Managers
|
|
|
|
|
|
|
Citigroup
|
|
Credit Suisse
|
|
Daiwa Securities SMBC
|
|
JPMorgan |
|
|
Lehman Brothers
|
|
Morgan Stanley |
|
|
Co-Manager
RBC Capital Markets
The date of this Institutional Offering Memorandum is 18 November 2006.
IMPORTANT NOTICES
This Institutional Offering Memorandum is confidential and is being furnished to prospective
investors by the Commonwealth in connection with an offering exempt from registration under the
Securities Act solely for the purpose of enabling a prospective investor to consider the purchase
of instalment receipts or shares as described herein. The information contained in this
Institutional Offering Memorandum has been provided by Telstra and other sources identified herein.
No representation or warranty, express or implied, is made by the Commonwealth, the Joint Global
Coordinators, the Co-Lead Managers, the Co-Manager or any adviser named herein or any of their
respective affiliates or representatives as to the accuracy or completeness of such information.
Nothing contained in this Institutional Offering Memorandum is, or shall be relied upon as, a
promise or representation by the Joint Global Coordinators, the Co-Lead Managers, the Co-Manager or
any such advisers, affiliates or representatives. Any reproduction of this Institutional Offering
Memorandum, in whole or in part, and any disclosure of its contents or use of any information
herein for any purpose other than considering an investment in the instalment receipts or shares is
prohibited. By accepting delivery of this Institutional Offering Memorandum, each offeree of the
instalment receipts or shares agrees to the foregoing.
Notwithstanding anything in this Institutional Offering Memorandum to the contrary, each
prospective investor (and each employee, representative or other agent of the prospective investor)
may disclose to any and all persons, without limitation of any kind, the United States federal and
state income tax treatment and tax structure of the offering and all materials of any kind
(including opinions or other tax analyses) that are provided to the prospective investor relating
to such United States federal and state income tax treatment and tax structure, other than any
information for which nondisclosure is reasonably necessary in order to comply with applicable
securities laws. For this purpose, tax structure is any fact that may be relevant to
understanding the United States federal or state income tax treatment of the offering.
In making an investment decision, you must rely on your own examination of Telstra, the
instalment receipts and shares and the terms of the offering, including the merits and risks
involved. The contents of this Institutional Offering Memorandum are not to be construed as legal,
business or tax advice. Each prospective investor should consult its attorney, business adviser and
tax adviser as to legal, business or tax advice. The instalment receipts and the shares offered
hereby have not been approved by any United States federal or state securities commission or
regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or
determined the adequacy of this Institutional Offering Memorandum. Any representation to the
contrary is a criminal offence.
No dealer, salesperson or other individual has been authorised to give any information or to
make any representations other than those contained in this Institutional Offering Memorandum and,
if given or made, such information or representations must not be relied upon as having been
authorised by Telstra, the Commonwealth, the Joint Global Coordinators, the Co-Lead Managers, the
Co-Manager or their respective affiliates. Neither the delivery of this Institutional Offering
Memorandum nor any sale made hereunder shall under any circumstance create an implication that
there has been no change in the affairs of Telstra since the date hereof.
The distribution of this Institutional Offering Memorandum and the offer or sale of the
instalment receipts or shares in certain jurisdictions may be restricted by law. Any person who
receives this Institutional Offering Memorandum is required to inform themselves about and to
observe any such restrictions. This Institutional Offering Memorandum does not constitute an offer
of, or an invitation to purchase or subscribe for any of the instalment receipts or shares in any
jurisdiction in which such offer or invitation would be unlawful. See Plan of Distribution
Restrictions on Offers and Sales.
In connection with the offering of the instalment receipts and the shares, the Joint Global
Coordinators, or agents thereof, may over-allot or effect transactions with a view to supporting
the market price of the instalment receipts at a level higher than that which might otherwise
prevail for a limited period of time after the commencement of conditional and deferred settlement
of the instalment receipts on the ASX. However, there may be no obligation on the Joint Global
Coordinators or their respective agents to do this. Such stabilisation, if commenced, may be
discontinued at any time, and must be brought to an end after a limited period.
ii
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED
UNDER CHAPTER 421 B OF THE NEW HAMPSHIRE REVISED STATUTES (ANNOTATED) (RSA 421 B) WITH THE STATE OF
NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENCED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421 B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE
SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR
GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE
PROVISIONS OF THIS PARAGRAPH.
Cautionary Statement Regarding Forward-Looking Statements
Some of the information contained in this Institutional Offering Memorandum constitutes
forward-looking statements that are subject to various risks and uncertainties. These statements
can be identified by the use of forward-looking terminology such as may, will, expect,
anticipate, estimate, continue, plan, intend, believe, objectives, outlook,
guidance or other similar words, including statements relating to our outlook for fiscal 2007 and
strategic management objectives set forth in Operational and Financial Review and Prospects,
including under the captions Operational and Financial Review and Prospects Strategic Management
Objectives and Outlook. Our actual results, performance or achievements could be significantly
different from the results or objectives expressed in, or implied by, those forward-looking
statements.
Our fiscal 2007 outlook and strategic management objectives contained in this Institutional
Offering Memorandum are based on a large number of assumptions concerning future events, including
without limitation the successful implementation of our transformation strategy and no further
adverse regulatory outcomes, as well as a number of assumptions and estimates relating to factors
affecting our business. As a result, these assumptions and estimates are inherently uncertain and
subject to a wide variety of risks, including significant regulatory, business, economic and
competitive risks, that could cause our actual results to differ materially from our fiscal 2007
outlook and strategic management objectives. Investors should note that our Board established the
strategic management objectives in order to measure the performance of management, particularly in
relation to the implementation of our transformation strategy. See Operating and Financial Review
and Prospects Strategic Management Objectives. It is important to note that our outlook for
fiscal 2007 and strategic management objectives are not forecasts or projections, and should not be
regarded as such by investors. Investors should also note that any movement in an assumption may
offset or compound the effect of a change in any other assumption. Accordingly, there can be no
assurance that the fiscal 2007 outlook and strategic management objectives will be indicative of
our future performance or that actual results will not differ materially. We can not give any
assurance that either our fiscal 2007 outlook or strategic management objectives will be achieved
and their inclusion in this Institutional Offering Memorandum should not be regarded as a
representation by any person that they will be achieved.
Important factors that could cause our actual results to differ materially from our fiscal
2007 outlook and strategic management objectives and other forward-looking statements in this
Institutional Offering Memorandum are set forth under the caption Risk Factors and elsewhere in
this Institutional Offering Memorandum, including under the captions Operational and Financial
Review and Prospects Outlook and Strategic Management Objectives. Given these risks,
uncertainties and other factors, you should not place an undue reliance on any forward-looking
statement.
Where to Find More Information
We file reports and other information with the Securities and Exchange Commission (the SEC).
These reports and other information about us can be read and copied at the SECs Public Reference
Room at 100 F Street,
iii
N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. In addition, these materials may also be inspected and copied at the
offices of the New York Stock Exchange (NYSE), Inc., 20 Broad Street, New York, New York 10005.
Our filings are also available over the Internet at the SECs website at www.sec.gov. We intend to
deregister from the SEC reporting obligation and delist our American Depositary Receipt (ADRs)
from the NYSE as soon as feasible following adoption of new SEC regulations on deregistration.
Following the deregistration and delisting, we will cease to file periodic and current reports to
the SEC, including annual reports on Form 20-F, and instead will only be required to comply with
Australian reporting obligations. See Risk Factors for a further discussion.
Presentation of Financial Information
In July 2002, the Financial Reporting Council in Australia formally announced that Australian
reporting entities would be required to comply with Australian accounting standards equivalent to
International Financial Reporting Standards (A-IFRS) as adopted by the Australian Accounting
Standards Board (AASB) and other pronouncements set by the International Accounting Standards
Board (IASB) for financial years commencing on or after 1 January 2005.
Our audited consolidated financial statements for the year ended 30 June 2006 were prepared in
accordance with A-IFRS, and comparative information for the year ended 30 June 2005 has been
restated in accordance with A-IFRS, except for AASB 132: Financial Instruments: Disclosure and
Presentation and AASB 139: Financial Instruments: Recognition and Measurement, where comparative
information was not required to be restated. In addition, we have elected to early adopt AASB 7:
Financial Instruments: Disclosures, which supersedes the disclosure requirements of AASB 132.
Certain financial information for the years ended 30 June 2004, 2003 and 2002 has been reconciled
to US-GAAP and is derived from our audited consolidated financial data for those periods, which is
not included herein. A-IFRS differs in some material respects from US-GAAP. For a reconciliation of
the material differences between A-IFRS and US-GAAP as they relate to our audited consolidated
financial statements, see note 37 to our audited consolidated financial statements.
Information based on Australian generally accepted accounting principles in existence prior to
the adoption of A-IFRS is not comparable to information prepared in accordance with A-IFRS.
Enforceability of Civil Liabilities
We are an Australian public corporation having limited liability. Most of our directors and
executive officers and certain of the experts named herein are residents of Australia. All or a
substantial portion of our assets and these persons are located outside of the United States. As a
result, it may be difficult for investors to effect service within the United States upon us, our
directors, executive officers or experts, or to enforce against us or any of these persons in
United States judgements predicated solely upon civil liability under United States federal or
state securities laws. In addition, it may be difficult for investors to enforce, in original
actions brought in courts in jurisdictions located outside the United States, liabilities
predicated upon United States federal or state securities laws. We have been advised by our
Australian counsel, Mallesons Stephen Jaques, that there is doubt as to the enforceability in
Australia, in original actions or in actions for enforcement of judgements of United States courts,
of civil liabilities predicated upon the federal or state securities laws of the United States.
The Commonwealth of Australia is a sovereign entity and, therefore, may be entitled to
sovereign immunity from civil liability predicated under the United States federal or state
securities laws and the laws of other jurisdictions. It may be difficult for investors to effect
service within the United States upon the Commonwealth of Australia, or to obtain or realise upon
judgements of courts in the United States or other jurisdictions against the Commonwealth. The
Australian Government has been advised by Freehills, its Australian legal counsel, that there is
doubt as to the enforceability in Australia, in original actions or in actions for the enforcement
of judgements of courts of the United States, of civil liabilities predicated solely upon federal
or state securities laws of the United States.
iv
Table of Contents
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|
Summary Overview |
|
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1 |
|
Risk Factors |
|
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18 |
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Dividends |
|
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27 |
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Exchange Rates |
|
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28 |
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Listing Information |
|
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29 |
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Major Shareholders and Related Parties |
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31 |
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Relationship with the Commonwealth |
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33 |
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The Future Fund |
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36 |
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Use of Proceeds |
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37 |
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Selected Consolidated Financial and Statistical Data |
|
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38 |
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Operating and Financial Review and Prospects |
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42 |
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Quantitative and Qualitative Disclosures about Market Risk |
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110 |
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Information on the Company |
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114 |
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Competition |
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134 |
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Regulation |
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137 |
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Directors and Management |
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146 |
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Exchange Controls and Foreign Ownership |
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167 |
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Description of Shares and our Constitution |
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173 |
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Relationship between Shares and Instalment Receipts |
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179 |
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Description of the Instalment Receipts and Trust Deed |
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179 |
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Taxation |
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188 |
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Notice to Investors |
|
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198 |
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Plan of Distribution |
|
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200 |
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Validity of Securities |
|
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209 |
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Independent Auditors |
|
|
209 |
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Glossary |
|
|
210 |
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Index to Financial Statements |
|
|
F-1 |
|
Annex A: Remuneration Report |
|
|
A-1 |
|
v
( This page intentionally left blank)
Summary Overview
This summary highlights key aspects of the offering of our shares contained elsewhere in this
Institutional Offering Memorandum. This summary is not a substitute for the more detailed
information contained in the rest of this Institutional Offering Memorandum. For a more
comprehensive description of the offering of our shares, you should read the entire Institutional
Offering Memorandum including Risk Factors. The terms we, our, us, and other like terms
refer to Telstra Corporation Limited and its consolidated subsidiaries, unless the context requires
otherwise. The Commonwealth of Australia is referred to as the Commonwealth and the Government of
the Commonwealth of Australia is referred to as the Australian Government or the Government.
General
We are Australias leading telecommunications and information services company, offering a
full range of services in these markets. We also operate in certain overseas countries.
Our main activities include the provision of:
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basic access services to most homes and businesses in Australia; |
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local and long distance telephone calls in Australia and international calls to and from
Australia; |
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mobile telecommunications services; |
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broadband access and content; |
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a comprehensive range of data and Internet services including
through Telstra BigPond®,
Australias leading Internet service provider (ISP); |
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management of business customers information technology and/or telecommunications services; |
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wholesale services to other carriers, carriage service providers (CSPs) and ISPs; |
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advertising, search and information services through Sensis; and |
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cable distribution services for FOXTELs cable subscription television services. |
One of our strengths in providing integrated telecommunications services is our extensive
geographical coverage through both our fixed and mobile network infrastructure. This underpins the
carriage and termination of the majority of Australias domestic and international voice and data
traffic.
We own 50% of FOXTEL, and our international businesses include interests in CSL New World
Mobility Group (CSL), Hong Kongs leading mobile operator, TelstraClear Limited (TelstraClear),
the second largest full service carrier in New Zealand, and Reach Ltd (REACH), a provider of
global connectivity and international voice and satellite services, as well as SouFun Holdings
Limited, a leading real estate and home furnishings website in China.
Corporate Objective
Our corporate objective is to create long-term shareholder value through providing integrated
communication, information and entertainment services and customer-focused solutions.
Vision and Mission
Our vision is to do for our customers what no one else has done. That is, create a world of
1-click, 1-touch, 1-button, 1-screen, 1-step solutions that are simple, easy and valued by
individuals, businesses, enterprises and governments.
Our mission is to know our customers and meet their needs better than anyone else. We aim to
give customers a personalised, seamless experience that makes it easy for them to do what they
want, when they want it.
1
Strategy
Following a comprehensive review of our operations during the first half of fiscal 2006, from
customer-facing to back-office operations, we announced a whole-of-company, five year
transformation strategy in November 2005. The key elements of this transformation strategy are:
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building a next-generation fixed network to support the growing demand for IP-based services
and simplifying IT systems; |
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rolling out next-generation wireless services over our recently launched NEXT GTM
national wireless broadband network (NEXT GTM wireless network); |
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implementing market-based management using extensive customer research and knowledge to
differentiate our product and service offerings tailored for particular customer segments; |
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providing customers with an integrated user experience across all devices and platforms
fixed, wireless and Internet; |
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removing costs from operations, by reducing complexity, making business systems more efficient
and simplifying operations; |
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expanding and enhancing our Sensis business through organic growth and targeted acquisitions
of advertising, search and information businesses; and |
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undergoing cultural transformation, including large investments in training staff and
reforming the way we do business. |
Our transformation strategy involves a complex and fundamental change to our business,
operations, networks and systems and we are undertaking the transformation on an accelerated
schedule. A transformation of this size, speed and complexity has not been attempted by any other
telecommunications company around the world. The initiatives associated with our transformation
strategy involve significant capital expenditure and extensive management attention and resources
and entail substantial risks. Our ongoing investment in this transformation has significantly
reduced income and free cash flows. We believe we have to undertake these major changes at this
time and under our proposed schedule in order to maintain our competitiveness and improve our
financial results in an increasingly competitive, technologically challenging and highly regulated
environment. The main initiatives of our transformation strategy are described below.
Strengthening our fixed line telecommunication network and services
We intend that our next-generation fixed network will deliver new, better and faster services
to our customers. This next-generation fixed network will include an IP core network that will
offer increased platform capacity compared to our current network. We intend to provide users with
more reliable and stable media and telephony services and expand the number and range of services
available to customers.
The development of our IP core network is well advanced. We are beginning to deploy advanced
services to upgrade business customers, including IP telephony and conferencing, IP-based call
centres, reliable higher-speed broadband, web-hosting and security services. We will offer new
multimedia applications to residential customers when higher speed services become available.
The new next-generation fixed network is expected to provide us with the ability to address
increasing customer demand and the growing market for Virtual Private Networks (VPNs) to connect
organisations and enterprises to the Internet. The new next-generation fixed network is expected to
reduce overall unit costs, allow proactive management of actual and predicted network demand and
permit network upgrades to be implemented simultaneously across the nation rather than sequentially
over many months. We are also investing in technology that greatly improves the speed of ADSL.
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Deploying NEXT GTM our national wireless broadband network for Australians
In October 2006, we launched our new NEXT GTM wireless network to replace our
existing CDMA network. Our NEXT GTM
wireless network customers will enjoy access to a
greater range of content and services as well as many enhanced features, such as improved video
calling services and faster broadband access speeds, in addition to better in-building coverage. We
will continue to operate services over both our existing GSM and CDMA networks until the national
NEXT GTM wireless network provides the same or better coverage than the CDMA network,
and in any event at least until January 2008. From that time, once the software upgrades are
complete and the new service matches or betters the current range and performance of CDMA and any
necessary Government agreements have been gained, we will close our CDMA network. We expect that
this initiative will reduce duplication of both capital and operational expenditure.
Implementing market-based management
We are implementing a market-based management approach focused on our customers needs. We
believe that extensive customer research will allow us to differentiate ourselves from competitors
by creating offers that are more relevant to the lifestyles and needs of particular customer
segments. Our ongoing customer research has guided the restructure of our consumer and small
business sales and marketing teams around seven consumer and five small and mid-sized enterprise
segments.
Creating integrated solutions for customers
We are seeking to provide individual and business customers with an integrated user experience
across devices and platforms fixed, wireless and Internet. Our transformation strategy involves
the integration of services across mobiles, BigPond®, and Sensis and is designed to facilitate
product differentiation tailored to customer needs, increasing the value of our products and
services for our customers.
Rationalising product and network platforms using a one factory approach
We are endeavouring to remove costs from our operations in part by reducing complexity, making
business systems more efficient and simplifying operations. We are removing or capping obsolete,
duplicated and ageing products and network platforms. Working with the customer is a crucial part
of this program as the customers move off legacy systems. Cutting complexity and the associated
cost from our operations is a critical first step to deliver customers a powerful and seamless user
experience, integrating devices and platforms in a simpler way.
Expanding and enhancing Sensis online offerings
Sensis, our advertising, search and information services business, is building on its search
and transaction business and over time integrating its applications and services business with
other products such as BigPond® and Telstra Mobile. Sensis is seeking to achieve rapid user and
advertiser growth by increasing online and wireless usage with a wide range of new content,
services and improvements across Sensis online network and through targeted acquisitions.
Transforming our culture
We are also undergoing a cultural transformation, with large investments in training employees
and improving the way we do business.
We have recast leadership, talent management and performance incentives to deliver essential
culture change. Our technical field workforce is becoming more mobile and responsive to customer
needs with new tools and equipment to support its operational performance. We are investing an
additional A$210 million over three years in a new training program for technical, engineering and
marketing staff in order to equip them with the right skills to build, operate and maintain
next-generation networks and better serve customers.
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Achieving regulatory reform
We remain committed to working towards a new regulatory environment that is pro-investment,
pro-consumer, pro-innovation and pro-competition. That is the kind of environment that we believe
is good for our business, our shareholders, our customers and the Australian telecommunications
industry overall. We will continue to invest considerable time and resources in a dialogue with
policy-making and regulatory authorities seeking to achieve a regulatory environment that
safeguards shareholder investments in next-generation networks and services.
4
The Global Offering
The Commonwealth is offering 3,693,955,817 shares in the Global Offering. If the
Over-allotment Option is exercised in full, the offer size will increase by an additional
554,093,373 shares.
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Retail Offering
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An offering of 2,422,818,374 shares comprising: |
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an offer to eligible Australian and New Zealand resident retail
shareholders in Telstra of an allocation benefit of 1 share for
every 2 shares held; and |
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a general public offer and a broker firm offer to Australian and
New Zealand resident retail investors. |
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Retail investors subscribing under the Retail Offering will be
entitled to (i) a discount of A$0.10 on the amount of the first
instalment payable by institutional investors and (ii) 1 bonus
loyalty share for every 25 instalment receipts purchased under the
Australian component of the Retail Offering and held until 15 May
2008, subject to certain conditions. The final instalment price for
Australian retail investors who hold their instalment receipts
until 15 May 2008 is A$1.60. |
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Institutional Offering
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An offering of 1,271,137,443 shares consisting of an invitation to: |
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institutional investors in Australia, New Zealand, the United
States and certain other overseas jurisdictions who are eligible
Telstra shareholders to bid for shares and be entitled to receive
an initial allocation benefit of 1 share for every 2 shares held,
as further described below; |
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other institutional investors in Australia, New Zealand, the
United States and certain other overseas jurisdictions to bid for shares; and |
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investors in Japan to subscribe for shares via a public offer
without listing, or POWL. |
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The Institutional Offering therefore comprises (i) the US Offering
and the ROW Offering, made pursuant to this Institutional Offering
Memorandum, (ii) the Australian Offering, made pursuant to the
Australian Prospectus or the New Zealand Investment Statement, as
applicable and (iii) the POWL, made pursuant to a Japanese
Prospectus that has been lodged with the relevant Japanese
regulatory authorities. |
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Selling shareholder
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The Commonwealth currently owns approximately 51.8% of Telstra, or 6,446,207,123 shares. |
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Future Fund
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Any shares not sold by the Commonwealth under the Global Offering will be transferred to the Future Fund, a Commonwealth investment
fund set up to strengthen the Commonwealths long-term finances by providing for its unfunded
superannuation liabilities. The Future Fund Board is a separate legal entity from the
Commonwealth, responsible for investment decisions and holds the Future Funds investments. |
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The exact number of shares to be transferred to the Future Fund and
the date of transfer will depend on whether or not the
Over-allotment Option is exercised and other administrative
mechanisms. The Commonwealth will initially retain sufficient
shares to meet the bonus |
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loyalty obligations available to certain retail investors in the
Retail Offering. Assuming no exercise of the Over-allotment Option,
the Future Fund will hold approximately 21% of Telstra shares upon
the completion of the Global Offering. |
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The shares transferred to the Future Fund will be subject to the
lock-up provisions described below. |
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Offer size
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The offer size is 3,693,955,817 shares, unless increased through the exercise of the Over-allotment Option. |
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Initial allocation benefits
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Institutions holding Telstra shares as of 6.00 pm Sydney time on 17 November 2006, that lodged a valid bid by that time, were entitled to an
initial allocation benefit of 1 share for every 2 shares held in Telstra as at the close of
the bookbuild, or such lesser number of shares for which the institution had lodged a valid
bid. |
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Over-allotment Option
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The Commonwealth has granted the Joint Global Coordinators an option exercisable within 30 days from the date of commencement of conditional
and deferred settlement trading of the instalment receipts on the ASX, to cover
over-allotments, if any, under the Institutional Offering. A full exercise of the
Over-allotment Option would increase the offer size by an additional 554,093,373 shares. |
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Final price
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A$3.70 per share. Payment for shares is to be made in Australian dollars. The first instalment payment per share is A$2.10. The final
instalment payment per share, due on 29 May 2008, will be A$1.60. |
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Institutional allocation policy
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The allocation of shares among institutional investors in the Global Offering was determined by the Commonwealth after consultation with
the Joint Global Coordinators and the Commonwealths financial adviser. There is no assurance
that any institutional investor has been allocated any shares or the number of shares for
which it has bid. |
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The first determinant was the final price. Bids for shares that
were submitted at prices lower than the final price received no
allocation of shares. After disregarding bids at prices lower than
the final price, the institutional allocation policy reflected a
number of factors. Following the provision of the initial
allocation benefit described above, the balance of the
institutions bid, if any, was subject to allocation on the basis
of various allocation criteria, which included investor quality,
quality of bid, participation in marketing activities and provision
of feedback in connection therewith and any other criteria as
considered by the Commonwealth. In addition, institutions believed
to have engaged in adverse market behavior prior to or during the
Global Offering may have been penalised. |
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Institutions (and retail investors bidding via broker-sponsored
bids) who were entitled to receive an initial allocation benefit
and who bid for shares at or above the final price generally
received their initial allocation benefit, although the
Commonwealth has reserved the right to withhold the initial
allocation benefit from persons it considers have engaged in
adverse market behaviour. |
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Instalment payment arrangements
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Payment for the shares is to be made in two instalments.
It is important to recognise that the partial payment characteristics of instalment receipts |
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may make percentage price movements in them, other things being
equal, greater than percentage price movements in fully paid
shares. |
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Prepayment option
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Holders of instalment receipts
(other than holders with a New
Zealand registered address) may prepay the final instalment for some (in
minimum parcels of 2,000 instalment receipts) or all of their registered holding on or by 28
February 2007 and on or by the last day of every month thereafter (each a prepayment date)
until 31 March 2008 and will receive a prepayment discount if they do so. Such prepayment must
be paid in Australian dollars. To prepay, institutional investors will need to contact the
instalment receipt and share registrar to obtain notification of the amount payable and the
applicable prepayment discount described below. A prepayment notification must be requested by
the eighth business day of the month during which prepayment is intended to be made. Payment
must be submitted to the instalment receipt and share registrar by 5:00 pm Sydney time on the
last business day of the relevant month. |
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Prepayment discount
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The prepayment discount is calculated by discounting the final instalment payable by institutional investors, for the period between
the relevant prepayment day (the last day of the month in which payment is received) and 29
May 2008, using the yield to maturity of the benchmark Government bond 8.75% Coupon, maturing
15 August 2008, applicable as at the end of the previous month. |
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Instalment receipts
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Upon payment of the first instalment, purchasers of the shares will be issued instalment receipts. Each instalment receipt will
evidence beneficial ownership in a particular share, subject to a security interest in favor
of the Commonwealth securing payment of the final instalment for that share. Upon payment of
the first instalment, the underlying shares will be transferred to the instalment receipt
trustee, Telstra Sale Company Limited (A.C.N. 121 986 187) under the trust deed, dated on or
about 8 October 2006, among the Commonwealth, the trustee and the holders of instalment
receipts. The trustee will be the registered holder of the shares and will hold them in trust
for the benefit of the holders of instalment receipts until payment of the final instalment,
subject to a security interest in favour of the Commonwealth securing payment of the final
instalment. |
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The trust deed allows for the holder of the instalment receipt to
exercise the voting rights attached to the share underlying each
instalment receipt and to receive all dividends and other benefits
paid or given on that share. |
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Upon payment of the final instalment, the instalment receipts will
be cancelled and investors will become registered holders of the
underlying shares. |
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Lock-ups
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Telstra has agreed that it will not offer to sell, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the SEC a registration statement under the Securities Act relating to, any shares
(or securities convertible into or exchangeable or exercisable for any shares) or deposit any
such securities in an American depositary receipt facility, or publicly disclose the intention
to make any such offer, sale, pledge, disposition or deposit, except under the Global
Offering, for a period of 180 days after the date of the International |
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Purchase Agreement without the prior written consent of the Joint
Global Coordinators. This lock-up does not prohibit (and no consent
will be required for) any offer to sell, sale, contract to sell,
pledge or other disposition, directly or indirectly, by Telstra of
any shares pursuant to or in connection with any employee,
executive, director or agent share option or purchase plans, or any
dividend reinvestment plan. |
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On the day that shares are transferred to the Future Fund, the
Minister of Finance and Administration (the Finance Minister)
will direct the Future Fund Board not to dispose of or agree to
dispose of the Future Funds Telstra shares for a period of two
years from the date instalment receipts are first listed on the ASX
except (a) in order to satisfy demand from eligible Telstra
shareholders under a Telstra initiated dividend reinvestment plan;
(b) as part of any Telstra capital management initiative, such as a
buy-back or capital reduction or (c) to a single investor, provided
that (i) the disposal involves at least 3% of Telstras issued
ordinary shares at the time of the disposal; (ii) the disposal does
not take place until at least six months after the date instalment
receipts are first listed on the ASX; (iii) the investor provides
an acceptable undertaking for at least the balance of the escrow
period; (iv) the price per share is no less than the final price
payable by institutional investors; and (v) Telstra is advised
prior to such disposal. After the two year lock-up period, the
Future Fund Board will be required to sell down its Telstra
shareholding over the medium term as directed under its investment
mandate. The current Government intends that the lock-up direction
will not be varied or revoked. However, a future Government may
take a different approach. |
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Use of proceeds
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The Commonwealth will receive all of the net proceeds of the Global Offering. We will receive none of the proceeds. |
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Dividends
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Our Board has considered the level of future dividends. In the interests of shareholders, it is the current intention of the Board
to declare fully franked ordinary dividends of A$0.28 per share for fiscal 2007. This assumes
the company continues to be successful in implementing its transformation strategy and there
are no further material adverse regulatory outcomes during the course of fiscal 2007. |
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The Board is unable to give guidance on ordinary dividends for
fiscal 2008 owing to the continuing uncertainty attached to
regulatory outcomes and impacts on our business as well as
transformation and market place risks. The final amount of
dividends declared for any year is a decision for the Board to make
twice a year in its normal cycle having regard to, among other
factors, the companys earnings and cash flow as well as future
regulatory impacts and all other factors that affect the operation
of the company. |
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United States taxation
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If you are a US holder, as defined in Taxation United States Taxation, your obligation to pay the final instalment will be treated for
United States federal income tax purposes as a debt obligation (a purchase obligation),
which will bear original issue discount (OID) to the extent that the amount of the final
instalment exceeds the difference between the fair market value of a share at the date of the
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instalment, all calculated in Australian dollars. In addition,
whether you are a cash-basis or accrual-basis taxpayer, you will be
entitled to deduct as interest expense, subject to various
limitations discussed below, the OID with respect to each purchase
obligation you have issued. See Taxation United States
Taxation. |
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Tax exempt US holders
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If you are a US holder that is exempt from United States federal income tax, such as an individual retirement account, Keogh plan or pension or
other employee benefits plan with tax exempt trusts, the obligation to pay the final
instalment constitutes acquisition indebtedness as defined in the US Internal Revenue Code
of 1986, as amended. Accordingly, dividends and gains, if any, on the sale of shares may be
taxable, in part, as unrelated business taxable income to you. See Taxation United States
Taxation. |
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Australian taxation
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The application of Australian
income tax to investors who are non-residents of Australia for tax purposes (tax non-residents) on the
disposal of their investment depends on the individual circumstances of the taxpayer as well
as the provisions of any tax treaty between Australia and the investors resident
jurisdiction. The Australian Government has announced proposed changes to the capital gains
tax provisions, which have not yet become law. In general, since the holding of an instalment
receipt constitutes an interest in an Australian resident trust estate, under current capital
gains tax provisions, a capital gain on the disposal of instalment receipts by tax
non-residents will be subject to Australian income tax. |
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In general, under the current capital gains tax provisions a
capital gain on disposal of shares by tax non-residents should not
be subject to Australian income tax where the tax non-residents
holding, together with the holding of associates, over a prescribed
period is less than 10% of issued shares in Telstra. Restrictions
on the extent of foreign ownership in Telstra should ensure that
non-resident investors qualify for exemption from Australian income
tax on capital gains on disposal of shares because the holding will be less than 10%. |
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Tax non-residents subject to such Australian income tax would also be required to file an income tax return in Australia. |
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The applicable Australian double tax treaty may exempt a gain from taxation, if the gain represents business profits and the tax
non-resident does not have a permanent establishment in Australia to
which those business profits are attributable. There is a question
as to whether or not a gain on instalment receipts will represent
business profits. Certain of Australias tax treaties
specifically exclude capital gains from business profits.
Investors who wish to rely on a double tax treaty for relief from
liability to pay Australian tax are urged to consult their tax advisers. |
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Under the proposed changes, a capital gain from an instalment receipt or a share by a tax non-resident should be subject to
Australian income tax only in limited circumstances. This is, in
general terms, where the value of the relevant interest is wholly
or principally attributable to Australian real property. Investors
should seek their own advice in relation to the potential impact of
the proposed changes to take into account their own circumstances. |
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See Taxation Australian Taxation. |
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Australian stamp duty
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The stamp duty laws of the Australian Capital Territory are relevant to dealings in the instalment receipts or shares of Telstra. Under
those laws, the transfer of marketable securities or an interest in marketable securities is a
dutiable transaction and liable to duty at the rate of 0.6% on the greater of (i) the
consideration (if any); and (ii) the market value of the marketable securities (or interest in them). |
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The transfer of shares from the Commonwealth to the trustee and
from the trustee to the holder of an instalment receipt on payment
of the final instalment are, however, exempt from duty under the
Commonwealth legislation relating to the privatisation of Telstra. |
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No duty is payable in respect of an agreement for sale or transfer
of shares which are quoted on the ASX, another stock exchange which
is a member of the World Federation of Exchanges or another stock
exchange which has been approved by the relevant Minister (a
Relevant Stock Exchange), or an interest in shares where the
underlying shares are quoted on a Relevant Stock Exchange (whether
the interest is quoted on such an exchange or not). |
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Therefore, stamp duty will not be payable by a subsequent acquirer
of the instalment receipts or shares if at the time of both any
agreement for sale and any transfer, the instalment receipts or
shares that are the subject of the transfer are quoted on a
Relevant Stock Exchange. |
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If at the time of a transfer or agreement for transfer of the
instalment receipts or shares, Telstra shares have been suspended
from quotation, this exemption may not apply. The ACT Revenue
Office is currently considering whether to treat marketable
securities as being quoted when there is a suspension from
quotation. If the exemption does not apply, any duty payable would
be payable by the subsequent acquirer of the instalment receipts or
shares. |
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Apart from the exemptions referred to above, other exemptions may
apply depending on the circumstances. |
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See Taxation Australian Taxation. |
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Voting rights
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Shareholders have one vote on a show of hands and one vote for each share held by them on a poll. Under the trust deed, the trustee
will appoint the holders of the instalment receipts to exercise the voting rights attached to
the shares underlying the instalment receipts. |
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The Minister for Communications, Information Technology and the
Arts (the Communications Minister) has discretionary powers to
direct us in some circumstances regarding matters involving the
public interest. To date, the Communications Minister has not used
this power. Our Board must ensure that we comply with any direction
from the Communications Minister given under these powers. |
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Foreign ownership restrictions
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The Telstra Corporation Act 1991 imposes limitations on the ownership of shares by foreign persons. Foreign persons and their associates may
not in total have interests in more than 35% of our shares not held by the Commonwealth,
referred to as the aggregate limit, and no single foreign person and its associates may have
an interest in more than 5% of our shares not held by the Commonwealth, referred to as the
individual limit. Telstra shares transferred to the Future Fund following the completion of
the Global Offering will not be considered to be held by the Commonwealth for the purposes of
these restrictions |
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on foreign ownership. If all of the shares currently held by the
Commonwealth are sold or transferred to the Future Fund, the
effective aggregate limit will be 35% rather than the current
16.87%, and the effective individual limit will be 5% rather than
the current 2.41%. In the event that either of the foregoing
limitations is exceeded, a person or persons who acquired
instalment receipts or shares which resulted in the limits being
exceeded, or further increased the level of interests held by
foreign persons and their associates in excess of these
limitations, may be subject to fines. Under the trust deed and our
constitution, Telstra and the trustee will have the power to divest
instalment receipts or shares in which foreign persons or their
associates have interests in excess of the limitations described
above in accordance with rules to be approved and published from
time to time by Telstra and the trustee. Telstra or the
Commonwealth may also request judicial intervention for remedies
which could include directing the disposal of instalment receipts
or shares, restraining the exercise of any rights attaching to
instalment receipts or shares and prohibiting or deferring the
receipt of sums payable on instalment receipts or shares. |
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The instalment receipts and shares sold in reliance on Rule 144A under the Securities Act will constitute restricted securities within
the meaning of Rule 144(a)(3) under the Securities Act, and for so long as they remain
restricted securities, such securities may not be transferred except in compliance with
certain transfer restrictions. See Notice to Investors. Furthermore, such securities may not
be deposited into any unrestricted depositary receipt facility in respect of Telstras
ordinary shares, including but not limited to Telstras American Depositary Receipt facility
for which the Bank of New York acts as depositary, unless and until such time as such
securities are no longer restricted securities within the meaning of Rule 144(a)(3). |
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Listing
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Application has been made for the instalment receipts and the underlying shares to be approved for official quotation on the
ASX. Application has been made for the instalment receipts and the underlying shares to be
approved for official quotation on the NZSX. |
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Neither the instalment receipts nor the shares will be listed, or
eligible for trading, on the NYSE, and neither may be deposited
into any unrestricted depository receipt facility in respect of
Telstras ordinary shares for such time as the instalment receipts
and shares are restricted securities within the meaning of Rule
144(a)(3) under the Securities Act. See Restricted Securities
above. As discussed elsewhere in this Institutional Offering
Memorandum, in the event that the SEC adopts the proposed rules
permitting foreign private issuers to deregister and terminate
their reporting obligations under the US Securities Exchange Act of
1934 (the Exchange Act), and if we are eligible to deregister
under such rules as adopted, we intend to deregister our ordinary
shares and delist our ADRs from the NYSE at such time. In such
case, we would no longer continue to prepare and file with the SEC
annual reports on Form 20-F, or otherwise be subject to reporting
obligations under the Exchange Act. We will continue to be subject
to our continuous ASX disclosure obligations in Australia under the
Corporations Act, but investors should note that such disclosure
obligations differ in certain material respects from the continuing
reporting obligations for foreign private issuers under the
Exchange Act. See Risk Factors. |
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ASX symbols
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Shares
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TLS |
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Instalment receipts
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TLSCA |
|
|
|
|
|
NZSX symbols
|
|
Shares
|
|
TLS |
|
|
|
|
|
|
|
Instalment receipts
|
|
TLSCC |
|
|
|
Settlement of first instalment
|
|
Payment of the first instalment and delivery of the instalment receipts
is expected to take place on or about 24 November 2006. Application
has been made for clearance of the instalment receipts through the
Clearing House Electronic Subregister System, or CHESS. |
|
|
|
12
Summary Consolidated Financial and Statistical Data
The following summary consolidated financial data comes from our audited consolidated
financial statements. The statistical data represent managements best estimates. The following
information should be read in conjunction with our audited consolidated financial statements and
the other information contained in this Institutional Offering Memorandum. Our audited consolidated
financial statements for the year ended 30 June 2006 were prepared in accordance with A-IFRS, and
comparative information for the year ended 30 June 2005 has been restated in accordance with
A-IFRS, except for AASB 132: Financial Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement, where comparative information was not
required to be restated. In addition, we have elected to early adopt AASB 7: Financial
Instruments: Disclosures, which supersedes the disclosure requirements of AASB 132. The financial
information for the years ended 30 June 2004, 2003 and 2002 has been reconciled to US-GAAP and is
derived from our audited consolidated financial data for those periods, which is not included
herein. A-IFRS differs in some material respects from US-GAAP. For a reconciliation of the material
differences between A-IFRS and US-GAAP as they relate to our audited consolidated financial
statements, see note 37 to our audited consolidated financial statements.
Financial data in accordance with A-IFRS for the two-year period ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2006(1) |
|
2005 |
|
|
A$ |
|
US$ |
|
A$ |
|
|
(In millions, except per |
|
|
share amounts) |
Income Statement data |
|
|
|
|
|
|
|
|
|
|
|
|
Total Income (excluding finance income)(2) |
|
|
23,100 |
|
|
|
17,147 |
|
|
|
22,442 |
|
Expenses (excluding depreciation, amortisation and finance
costs)(2)(3) |
|
|
13,516 |
|
|
|
10,032 |
|
|
|
11,978 |
|
Depreciation and amortisation |
|
|
4,087 |
|
|
|
3,034 |
|
|
|
3,529 |
|
Net finance costs |
|
|
936 |
|
|
|
695 |
|
|
|
880 |
|
Profit before income tax expense |
|
|
4,561 |
|
|
|
3,386 |
|
|
|
6,055 |
|
Profit for the year |
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
Basic earnings per share(4) |
|
|
0.26 |
|
|
|
0.19 |
|
|
|
0.35 |
|
Dividends paid(5) |
|
|
4,970 |
|
|
|
3,689 |
|
|
|
4,124 |
|
Dividends declared for the fiscal year |
|
|
4,224 |
|
|
|
3,135 |
|
|
|
4,970 |
|
Dividends declared per share |
|
|
0.34 |
|
|
|
0.25 |
|
|
|
0.40 |
|
Total income comprises |
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue |
|
|
22,750 |
|
|
|
16,888 |
|
|
|
22,161 |
|
Other revenue |
|
|
22 |
|
|
|
16 |
|
|
|
20 |
|
Other income |
|
|
328 |
|
|
|
243 |
|
|
|
261 |
|
Finance income |
|
|
66 |
|
|
|
49 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,166 |
|
|
|
17,196 |
|
|
|
22,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
36,175 |
|
|
|
26,853 |
|
|
|
35,211 |
|
Current borrowings |
|
|
1,969 |
|
|
|
1,462 |
|
|
|
1,507 |
|
Non-current borrowings |
|
|
11,409 |
|
|
|
8,469 |
|
|
|
10,941 |
|
Share capital |
|
|
5,569 |
|
|
|
4,134 |
|
|
|
5,536 |
|
Equity/net assets |
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
|
(1) |
|
Unless otherwise noted, all amounts have been translated at the noon buying rate on 30 June
2006 of A$1.00 = US$0.7423. |
|
|
|
|
13
|
|
|
(2) |
|
For a breakdown of operating revenue by product group and a breakdown of operating expenses
by expense category, see Operating and Financial Review and Prospects. |
|
(3) |
|
Includes our share of net (profit)/loss from jointly controlled and associated entities. |
|
(4) |
|
Calculated based on the weighted average number of issued ordinary shares that were outstanding
during the fiscal year. Refer to note 3 in our consolidated financial statements for further details.
Basic earnings per share for each year was materially consistent with diluted earnings per share. As at
30 June 2006, we had ordinary shares of 12,443,074,357 (2005: 12,443,074,357). During fiscal 2005,
we completed a share buy-back of 185,284,669 ordinary shares. |
|
(5) |
|
During fiscal 2006, we paid dividends of A$4,970 million, being the previous years final
dividend A$1,739 million, a special dividend of A$746 million paid with the previous years final
dividend, the fiscal 2006 interim dividend of A$1,739 million and a special dividend of A$746 million paid
with the interim dividend. |
Financial data in accordance with US-GAAP for the five-year period ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2006(1) |
|
2005(4) |
|
2004(4) |
|
2003(4) |
|
2002(4) |
|
|
A$ |
|
US$ |
|
A$ |
|
A$ |
|
A$ |
|
A$ |
|
|
(In millions, except per share amounts) |
Income Statement data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
22,779 |
|
|
|
16,909 |
|
|
|
22,167 |
|
|
|
20,737 |
|
|
|
20,495 |
|
|
|
20,196 |
|
Net income, before cumulative effect of change
in accounting principle |
|
|
2,718 |
|
|
|
2,019 |
|
|
|
4,204 |
|
|
|
1,265 |
|
|
|
3,847 |
|
|
|
3,922 |
|
Cumulative effect of change in accounting
principle(2) |
|
|
(245 |
) |
|
|
(181 |
) |
|
|
|
|
|
|
4 |
|
|
|
(309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
2,473 |
|
|
|
1,838 |
|
|
|
4,204 |
|
|
|
1,269 |
|
|
|
3,538 |
|
|
|
3,922 |
|
Basic earnings per share, before cumulative effect
of change in accounting principle |
|
|
0.22 |
|
|
|
0.16 |
|
|
|
0.34 |
|
|
|
0.10 |
|
|
|
0.29 |
|
|
|
0.31 |
|
Cumulative effect of change in accounting
principle(2) |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share(3) |
|
|
0.20 |
|
|
|
0.15 |
|
|
|
0.34 |
|
|
|
0.10 |
|
|
|
0.27 |
|
|
|
0.31 |
|
Proforma net income(2) |
|
|
2,718 |
|
|
|
2,019 |
|
|
|
4,184 |
|
|
|
1,228 |
|
|
|
3,569 |
|
|
|
3,936 |
|
Proforma basic earnings per share(2) |
|
|
0.22 |
|
|
|
0.16 |
|
|
|
0.34 |
|
|
|
0.10 |
|
|
|
0.28 |
|
|
|
0.31 |
|
Balance Sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
35,777 |
|
|
|
26,557 |
|
|
|
37,040 |
|
|
|
35,670 |
|
|
|
40,529 |
|
|
|
42,948 |
|
Current borrowings |
|
|
1,984 |
|
|
|
1,473 |
|
|
|
1,524 |
|
|
|
3,246 |
|
|
|
1,323 |
|
|
|
1,866 |
|
Non current borrowings |
|
|
11,734 |
|
|
|
8,710 |
|
|
|
11,641 |
|
|
|
9,095 |
|
|
|
11,580 |
|
|
|
12,372 |
|
Share capital |
|
|
5,954 |
|
|
|
4,420 |
|
|
|
5,921 |
|
|
|
6,164 |
|
|
|
6,568 |
|
|
|
6,536 |
|
Equity/net assets |
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
15,082 |
|
|
|
17,899 |
|
|
|
18,363 |
|
|
|
|
(1) |
|
Unless otherwise noted, all amounts have been translated at the noon buying rate on 30 June
2006 of A$1.00 = US$0.7423 |
|
(2) |
|
During fiscal 2006, we changed our accounting principles under US-GAAP in relation to mobile
handset subsidies and capitalisation of pension costs. Refer to note 37(b) in our financial
statement for further details. The proforma amounts for net income and basic earnings per share assume that these changes in
accounting principle were applied retroactively. |
|
(3) |
|
Calculated based on the weighted average number of issued ordinary shares that were outstanding
during the fiscal year. Refer to note 3 in our consolidated financial statements for further
details. Basic earnings per share |
|
|
|
|
14
|
|
|
|
|
for each year was materially consistent with diluted earnings per share. As at 30 June 2006, we
had issued ordinary shares of 12,443,074,357. As at 30 June 2005, we had issued ordinary shares
of 12,443,074,357 after completing a share buy-back of 185,284,669 ordinary shares. As at 30
June 2004, we had issued ordinary shares of 12,628,359,026 after completing a share buy-back
during fiscal 2004 of 238,241,174 ordinary shares. As at 30 June 2003 and 30 June 2002, we had
12,866,600,200 issued ordinary shares. |
|
(4) |
|
Certain US-GAAP amounts in 2005, 2004, 2003 and 2002 have been restated as a result of a number
of immaterial adjustments that were identified as part of our adoption of A-IFRS. Refer to note
37(a) in our consolidated financial statements for further details. |
|
|
|
|
15
Statistical Data as at the end of the period (except for traffic data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
Billable Traffic Data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local calls (number of calls) |
|
|
7,432 |
|
|
|
8,469 |
|
|
|
9,397 |
|
|
|
9,794 |
|
|
|
10,269 |
|
National long distance minutes(1) |
|
|
7,215 |
|
|
|
7,743 |
|
|
|
8,520 |
|
|
|
9,161 |
|
|
|
9,170 |
|
Fixed to mobile minutes |
|
|
4,491 |
|
|
|
4,375 |
|
|
|
4,226 |
|
|
|
3,944 |
|
|
|
3,691 |
|
International direct minutes |
|
|
534 |
|
|
|
580 |
|
|
|
651 |
|
|
|
740 |
|
|
|
781 |
|
Mobile voice telephone minutes(2) |
|
|
7,311 |
|
|
|
6,746 |
|
|
|
6,145 |
|
|
|
6,335 |
|
|
|
5,780 |
|
Inbound Calling Products B Party minutes |
|
|
2,922 |
|
|
|
2,773 |
|
|
|
2,708 |
|
|
|
2,655 |
|
|
|
3,345 |
|
Inbound Calling Products A Party minutes |
|
|
1,012 |
|
|
|
940 |
|
|
|
938 |
|
|
|
918 |
|
|
|
N/A |
|
Number of short messaging service (SMS) sent |
|
|
3,019 |
|
|
|
2,289 |
|
|
|
1,944 |
|
|
|
1,413 |
|
|
|
N/A |
|
Network and Operations Data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access lines in service(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
5.46 |
|
|
|
5.60 |
|
|
|
5.87 |
|
|
|
6.20 |
|
|
|
6.35 |
|
Business |
|
|
2.32 |
|
|
|
2.45 |
|
|
|
2.57 |
|
|
|
2.71 |
|
|
|
2.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail customers |
|
|
7.78 |
|
|
|
8.05 |
|
|
|
8.44 |
|
|
|
8.91 |
|
|
|
9.07 |
|
Domestic wholesale |
|
|
2.16 |
|
|
|
2.07 |
|
|
|
1.84 |
|
|
|
1.55 |
|
|
|
1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic access lines in service |
|
|
9.94 |
|
|
|
10.12 |
|
|
|
10.28 |
|
|
|
10.46 |
|
|
|
10.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN access (basic lines equivalents) (in
thousands)(4) |
|
|
1,214 |
|
|
|
1,208 |
|
|
|
1,288 |
|
|
|
1,213 |
|
|
|
1,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Services in Operation (SIO) (in
thousands)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3G |
|
|
317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSM |
|
|
6,468 |
|
|
|
6,894 |
|
|
|
6,653 |
|
|
|
5,812 |
|
|
|
5,346 |
|
CDMA |
|
|
1,703 |
|
|
|
1,333 |
|
|
|
951 |
|
|
|
757 |
|
|
|
596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services in operation |
|
|
8,488 |
|
|
|
8,227 |
|
|
|
7,604 |
|
|
|
6,569 |
|
|
|
5,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wholesale mobile SIOs (in thousands) |
|
|
119 |
|
|
|
83 |
|
|
|
61 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online subscribers (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband subscribers |
|
|
1,027 |
|
|
|
1,205 |
|
|
|
1,194 |
|
|
|
1,158 |
|
|
|
1,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadband subscribers Retail |
|
|
1,476 |
|
|
|
856 |
|
|
|
427 |
|
|
|
121 |
|
|
|
168 |
|
Broadband subscribers Wholesale(6) |
|
|
1,427 |
|
|
|
888 |
|
|
|
379 |
|
|
|
240 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Broadband subscribers |
|
|
2,903 |
|
|
|
1,744 |
|
|
|
806 |
|
|
|
361 |
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total online subscribers |
|
|
3,930 |
|
|
|
2,949 |
|
|
|
2,000 |
|
|
|
1,519 |
|
|
|
1,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FOXTEL subscribers (in thousands) |
|
|
1,130 |
|
|
|
1,023 |
|
|
|
904 |
|
|
|
836 |
|
|
|
800 |
|
Employee Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic full-time staff(7) |
|
|
37,599 |
|
|
|
39,680 |
|
|
|
36,159 |
|
|
|
37,169 |
|
|
|
40,427 |
|
Full time staff and equivalents(8) |
|
|
44,452 |
|
|
|
46,227 |
|
|
|
41,941 |
|
|
|
41,941 |
|
|
|
44,977 |
|
Total workforce(9) |
|
|
49,443 |
|
|
|
52,705 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
(1) |
|
Includes national long distance minutes from our public switched telephone network (PSTN)
and independently operated payphones. Excludes minutes related to calls from non-PSTN
networks, such as ISDN and virtual private networks. |
|
|
|
|
16
|
|
|
(2) |
|
Includes all calls made from mobile telephones including long distance and international calls,
excludes data, messagebank, international roaming and CSL New World. |
|
(3) |
|
Excludes Incontact service (a free service with restrictive calling access) and advanced access
services, such as ISDN services. |
|
(4) |
|
Expressed in equivalent number of clear voice channels. Comparatives have been restated to
reflect updated assessment of channels per SIO on ISDN 10/20/30. The previous assessment was based
on a calculation of channel configurations across sample services. The revised assessment is based
on the entire customer base. |
|
(5) |
|
Excludes CSL New World SIOs. |
|
(6) |
|
Within Broadband, retail products include cable, satellite, BigPond Wireless, HyperConnect,
ADSL and Symmetrical HDSL, while wholesale products include DSL Layer 1, DSL Layer 2, DSL Layer 3,
Spectrum Sharing and vISP Broadband. Total Broadband subscribers exclude Broadband component of ULL
and Mobile Broadband which form part of intercarrier services and mobiles revenue respectively. |
|
(7) |
|
Excludes offshore, casual and part time employees. |
|
(8) |
|
Includes all domestic and offshore employees, including controlled entities. |
|
(9) |
|
Includes all domestic and offshore employees, including controlled entities, as well as
contractors and agency staff. |
|
|
|
|
17
Risk Factors
The following describes some of the significant risks that could affect us. Additionally, some
risks may be unknown to us and other risks, currently believed to be immaterial, could turn out to
be material. Some or all of these could materially adversely affect our business, profits, outlook
and management objectives, assets, liquidity and capital resources. These risks should be
considered in conjunction with any forward-looking statements in this Institutional Offering
Memorandum and the cautionary statement regarding forward-looking statements in this Institutional
Offering Memorandum.
We operate in a highly regulated environment that negatively affects our business and
profitability. In particular, we believe that regulation limits our ability to pursue certain
business opportunities and activities affecting the returns we can generate on our assets. We are
required to give our competitors access to certain services and infrastructure in which we have
invested significant shareholder funds, even though the competitors could have invested in
developing their own capabilities but chose not to do so.
A further description of Australias telecommunications regulatory regime is contained in
Relationship with the Commonwealth The Commonwealth as regulator and Regulation.
Telstra believes that regulation is the most significant ongoing risk to the company. There
can be no assurances as to future policies, ministerial decisions or regulatory outcomes. These may
be significantly adverse to our shareholders.
We are focused on building competitive advantage. This may however be undermined by adverse
policies, decisions or regulatory outcomes.
We believe the current regulatory regime is value destroying. Regulatory reform is an issue
with which management is seriously engaged and although recent history does not give us any
indication that regulatory risks will be reduced, we are committed to seek regulatory reform on
behalf of our shareholders.
We face substantial regulatory risks that we believe have, and will continue to have,
substantial adverse effects on our operations and financial performance. The key risks include:
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Access pricing: The ACCC can require us to provide certain services to our competitors using
our networks, at a price based on the ACCCs calculation of the efficient costs of providing
these services if the parties fail to agree a price. In many cases we believe that the ACCC
proposes prices that are below our efficient cost of supply. The ACCC is yet to issue its
final ruling on the prices it will allow us to charge for various wholesale services including
unconditioned local loop service (ULLS) and spectrum sharing service (SSS). We believe
that these are extremely important matters for the financial performance of our business. The
ACCC has recently issued several interim determinations in ULLS arbitrations to which we are a
party, reducing the price from A$22 to A$17.70 per line per month in band 2 (metropolitan
areas, where the greatest number of ULLS services will be provided). We are effectively
required by law to charge the same price for a basic line rental service for all retail
customers across Australia, but the ACCC will not follow the same principle for wholesale
customers, instead setting prices which differentiate between metropolitan and
non-metropolitan areas (de-averaged prices), well below our calculation of the efficient
costs. This will enable our competitors to target customers in higher density areas where
access prices are low, leaving us to provide services to some customers in high cost, low
density areas at the same retail price as in metropolitan areas. The ACCC may reduce access
prices further which would adversely affect our revenues, earnings and shareholder returns,
including dividends. In addition, the ACCC recently issued two draft interim decisions in SSS
arbitrations significantly reducing the monthly charge to A$3.20. We believe such a price
would lead to accelerated growth in SSS enabling our competitors to provide broadband and VoIP
services with greater growth opportunities while we are restricted to supplying basic access
services. In addition, we believe such reduced access prices would be likely to lead to a
reduction in our retail prices. |
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Mandated access to Telstra networks: A key part of our transformation strategy involves
deploying next-
generation networks, including our recently launched NEXT GTM wireless network. The
ACCC may hold a public inquiry at any time into whether compulsory competitor access to the
network should be required. We believe such compulsory competitor access would not be appropriate
because of the wide availability of |
18
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|
|
competing wireless networks. Were such access to be required this would deprive our shareholders of
the benefits of the wider coverage of our network and we believe this would materially adversely
affect our investment returns, earnings and shareholder returns, including dividends. This may
undermine our commercial incentives to continue to invest in the NEXT GTM wireless
network, for example, to increase data speeds. |
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|
Conduct regulation: On 12 April 2006, the ACCC claimed that we engaged in anti-competitive
conduct when we raised our wholesale basic access prices to allow greater recovery of our
estimated costs of providing the service without a similar increase in retail prices, in
breach of the Trade Practices Act. The ACCC may take us to the Federal Court for this alleged
breach. The maximum potential penalties that the Federal Court could impose exceed A$470
million as at 30 September 2006 and are increasing at A$3 million per day. Optus Networks Pty
Ltd, a subsidiary of one of our principal competitors, has issued proceedings in the Federal
Court in the same matter seeking damages and an injunction. We will vigorously defend these
proceedings and any enforcement proceedings that may be brought by the ACCC, on the basis that
we have not acted anti-competitively and that we believe we should be allowed to move our
prices closer to our costs. The ACCC may in the future reach the view that other of our
conduct is a breach of the Act. For example, a refusal by us to supply services to our
competitors for what we believe to be normal commercial reasons may in the ACCCs view, be a
breach of the Act. We believe that, should the ACCC allege that we have engaged in
anti-competitive conduct, it will rely upon the potential for very large fines in an endeavour
to have us modify what we believe to be normal commercial behavior. We will defend our right
to act in what we believe to be a normal commercial manner. |
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|
Wide ministerial and regulatory discretion: The Communications Minister has broad and largely
discretionary powers to impose and vary licence conditions and other obligations on us. For
example, the requirement to operate separate retail, wholesale and network business units
(operational separation) places a burden on us with many restrictions imposed on the way we
run our business. Refer Regulation Operational separation. However, the real risk with
operational separation lies in the power of the Communications Minister to determine the way
we conduct our business by directing us to vary our operational separation plan, subject only
to the aims and objects of the legislation which are very broad. In addition, we are subject
to retail price controls for example, we are not allowed to charge for directory assistance
(even to customers of our competitors), but there is no such restriction on our competitors
charging for these services. Also, we are obliged to make certain uneconomic services
available in rural and remote areas, without receiving what in our opinion is a fair
contribution to our costs from our competitors. Further, the ACCC has broad discretionary
powers and is in general not subject to ministerial oversight or direction. |
Because of these regulatory factors, there is a risk that we are, and could be, exposed to
significant limitations, uncommercial imposts, penalties and compensation payments in relation to
our current and future activities and assets. This may make it prudent on some occasions for us to
cease, or choose not to engage in, business activities in which we might otherwise engage; or
avoid, defer or abandon certain capital projects as was the case with our fibre to the node (FTTN)
project, where we chose not to build this network because in our view the access price likely to be
set by the ACCC would not enable us to earn a competitive return for our shareholders. These
regulatory risks could therefore have an adverse effect on our ability to pursue certain business
opportunities and activities and the returns we can generate on our assets, and could benefit our
competitors. This may in turn adversely affect our financial performance.
For more detailed information regarding our regulatory environment and our obligations and
potential liabilities under Australian regulations, see Regulation.
We may not succeed in implementing our transformation strategy. Even if successfully
implemented, our transformation strategy may not achieve the expected benefits, or may not be
achieved within the intended timeframe.
We have invested substantial capital and other resources in the development, streamlining and
modernisation of our networks and systems and have embarked upon a substantial transformation of
the company. Our transformation strategy involves a complex and fundamental change to our business,
operations, networks and
19
systems, and we are undertaking the transformation on an accelerated schedule. A transformation of
this size, speed and complexity has not been attempted by any other telecommunications company
around the world. There is a significant risk that we may not be successful in the implementation
of our transformation strategy. In particular, there are substantial risks that:
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|
|
our next-generation technologies and network, including our recently launched NEXT GTM
wireless network, and IT support systems and processes will not function as anticipated; |
|
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|
key vendors on which we are dependent may not perform as expected; |
|
|
|
|
customer take-up of and planned large-scale migration to our new products and services are
significantly less than planned; |
|
|
|
|
extended delays and other execution problems in implementing our transformation strategy may
develop; |
|
|
|
|
competitors may in time offer similar services and capabilities; and |
|
|
|
|
our actual
capital and operating costs turn out to be substantially greater than those budgeted. |
The occurrence of any or all of these risks may have a material adverse impact on our
competitiveness, earnings and shareholder returns, including dividends.
Our next-generation technologies and network and IT support systems may not function as planned and
the timetable for implementation is aggressive.
Our next-generation technologies span across our fixed line and wireless networks, including
our switching and transmission systems, as well as all our network and IT support systems and
processes. We face significant risks that the technology may not be installed in a satisfactory
manner, on time or within budget, and that the technology may not perform as expected and
represented by our key vendors. The risks of non-performance include those relating to speed of
transmission, quality of service, costs to deploy and operate the new networks and systems, the
ability to create and effectively implement new product and service offerings and the capability to
integrate applications and create seamless interfaces with front office order-entry systems and
back office billing and customer support systems. As more customers are migrated to our
next-generation networks and systems, some of these operational risks will increase. Any
substantial delays in completing the new IT systems, or the customer migration, will lead to an
extended period where we face the additional cost of operating old and new systems in parallel and
delay the benefits from decommissioning the old systems.
One of the most complex and highest risk elements of our transformation strategy is the
rationalisation of our network platforms and IT systems, including our operational support systems
and business support systems. Our plan to cap or exit 65% of our network platforms and reduce the
number of our IT systems by at least 80% by 2010 is in its early stages and we have not yet
delivered the initial release. If we are unable to simplify and rationalise our networks and
systems or if we are substantially delayed in achieving this objective, we may not be able to
achieve the full benefits of our transformation strategy.
Our transformation strategy also depends upon the installation of new and untested support
systems that we expect will allow us to price and sell services efficiently and bill and care for
the customers who purchase them. The systems we are deploying are largely untested in the
applications and the environments we intend for them. There is therefore substantial risk that our
planned system installation and the migration of our customers to the new systems may not be
successful or that we may not be able to integrate the systems supporting the multiple technologies
and services we plan to operate. In addition, the migration of our CDMA customers to our NEXT
GTM wireless network may be more costly or take longer than anticipated, leading to
unanticipated costs in operating the CDMA network for longer than expected.
We are dependent on key vendors which may not perform as expected.
We are dependent on key vendors for the implementation of our transformation strategy, such as
Accenture, Alcatel, Cisco, Ericsson, Siebel, Kenan Systems and IBM. Our dependence on key vendors
for the implementation of our next-generation technologies creates a number of risks, including
risks that key vendors may not deliver or
20
perform as promised or may fail, and the products we have chosen may be discontinued or become
unsupported. Also, our ability to use other vendors, obtain contractual recourse or secure
intellectual property rights should one of our chosen vendors fail to deliver or perform as
promised may be limited.
Customer acceptance and take up of our new product and service offerings and our planned
large-scale customer migration to new platforms, including in relation to our recently launched
NEXT GTM wireless network, may be significantly less than planned.
The success of our transformation strategy depends upon the large scale customer take-up of
newly-created products and services enabled by our next-generation networks, including our NEXT
GTM wireless network. No other major international telecommunications company has proven
the commercial viability of creating and marketing the next-generation products and services we are
planning to roll out. There is a substantial risk that we will not be able to create and develop
appropriate or commercially attractive products and services that take advantage of these new
network capabilities and meet market demand or that we will not develop appropriately tailored
bundles of products and services compared to our competitors. Even if we do, there is a risk that
customers will not purchase them in sufficient quantities or at high enough prices to recoup our
investment.
The take-up of new next-generation products and services also depends on our ability to
successfully migrate our substantial customer base to our new network platforms. There is a risk
that we may be unable to migrate our customers to our new networks and systems successfully and
that we experience excessive churn of customers to other providers during the migration process. We
may also be unable to suppress continuing demand for development of existing or legacy IT systems.
The occurrence of any of these risks could also complicate the build and integration of new systems
and hamper the application of sufficient resources to build and integrate the new systems and cause
us to have to operate old and new systems for an extended period.
We may face extended delays and other execution problems in implementing our transformation
strategy.
Our transformation strategy calls for more deployments of more network technologies and IT
support systems than we have ever attempted or that any major telecommunications company worldwide
has successfully accomplished. The risks of executing all aspects of these deployments and the
integration process on time and on budget, with high quality results, are significant. The risks
associated with any one such deployment increase significantly as multiple deployments are being
pursued simultaneously, each dependent in some measure upon the others being performed. In
addition, our transformation is being executed in a relatively short period by a company that has
not experienced a transformation process of this magnitude. There is substantial risk that our
installation of these systems and the conversion of our embedded base of customers to them will
take longer, be more expensive and cause more disruption than we anticipated, leading to lower
sales, higher costs and widespread customer dissatisfaction. The risks associated with the
execution of our transformation strategy also include the lack of suitable personnel and resources
to implement our transformation, an inability of new IT systems and processes to deliver
productivity gains and targeted workforce reductions and the potential for industrial disputes,
each of which could significantly delay the transformation or limit its effectiveness.
Competitors may in time offer similar services and capabilities.
We expect our competitors to continue to adapt their product offerings and technical
capabilities. As a result, there is a risk that our ability to differentiate ourselves from our
competitors on the basis of our planned next-generation technologies, network and IT support
systems may be reduced, affecting our revenues, margins and profits. In addition, the relative
advantages expected of our NEXT GTM wireless networks geographic and in-building
coverage and speed may be offset by competitors offering similar services and capabilities.
Our actual capital and operating costs may turn out to be substantially greater than budgeted.
Our transformation strategy is very costly and has resulted in significant declines in our net
income and our cash flow available for reinvestment or the payment of dividends. The foregoing
risks could cause additional costs and expenses, delays in the availability of new technology and
new products and services, fewer than expected customers buying fewer new products at lower than
expected prices, and asset write-downs. These risks could lead
21
to us not generating profits or cash flow to the levels prevailing when the transformation
began and could also result in a significant reduction in earnings and shareholder returns,
including dividends. In addition, while our transformation strategy is designed to respond to
current market changes through the modernisation of our networks and systems, future technology and
market changes may create the need for other network and systems changes and therefore require us
to spend more than currently budgeted.
The success of our transformation strategy is highly dependent on our key personnel and the loss of
one or more of these key executives could materially impact the timely and effective implementation
of this strategy.
Our CEO and a number of key members of his senior management team have joined the company
within the last eighteen months and bring with them extensive telecommunications expertise. The
transformation strategy that we are now pursuing is an enormous enterprise formulated by our
current senior management team. Given the breadth of the strategy and the significant undertakings
associated with it, the loss of one or more of these key executives, in particular the CEO or COO,
could have a material adverse impact on our ability to achieve some or all of the objectives of the
transformation strategy and consequently our earnings and shareholder returns, including dividends.
There is also a risk that if the CEO were to leave us one or more of the overseas executives he has
recruited may also leave.
We could experience difficulty in retaining and attracting skilled and experienced people.
As technology evolves we will need to attract, retain and train our workforce. The relevant
skills are in short supply worldwide. There is a risk that an inability to attract and retain
skilled and experienced people and hence to embrace new technology and retain our corporate
knowledge could impact our ability to remain competitive.
For more information on our workforce, see Directors and Management.
If we are not successful in addressing the decline in revenues from our traditional high-margin
fixed-line (PSTN) products and services and in increasing the revenues and profitability of our
emerging products and services, our overall profitability will decline.
Our PSTN revenues declined by 6.7% in fiscal 2006. This decline will continue and may
accelerate. The decline has been caused by increasing competition, substantial regulatory impacts
and the continued growth and development of technologies that offer increasingly viable
alternatives to our PSTN services. This trend is present across telecommunications markets
globally, and it is expected to continue. PSTN revenues comprise a significant portion of our
revenues and provide high margins and strong cash flows that enable us to invest in and develop our
business. If we are unable to arrest or slow the rate of decline in our PSTN revenues or grow
alternative revenue sources, manage costs and minimise margin erosion in newer lower-margin
products and services, such as mobiles, Internet, IP solutions, advertising and directory services
and pay TV bundling, our earnings and shareholder returns, including dividends, could be materially
adversely affected.
Rapid technological changes and the convergence of traditional telecommunications markets with
data, Internet and media markets expose us to significant operational, competitive and
technological risks.
Rapid changes in telecommunications and IT are continuing to redefine the markets in which we
operate, the products and services required by our customers and the ability of companies to
compete in the telecommunications industry in Australia and elsewhere in the world. These changes
are likely to broaden the range, reduce the costs and expand the capacities and functions of
infrastructure capable of delivering these products and services. We are responding to current
market changes through the modernisation of our networks and systems, including the deployment of
our new nationwide NEXT GTM wireless network, but future technology and market changes
may create the need for other network and systems changes at considerable cost to Telstra.
To address the continuing changes in converging telecommunications, data, Internet and media
markets, we may be required to devote considerable resources to enhancing our ability to deliver
services required by these markets. There is a risk that competitors may leverage both their own
and our infrastructure or deploy or develop technologies or infrastructure that provides them with
a lower cost base or other operating advantages that may
22
drive down market prices. This could give these competitors an advantage if we are unable to
promptly and efficiently provide equivalent services.
Competition in the Australian telecommunications market could cause us to continue to lose market
share and reduce our prices and profits from current products and services.
The Australian telecommunications market has become increasingly competitive since the
Commonwealth introduced open competition on 1 July 1997. Although the overall market has
experienced growth to date, we have lost substantial market share in some key markets particularly
as a result of aggressive price competition, the development of new technologies and facilities by
competitors, the market entry of non-traditional competitors with access to significant content and
resources and increased regulatory action. In response to increased competition, we have lowered
the prices of our products and services, particularly the prices for our local calls, national long
distance calls and international telephone services and calls to and from mobile services.
There is also a risk that non-traditional competitors with greater access to content,
substantial resources and/or alternative delivery platforms, such as Internet search engine and
Internet trading companies, VoIP and media companies, may enter and compete effectively in our
telecommunications markets.
We expect vigorous price and facilities or network-based competition to continue or
accelerate. We also expect that our competitors will continue to market aggressively to our high
value customers. The continued loss of market share or downward pressure on prices would have an
adverse effect on our financial results in the market or markets in which this type of competition
occurs.
The Australian Government has announced Connect Australia, a A$1.1 billion package to
subsidise the supply of broadband, mobile and fixed line services for people living in regional,
rural and remote areas in Australia. In addition, nine of our competitors have outlined a possible
model for the building of a jointly owned FTTN network to deliver broadband services to a large
number of customers. Connect Australia is likely to increase facilities and network-based
competition in these areas.
For more information on our competitive environment, see Competition.
Our ability to pursue our strategy with some joint investments may be limited.
Some of our domestic and international activities are conducted through subsidiaries, joint
venture entities and other equity investments. These include our interests in FOXTEL, REACH, our
3GSM 2100 network sharing partnership with Hutchison (3GIS), CSL and SouFun. Under the governing
documents for some of these entities, certain key matters such as the approval of business plans
and decisions as to capital invested and the timing and amount of cash distributions require the
agreement of our co-participants. Our co-participants may have different approaches with respect to
the investment and the markets in which they operate and on occasions we may be unable to reach
agreement with them. Any dispute or disagreement from time to time with our partners may negatively
affect our ability to pursue our business strategies.
In some cases, strategic or venture participants may choose not to continue their
participation. In addition, our arrangements with our co-participants may expose us to additional
investment, capital expenditure or financing requirements. There are also circumstances where we do
not participate in the control of, or do not own a controlling interest in an investment and our
co-participants may have the right to make decisions on certain key business matters with which we
do not agree.
All of these factors could negatively affect our ability to pursue our business strategies
with respect to the concerned entities or business objectives and the markets in which they
operate. For more information on some of our investments, see Information on the Company
International investments and Information on the Company Products and services Mobiles 3G
wireless service and Information on the Company Products and services Subscription
television, and Information on the Company Networks and Systems.
23
Network and system failures could damage our reputation and earnings.
Our technical infrastructure is vulnerable to damage or interruption from a range of factors
including floods, wind storms, fires, power loss, telecommunication failures, cable cuts and/or
intentional wrongdoing. The networks and systems that make up our infrastructure require regular
maintenance and upgrade that may cause disruption. The occurrence of a national disaster or other
unanticipated problems at our facilities or any other damage to or failure of our networks and/or
systems could result in consequential interruptions in service across our integrated
infrastructure. Network and/or system failures, hardware or software failures or computer viruses
could also affect the quality of our services and cause temporary service interruptions.
There is a risk that our major customers capacity requirements will be in excess of our
ability to supply, resulting in lost revenue, customers moving to competitors and possibly claims
by customers against us.
Our IT systems are complex and there is a risk that our ability to support strategic
priorities in customer service and growth products may be delayed by our transformation program and
the complexity of changing our systems. Our IT systems are also vulnerable to viruses, denial of
service and other similar attacks which may damage our systems and data and that of our customers.
Any of these occurrences could result in customer dissatisfaction and damages or compensation
claims as well as reduced earnings.
Future sales of a substantial portion of our shares by the Future Fund could depress the market
price for our shares and other equity interests.
The Commonwealth has indicated it will transfer its Telstra shares not sold in the Global
Offering to the Future Fund, a Commonwealth investment fund. Following the Global Offering the
Future Fund will have a substantial shareholding in Telstra. The shares held by the Future Fund
will be subject to an escrow or lock-up period of two years (with certain exceptions). After the
escrow or lock-up period, the Future Fund will be required to sell down its shareholding over the
medium-term to a level consistent with its investment strategy (at least below 20% of our issued
share capital). See Future Fund General investment mandate. Future disposals by the Future Fund
of our shares or the perception that such disposals may occur could reduce our share price, and
adversely affect the timing and effectiveness of our capital raisings, which could have an adverse
impact on our cost of capital.
The Finance Minister may issue directions to the Board of the Future Fund in relation to
Telstra shares held by the Future Fund, including specifying how disposals, voting and other rights
relating to the shares are to be exercised. While the current Government does not intend to issue
directions specific to Telstra shares (except to impose the escrow and require the sell-down), a
future Government might take a different approach, using its direction power to require the
disposal or voting of the Telstra shares held by the Future Fund to pursue Government objectives.
There is also a risk that the interests of the Future Fund and/or the Commonwealth may not be
aligned with the interests of our other shareholders, and the Future Fund could take actions that
we may not regard as being in the best interests of our shareholders.
There are significant differences between the Commonwealth and the Telstra Board with respect to
the election as a director of Mr Geoffrey Cousins.
Telstras annual general meeting was held on 14 November 2006 shortly before the completion of
the Global Offering, at which time the Commonwealth still owned approximately 51.8% of Telstra
shares. The Commonwealth sought the nomination of Mr Geoffrey Cousins for election as a
director of Telstra at the annual general meeting and voted its shares in favour of the election of
Mr Cousins. Mr Cousins has more than 26 years experience as a company director and is currently a
director of Insurance Australia Group Limited. Mr Cousins was previously the Chairman of George
Patterson Australia and is a former director of Publishing and Broadcasting Limited, the Seven
Network, Hoyts Cinemas group and NM Rothschild & Sons Limited. He was the first Chief Executive of
Optus Vision and before that held a number of executive positions at George Patterson, including
Chief Executive of George Patterson Australia. Mr Cousins is a director of the Cure Cancer
Australia Foundation.
Mr Cousins was a part-time consultant to the Prime Minister for nine years resigning upon his
nomination for the Board.
24
The Government believes that Mr Cousins has the necessary qualifications to serve as a
director given his broad experience across the telecommunications, broadcasting and advertising
sectors and will be an effective director. It does not intend or believe that Mr Cousins will act
as a representative of the Government on the Telstra Board. It is not the Governments intention to
issue additional directions specific to Telstra shares to the Future Fund (see The Future Fund).
The Government raised Mr Cousins nomination with Telstra at the beginning of the week commencing
11 September 2006 and believes that it gave Telstra ample time to consider his nomination, having
regard to his extensive experience.
The Telstra Board did not seek Mr Cousins nomination and did not have the opportunity to
adequately assess Mr Cousins candidacy in accordance with its governance processes, which include
assessing a proposed director having regard to the independence requirements of the Boards Charter
and the ASX Principles of Good Corporate Governance. The Boards Charter states that it is the
Boards current intention that non-executive directors should be independent directors. While the
Board has not reached a concluded view, the Board is concerned that there is a risk that Mr
Cousins previous consulting role with the Government could interfere with his capacity to be
considered an independent director. In the Telstras notice of meeting for the annual general
meeting, the Board did not recommend that shareholders vote in favour of Mr Cousins.
To be satisfied that a director is independent the Board would need to conclude, among other
things, that the director is not associated directly with a substantial shareholder of Telstra
and is free from any interest and any business or other relationship which could, or could
reasonably be perceived to, materially interfere with the exercise of his or her unfettered and
independent judgement and ability to act in the best interests of the company. The Board has been
very careful to ensure that it does not, and is not seen to, prejudge in any way whether Mr Cousins
would meet these requirements. However, it is clear from the circumstances of Mr Cousins
nomination and his previous association with Government that these issues will require careful
examination in accordance with best practice and that this is likely to take some time to conduct
appropriately. The Board has commenced a process to assist it reaching a conclusion on these
issues.
The Government believes that Mr Cousins will act independently as a director and not as a
representative of the Government on the Telstra Board.
However, Telstra operates in a highly regulated environment and the Commonwealth and its
agencies are the key regulators. While Telstra acknowledges that Mr Cousins has served as a public
company director, Telstra believes that there is a risk if Mr Cousins cannot be considered an
independent director that this could prove disruptive to the smooth and effective functioning of
the Board. Were this to occur, this could also affect Telstras ability to attract and retain
qualified directors.
Actual or perceived health risks relating to the emission of electromagnetic energy (EME) by
mobile handsets and transmission equipment could lead to decreased mobile communications usage.
While certain reports have suggested that EME emissions from mobile handsets and transmission
equipment may have adverse health consequences, the overwhelming weight of scientific evidence is
that there are no adverse health effects when wireless equipment is used in accordance with
applicable standards. Nonetheless, any widespread perception of EME risks may lead to decreased
mobile communication usage, which would decrease our wireless business.
The price at which Telstra instalment receipts trade may be higher or lower than the price you pay
for them.
Numerous factors, many of which are beyond our control, may affect the price of the
instalment receipts and the underlying shares, including overall economic conditions, changes in
government policies, movement in interest rates and stock markets and general operational and
business risks relating to Telstra, including investor perception of the success of the
transformation strategy. The price at which instalment receipts trade may be higher or lower than
the amount of the first instalment. In addition, when the underlying shares begin to trade on the
ASX and NZSX (after the final instalment is due), they may trade below the total price paid.
Further, the partial payment characteristics of instalment receipts may make percentage price
movements in them, other things being equal, greater than percentage price movements in fully paid
shares. The Commonwealth, Telstra and the Joint Global
25
Coordinators cannot assure you that the public trading market price of the instalment receipts
will not decline below the price you pay for them in or after the Global Offering.
There may not be an active trading market for the instalment receipts.
Prior to the Global Offering, there has been no public market for the instalment receipts.
Application has been made to have the instalment receipts and underlying shares quoted on the ASX
and the NZSX. These securities will not be quoted on the NYSE. There is a risk that an active
trading market in the instalment receipts may not develop or be sustained after completion of the
Global Offering. In addition, holders have the option to prepay these securities before the final
instalment is due. If a substantial number of these holders decide to prepay the final instalment,
there is a risk that the liquidity of the trading market of instalment receipts may be adversely
affected. Instalment receipts may trade at a price reflecting a premium or discount to the price of
fully paid Telstra shares.
There may be a lower level of dividends.
The Boards current intention is to declare dividends totaling A$0.28 per share fully franked
for fiscal 2007, subject to continued success in implementing our transformation strategy and no
further material adverse regulatory outcomes during the course of the year. There is a risk that if
we are unsuccessful in implementing our transformation strategy or there are further material
adverse regulatory outcomes, the amount of dividends in any year may be reduced or not fully
franked, which would negatively affect yield.
There are limits on foreign ownership of our shares
The Telstra Corporation Act 1991 imposes limitations on the ownership of shares by foreign
persons. Foreign persons and their associates may not in total have interests in more than 35%
of our shares not held by the Commonwealth, and no single foreign person and its associates may
have an interest in more than 5% of our shares not held by the Commonwealth. If either of these
limitations is exceeded, the person who acquired shares or instalment receipts which resulted in
the limits being exceeded may be subject to fines.
Under the trust deed and our constitution, we and the trustee have the power to compel the
sale of the shares or instalment receipts held by foreign persons or their associates that exceed
these limits. We or the Commonwealth may also seek relief from the courts, which could include:
|
|
|
directing the disposal of shares or instalment receipts; |
|
|
|
|
restraining the exercise of any rights attaching to shares or instalment receipts; and |
|
|
|
|
prohibiting or deferring receipt of sums payable on shares or instalment receipts. |
We intend to deregister from the SEC and delist our ADRs from the NYSE as soon as feasible
following adoption of new SEC regulations on deregistration.
In December 2005, the SEC proposed rules that, if adopted, would make it easier for foreign
companies to terminate their SEC registration. If these rules are adopted, we intend to
deregister from the SEC and to delist our ADRs from the NYSE at the earliest opportunity, which may
be accomplished by the end of the 2006 calendar year. Following the deregistration and delisting,
we will no longer prepare annual reports on Form 20-F and instead will only be required to comply
with the Australian reporting obligations. Investors should note that such disclosure obligations
differ in certain material respects from our SEC ongoing reporting obligations. In addition, the
public trading market for our ADRs on the NYSE would then no longer exist.
Other risks
We also face other risks with respect to economic exposure to movements in market risks and
the environment which are discussed in Information on the Company and Quantitative and
Qualitative Disclosures about Market Risk. In addition, the government of the Australian Capital
Territory is seeking to charge rates on our infrastructure, which could lead to an additional cost
burden on us if this practise were to spread.
26
Dividends
Our Board has considered the level of future dividends. In the interests of shareholders, it
is the current intention of the Board to declare fully franked ordinary dividends of A$0.28 per
share for fiscal 2007. This assumes that we continue to be successful in implementing our
transformation strategy and there are no further material adverse regulatory outcomes during the
course of fiscal 2007.
The Board is unable to give guidance on ordinary dividends for fiscal 2008 owing to the
continuing uncertainty attached to regulatory outcomes and impacts on our business as well as
transformation and market place risks. The final amount of dividends declared for any year is a
decision for the Board to make twice a year in its normal cycle having regard to our earnings and
cash flow as well as future regulatory impacts and all other factors that affect our operations.
See also Operating and Financial Review and Prospects Liquidity and capital resources and
Operating and Financial Review and Prospects Outlook.
It is our policy to pay dividends to Australian and New Zealand shareholders by direct credit
to the shareholders or another nominated persons account with a bank or other financial
institution. We consider that payment by direct credit is fast, efficient and secure and
significantly reduces our administrative costs in relation to payment of dividends.
27
Exchange Rates
Our consolidated financial statements are shown in Australian dollars (A$) except where
another currency is specified. For convenience, this Institutional Offering Memorandum has
translations of certain A$ into US dollars (US$) at an exchange rate as at 30 June 2006 of A$1.00
= US$0.7423. These translations are indicative only and do not mean that the A$ amounts could be
converted to US$ at the rate indicated.
The following tables show, for the periods and dates indicated, information concerning the
rates of exchange at the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New York. On 14
November, the noon buying rate was A$1.00 = US$0.7656.
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
May 2006 |
|
|
0.7781 |
|
|
|
0.7509 |
|
June 2006 |
|
|
0.7527 |
|
|
|
0.7284 |
|
July 2006 |
|
|
0.7664 |
|
|
|
0.7407 |
|
August 2006 |
|
|
0.7699 |
|
|
|
0.7568 |
|
September 2006 |
|
|
0.7704 |
|
|
|
0.7461 |
|
October 2006 |
|
|
0.7743 |
|
|
|
0.7434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
At Period End |
|
Average Rate(1) |
|
High |
|
Low |
2002 |
|
|
0.5628 |
|
|
|
0.5240 |
|
|
|
0.5748 |
|
|
|
0.4841 |
|
2003 |
|
|
0.6713 |
|
|
|
0.5884 |
|
|
|
0.6729 |
|
|
|
0.5280 |
|
2004 |
|
|
0.6952 |
|
|
|
0.7155 |
|
|
|
0.7979 |
|
|
|
0.6930 |
|
2005 |
|
|
0.7618 |
|
|
|
0.7568 |
|
|
|
0.7974 |
|
|
|
0.6880 |
|
2006 |
|
|
0.7423 |
|
|
|
0.7472 |
|
|
|
0.7781 |
|
|
|
0.7056 |
|
|
|
|
(1) |
|
The average of the noon buying rates on the last day of each month during the year. |
Fluctuations in the A$ to US$ exchange rate will affect the US$ equivalent of the A$ price of
the shares and the
instalment receipts on the ASX.
28
Listing Information
Markets in which our shares are traded
We are listed on the ASX and the NZSX. We also have ADRs listed on the NYSE.
In December 2005, the SEC proposed rules that, if adopted, would make it easier for foreign
companies to terminate their SEC registration. If the SECs proposed deregistration rules are
adopted, we intend to deregister from the SEC ongoing reporting obligations and to delist our ADRs
from the NYSE at the earliest opportunity, which may be accomplished by the end of this calendar
year.
The stock market operated by the ASX is the principal stock exchange in Australia. The
exchange operates by way of the Stock Exchange Automated Trading System (SEATS), which is a fully
computerised system.
Trading on SEATS takes place each business day between the hours of 10:00am and 4:05pm,
Australian Eastern Standard Time or Australian Eastern Standard Summer Time. At 4:05pm each day,
the ASX subsequently matches any buy and sell orders in the system that satisfy both buyers and
sellers. The prices of all listed shares are continuously quoted while the market is open and the
system prioritises orders first by price and second by time of placement in the system. Exchange
participants can cross stock between buying and selling orders, at the buy or sell quote, provided
those quotes are no more than one marketable bid apart and can cross outside this range in amounts
of A$1 million or more. Transactions on the ASX are settled on the third business day following the
trade date.
Our securities were initially listed on 17 November 1997. This followed the sale by the
Commonwealth of 33.3% of its shares in Telstra. Subsequently on 18 October 1999, the Commonwealth
sold an additional 16.6% of the shares in Telstra.
Price history of our shares
The following tables give the price history of our shares as derived from the daily official
list of the ASX.
High and low closing price for shares on an annual basis for a period of five years or time
of trading if less than five years
|
|
|
|
|
|
|
|
|
|
|
A$ per Share |
Period |
|
High |
|
Low |
Fiscal 2002 |
|
|
5.68 |
|
|
|
4.48 |
|
Fiscal 2003 |
|
|
5.04 |
|
|
|
3.96 |
|
Fiscal 2004 |
|
|
5.15 |
|
|
|
4.45 |
|
Fiscal 2005 |
|
|
5.49 |
|
|
|
4.63 |
|
Fiscal 2006 |
|
|
5.14 |
|
|
|
3.63 |
|
29
High and low closing price for shares on a quarterly basis for the two most recent full financial
years
|
|
|
|
|
|
|
|
|
|
|
A$ per Share |
Period |
|
High |
|
Low |
2004 |
|
|
|
|
|
|
|
|
1 July 30 September |
|
|
5.05 |
|
|
|
4.63 |
|
1 October 31 December |
|
|
4.94 |
|
|
|
4.63 |
|
2005 |
|
|
|
|
|
|
|
|
1 January 31 March |
|
|
5.49 |
|
|
|
4.81 |
|
1 April 30 June |
|
|
5.17 |
|
|
|
4.79 |
|
1 July 30 September |
|
|
5.14 |
|
|
|
4.04 |
|
1 October 31 December |
|
|
4.32 |
|
|
|
3.76 |
|
2006 |
|
|
|
|
|
|
|
|
1 January 31 March |
|
|
4.10 |
|
|
|
3.63 |
|
1 April 30 June |
|
|
3.97 |
|
|
|
3.64 |
|
High and low closing prices for the most recent six months
|
|
|
|
|
|
|
|
|
|
|
A$ per Share |
Period |
|
High |
|
Low |
2006 |
|
|
|
|
|
|
|
|
April |
|
|
3.94 |
|
|
|
3.65 |
|
May |
|
|
3.97 |
|
|
|
3.71 |
|
June |
|
|
3.82 |
|
|
|
3.64 |
|
July |
|
|
3.87 |
|
|
|
3.67 |
|
August |
|
|
3.94 |
|
|
|
3.45 |
|
September |
|
|
3.71 |
|
|
|
3.53 |
|
October |
|
|
3.97 |
|
|
|
3.57 |
|
There were 5,997,078,863 shares issued and available for trading on the market as at 30 June
2006. This includes 211,629 shares held by the Commonwealth and listed for trading.
We successfully completed a A$1 billion off-market share buy-back in November 2003, and a
A$750 million off-market share buy-back in November 2004.
Before the buy-backs, we had 12,866,600,200 shares outstanding, including those held by the
Commonwealth. As a result of the 2003 buy-back, the number of shares outstanding reduced to
12,628,359,026 and the number of shareholders reduced from approximately 1.805 million to 1.769
million. Following the 2004 buy-back, the number of shares outstanding reduced to 12,443,074,357
and the number of shareholders reduced to 1.634 million. The Commonwealth did not participate in
the buy-backs.
On 1 September 2006, the number of shareholders was 1,524,532.
The closing price for our shares on the ASX on 17 November 2006 was A$3.75.
30
Major Shareholders and Related Parties
Major shareholders
The following table shows the number of unlisted and listed shares on issue at 1 September
2006. The table also shows, as a group, the shareholdings of our directors and officers:
|
|
|
|
|
|
|
|
|
|
|
Title of Class |
|
Identity of Person or Group |
|
Amount Owned |
|
% of Class |
Shares |
|
The Commonwealth |
|
|
6,446,207,123 |
(1) |
|
|
51.8 |
|
Shares |
|
Listed shareholders |
|
|
5,996,867,234 |
|
|
|
48.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,443,074,357 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Directors and officers as a group |
|
|
788,794 |
(2) |
|
|
|
|
|
|
|
(1) |
|
All shares held by the Commonwealth are unlisted, except for 211,629 listed
shares. |
|
(2) |
|
Refers to direct and indirect holdings. |
The shareholdings of each person known by us to be the owner of more than 5% of our voting
securities, as at 1 September 2006, is shown in the table titled Twenty largest registered
shareholders as at 1 September 2006. As at 1 September 2006, we are not aware of any individual
beneficial holder, other than the Commonwealth, whose shares represent more than 5% of the issued
and outstanding shares. The Commonwealth has equal voting rights with all other shareholders.
Distribution of shares
The following table summarises the distribution of our public listed shares as at 1 September
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Registered |
|
|
|
|
Shareholders(1) |
|
Shares(2) |
Size of Holding |
|
Number |
|
% |
|
Number |
|
% |
1-1,000 |
|
|
901,435 |
|
|
|
59.13 |
|
|
|
553,474,596 |
|
|
|
9.23 |
|
1,001-2,000 |
|
|
282,364 |
|
|
|
18.52 |
|
|
|
441,534,735 |
|
|
|
7.36 |
|
2,001-5,000 |
|
|
230,715 |
|
|
|
15.13 |
|
|
|
733,462,077 |
|
|
|
12.23 |
|
5,001-10,000 |
|
|
68,991 |
|
|
|
4.53 |
|
|
|
500,420,837 |
|
|
|
8.34 |
|
10,001-100,000 |
|
|
39,807 |
|
|
|
2.61 |
|
|
|
856,073,764 |
|
|
|
14.27 |
|
100,001 and over |
|
|
1,219 |
|
|
|
0.08 |
|
|
|
2,912,112,854 |
|
|
|
48.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,524,531 |
|
|
|
100 |
|
|
|
5,997,078,863 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Number of shareholders holding less than a marketable parcel of shares was 10,184, holding
885,786 shares. |
|
(2) |
|
Not including those shares held by the Commonwealth, except for 211,629 listed shares
which are held by the Commonwealth. |
31
Twenty largest registered shareholders as at 1 September 2006
The following table sets out the top 20 shareholders other than the Commonwealth when multiple
holdings are grouped together:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
% of Issued |
Shareholders |
|
Shares |
|
Shares(1) |
|
1 |
|
|
National Nominees Limited |
|
|
503,728,673 |
|
|
|
8.40 |
% |
|
2 |
|
|
J P Morgan Nominees Australia Ltd. |
|
|
482,830,142 |
|
|
|
8.05 |
% |
|
3 |
|
|
Westpac Custodian Nominees Ltd. |
|
|
394,323,133 |
|
|
|
6.58 |
% |
|
4 |
|
|
ANZ Nominees Limited |
|
|
242,189,871 |
|
|
|
4.04 |
% |
|
5 |
|
|
Citicorp Nominees Pty Limited |
|
|
205,576,971 |
|
|
|
3.43 |
% |
|
6 |
|
|
RBC Global Services Australia Nominees Pty Ltd. |
|
|
117,990,972 |
|
|
|
1.97 |
% |
|
7 |
|
|
Cogent Nominees Pty Limited |
|
|
103,922,712 |
|
|
|
1.73 |
% |
|
8 |
|
|
Telstra ESOP Trustee Pty Ltd. |
|
|
53,645,950 |
|
|
|
0.89 |
% |
|
9 |
|
|
UBS Nominees Pty Ltd. |
|
|
49,303,938 |
|
|
|
0.82 |
% |
|
10 |
|
|
Queensland Investment Corporation |
|
|
37,914,163 |
|
|
|
0.63 |
% |
|
11 |
|
|
HSBC Custody Nominees (Australia) Limited |
|
|
34,732,295 |
|
|
|
0.58 |
% |
|
12 |
|
|
Australian Foundation Investment Company Limited |
|
|
31,928,338 |
|
|
|
0.53 |
% |
|
13 |
|
|
AMP Life Limited |
|
|
31,536,393 |
|
|
|
0.53 |
% |
|
14 |
|
|
Australian Reward Investment Alliance |
|
|
29,169,224 |
|
|
|
0.49 |
% |
|
15 |
|
|
Merrill Lynch (Australia) Nominees Pty Ltd. |
|
|
22,700,965 |
|
|
|
0.38 |
% |
|
16 |
|
|
Dervat Nominees Pty Limited |
|
|
19,322,000 |
|
|
|
0.32 |
% |
|
17 |
|
|
Argo Investments Limited |
|
|
19,204,800 |
|
|
|
0.32 |
% |
|
18 |
|
|
Telstra Growthshare Pty Ltd. |
|
|
19,079,654 |
|
|
|
0.32 |
% |
|
19 |
|
|
Westpac Financial Services Ltd. |
|
|
17,239,314 |
|
|
|
0.29 |
% |
|
20 |
|
|
Questor Financial Services Limited |
|
|
13,851,999 |
|
|
|
0.23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,430,191,507 |
|
|
|
40.53 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Not including those shares held by the Commonwealth. |
Substantial shareholders
As at 1 September 2006, other than the Commonwealth, we did not have any substantial
shareholders.
32
Relationship with the Commonwealth
We have a number of distinct relationships with the Commonwealth, including as shareholder,
regulator and customer. The Commonwealth is currently our controlling shareholder and has special
rights and privileges under the Telstra Act. Our relationship with all of our shareholders
(including the Commonwealth) is, in general, regulated by the Corporations Act, the ASX Listing
Rules and our constitution. Commonwealth departments and independent agencies are also responsible
for the regulation of the telecommunications industry generally and us in particular under the
Telstra Act, the Trade Practices Act, the Telecommunications Act and the Telecommunications
(Consumer Protection and Service Standards) Act.
The Commonwealth as shareholder
As of the date of this Institutional Offering Memorandum, the Commonwealth owns approximately
51.8% of our shares. In September 2005, the Commonwealth amended the Telstra Act by passing the
Telstra (Transition to Full Private Ownership) Act 2005 (the Transition to Full Private Ownership
Act) to enable the Commonwealth to undertake a sale of all or part of its stake in Telstra.
The Commonwealth has issued requests to us and our Board under section 8AQ of the Telstra Act
for us and our Board to assist the Commonwealth and its advisers with the Global Offering. The
Telstra Act provides that, in providing such assistance, we are not subject to restrictions that
would otherwise apply under the Corporations Act, the listing rules of stock exchanges regulated
under Australian law, or rules of common law or equity (except for administrative law rules). The
Commonwealth has agreed to indemnify us and our directors and senior management for certain
liabilities that may be incurred in relation to the Global Offering, and to reimburse us for our
reasonable costs incurred in relation to the Global Offering.
Following completion of the Global Offering, the Commonwealth intends to transfer all of its
remaining Telstra shares to the Future Fund. See The Future Fund and Risk Factors. While the
Commonwealth continues to hold its stake in us, we are required under the Telstra Act to provide it
with certain information that we would not generally be required to disclose concurrently, if at
all, to other shareholders. This information includes:
|
|
|
annual provision of our three-year corporate plan; |
|
|
|
|
interim financial statements, if requested by the Communications Minister; and |
|
|
|
|
reports regarding significant proposed events, including corporate restructurings, acquisitions
and divestitures or joint venture and partnership activities. |
Under the Telstra Act, we are also required to keep the Communications Minister and the
Finance Minister generally informed about our operations and to give them such information about
our operations as they require.
The Communications Minister has the power under the Telstra Act to give us, after consultation
with our Board, such written directions as appear to the Communications Minister to be necessary in
the public interest. To date, no directions have been issued under this power. Our Board must
ensure that we comply with any such direction. The Telstra Act also deems the Commonwealth
Auditor-General to have been appointed as our auditor for the purposes of the Corporations Act.
Under the Telstra Act, as a result of new requirements introduced by the Transition to Full
Private Ownership Act, we must also notify the Finance Minister if we intend to issue securities or
financial products or otherwise engage in conduct that is likely to result in a dilution of the
Commonwealths equity in us. The Finance Minister may direct us not to engage in that conduct.
Our management is also required to appear before and, with limited exceptions, provide
information to Parliamentary committees.
Consequences of the Global Offering
Under the amendments to the Telstra Act made by the Transition to Full Private Ownership Act,
certain provisions in the Telstra Act and other Commonwealth legislation will cease to have effect
or apply to us once the Commonwealths ownership of Telstra falls below one of two particular
levels. Those two ownership thresholds are
33
below 50% and 15% or less. For this purpose, Telstra shares transferred to the Future Fund
following completion of the Global Offering will not be considered to be owned by the Commonwealth.
This means that these thresholds will be triggered following the Global Offering.
The Commonwealths ownership of Telstra will fall below 50% on completion of the Global
Offering. As a result, we will lose our Australian capital gains tax (CGT) exempt status on assets
that we acquired before
20 September 1985. Accordingly, any future gains in the value of these assets after completion of
the Global Offering will be taxable upon disposal of the asset by us. Since we do not currently
intend to dispose of any material assets acquired before 20 September 1985, the loss of CGT exempt
status for these assets is not expected to have a material impact on Telstra.
The legislative consequences of the Commonwealths ownership of Telstra falling below 50% are
not considered to have a material impact on Telstra but include:
|
|
|
our employees who are members of the Commonwealth Superannuation Scheme (CSS) will cease to be
eligible employees for the purposes of the Superannuation Act 1976, and will no longer be
entitled to contribute to the CSS; and |
|
|
|
|
our auditor, currently the Commonwealth Auditor-General, may (and is expected to) resign. In
any event, the Auditor-General will cease to be our auditor on the earlier of his resignation or
the end of the first annual general meeting held after the Commonwealths ownership of Telstra
falls below 50%. This means that we and our shareholders can decide who to appoint as our auditor. |
The Commonwealth has advised Telstra that it will introduce legislation into parliament that
maintains coverage for Telstra employees under existing Commonwealth long service leave legislation
for three years after the Commonwealths ownership in Telstra falls below 50%.
The Commonwealths ownership of Telstra is expected to fall to 15% or less no later than
when the Commonwealth transfers to the Future Fund Telstra shares not sold as part of the Global
Offering. This is intended to occur as soon as practicable after the exercise or expiry of the
Over-allotment Option, and in any event, no later than 24 February 2007. The main consequences of
the Commonwealths ownership of Telstra falling to 15% or less are:
|
|
|
we will no longer be subject to the obligations to provide financial and other information to the
Commonwealth; |
|
|
|
|
we will no longer be subject to the Communications Ministers power to direct us (as appears to
the Communications Minister to be necessary, in the public interest); and |
|
|
|
|
we will no longer be subject to the Finance Ministers power to direct us not to dilute the
Commonwealths equity in Telstra or to issue securities or financial products. |
The closing of the Global Offering and the transfer of the Commonwealths remaining shares to
the Future Fund may require regulatory or governmental approval under regulatory licenses of
Telstras international operations. For more information, refer to Regulation Offshore
subsidiaries.
Upon completion of the Global Offering, we expect to no longer have a standing obligation to
appear before and provide information to Parliamentary committees.
The Commonwealth as regulator
We are currently regulated by the Commonwealth, its Ministers and independent agencies under a
number of statutes including:
|
|
|
the Telstra Act; |
|
|
|
|
the Telecommunications (Consumer Protection and Service Standards) Act 1999; |
|
|
|
|
the Trade Practices Act;
and |
|
|
|
|
the
Telecommunications Act. |
The Commonwealth has stated that the telecommunications regulatory regime is intended to
promote the long-term interests of telecommunications consumers, including through promoting
competitive telecommunications
34
markets and encouraging economically efficient investment in infrastructure. The
telecommunications regime also supports industry self-regulation and is intended to minimise the
financial and administrative burdens on the telecommunications industry.
The Commonwealth believes that since the market was fully opened to competition in 1997,
consumers have benefited through a wider range of services and significant reductions in prices.
The Commonwealth considers that the telecommunications industry is currently in transition to
full competition and that appropriately targeted regulation is in place to facilitate this outcome.
Overall, the Commonwealth regards the regulatory legislation as settled. However, the Commonwealth
has announced that it will review the telecommunications competition regulatory regime in 2009.
Refer to Regulation for details of the regulatory regime and its effect on our business.
The Commonwealth as customer
The Commonwealth is a major user of our services. The Commonwealth, as a result of
telecommunications liberalisation, is increasingly seeking to take advantage of open competition
when purchasing telecommunications services in such a competitive environment.
Related party transactions
A discussion of our related party transactions is contained in Operating and Financial Review
and Prospects Related party transactions.
35
The Future Fund
In February 2006, the Commonwealth passed legislation to establish the Future Fund. The Future
Fund is a Commonwealth investment fund set up to strengthen the Commonwealths long term finances
by providing for its unfunded superannuation liabilities. Following completion of the Global
Offering, the Commonwealth intends to transfer to the Future Fund all of its Telstra shares which
are not transferred under the Global Offering. The exact number of shares to be transferred to the
Future Fund and the date of transfer will be determined by the size of the Global Offering, whether
or not the Over-Allotment Option is exercised and other administrative mechanisms. The Commonwealth
will initially retain sufficient shares to meet the bonus loyalty obligations available to certain
retail investors in the Retail Offering. These retained shares will be held for the Commonwealth by
the trustee until they are transferred to those entitled, and will not be voted while they are so
held. Any of these shares which are ultimately not required, because holders have transferred
instalment receipts or otherwise lost the right to receive bonus loyalty shares, will be
transferred to the Future Fund after the date the final instalment is due.
Assuming no exercise of the Over-allocation Option, the Future Fund will hold approximately
21% of our outstanding shares following the completion of the Global Offering, or approximately 17%
assuming full exercise of the Over-allotment Option.
The Future Fund
The Future Fund is a Commonwealth investment fund set up to strengthen the Commonwealths
long-term finances by providing for its unfunded superannuation liabilities. The Future Fund Board
is responsible for investment decisions and holds the Future Funds investments (for and on behalf
of the Commonwealth).
The Future Fund Board is a separate legal entity from the Commonwealth. The members of the
Future Fund Board are appointed by the Commonwealth for terms of up to 5 years. Their appointment
may only be terminated in certain limited circumstances. The Future Fund Board members are subject
to duties similar to those of company directors.
Currently, the Chair of the Future Fund Board is Mr. David Murray. Other members of the Future
Fund Board are Mr. Jeffrey Browne, Ms. Susan Doyle, Dr. John Mulcahy, Mr. Trevor Rowe AM and Mr.
Brian Watson. There is currently one vacancy on the Future Fund Board.
No specific direction
The Future Fund Act 2006 (Cth) provides that, subject to its obligations under that Act and
any directions from the Commonwealth, the Future Fund Board must seek to maximise the return earned
over the long term, consistent with international best practice for institutional investment.
The Government does not intend to issue directions specific to Telstra shares held by the
Future Fund Board, other than the escrow direction and changes to the general investment mandate
discussed below. However, a future Government may take a different approach.
In the absence of such specific directions, the Future Fund Board may vote the Future Funds
Telstra shares as it sees fit, subject to complying with the Future Funds obligations under the
Future Fund Act and the general investment mandate issued by the Government.
Escrow direction
On the day that shares are first transferred to the Future Fund, the Finance Minister will
direct the Future Fund Board not to dispose of or agree to dispose of the Future Funds Telstra
shares for a period of two years from the date instalment receipts under the Global Offering are
first listed on the ASX except:
|
|
|
in order to satisfy demand from eligible Telstra shareholders under a Telstra initiated dividend
reinvestment plan (if any); or |
36
|
|
|
as part of a Telstra capital management initiative, (if any); such as a buy-back or
capital reduction; or |
|
|
|
|
to a single investor, provided that: |
|
|
|
the disposal involves at least 3%
of Telstras issued ordinary shares at the time of the disposal; |
|
|
|
|
the disposal does not take place until at least six months after the date instalment receipts
are first listed on the ASX; |
|
|
|
|
the investor provides an acceptable undertaking for at least the balance of the escrow period; |
|
|
|
|
the price per share is no less than the final price in the Institutional Offering; and |
|
|
|
|
Telstra is advised prior to such disposal. |
After the two-year escrow period the Future Fund Board will sell down its Telstra shareholding
as directed under the investment mandate. The Government intends that the escrow direction will not
be varied or revoked, however, a future Government may take a different approach.
General investment mandate
The current investment mandate requires, among other things, the Future Fund Board to adopt a
benchmark for returns on the Future Fund of at least an average return of the Consumer Price Index
+ 4.5% to +5.5% per annum over the long term.
Prior to the shares being transferred to the Future Fund, the Commonwealth intends to amend
the investment mandate. The revised directives will be consistent with the following principles:
|
|
|
after the two-year escrow, the Future Fund Board will be required to sell down its Telstra
shareholding over the medium term to a level consistent with its investment strategy (at least
below 20% of Telstras issued share capital); |
|
|
|
|
the sell down is to be on a best endeavours basis with a view to optimising the long-term value
of the Future Fund; |
|
|
|
|
the performance of the Future Fund Boards Telstra shareholding will be assessed and reported
separately to the rest of the Future Fund until the sell down is completed; and |
|
|
|
|
the investment mandate will no longer prohibit the Future Fund Board from purchasing Telstra
shares. |
The Finance Minister and the Treasurer of the Commonwealth will formally invite the Future
Fund Board to make a submission on the revised directions to be issued and must consider any
submission that the Future Fund Board chooses to make, consistent with the Future Fund Act.
Use of Proceeds
The Commonwealth will receive all of the net proceeds from the Global Offering. We will
receive none of the proceeds of the Global Offering.
37
Selected Consolidated Financial and Statistical Data
The following selected consolidated financial data comes from our audited consolidated
financial statements. The statistical data represent managements best estimates. The following
information should be read in conjunction with our audited consolidated financial statements and
the other information contained in this Institutional Offering Memorandum. Our audited consolidated
financial statements for the year ended 30 June 2006 were prepared in accordance with A-IFRS, and
comparative information for the year ended 30 June 2005 has been restated in accordance with
A-IFRS, except for AASB 132: Financial Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement, where comparative information was not
required to be restated. In addition, we have elected to early adopt AASB 7: Financial
Instruments: Disclosures, which supersedes the disclosure requirements of AASB 132. The financial
information for the years ended 30 June 2004, 2003 and 2002 has been reconciled to US-GAAP and is
derived from our audited consolidated financial data for those periods, which is not included
herein. A-IFRS differs in some material respects from US-GAAP. For a reconciliation of the material
differences between A-IFRS and US-GAAP as they relate to our audited consolidated financial
statements, see note 37 to our audited consolidated financial statements.
Financial data in accordance with A-IFRS for the two-year period ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2006 (1) |
|
2005 |
|
|
A$ |
|
US$ |
|
A$ |
|
|
(In millions, except per share |
|
|
amounts) |
Income Statement data |
|
|
|
|
|
|
|
|
|
|
|
|
Total Income (excluding finance income)(2) |
|
|
23,100 |
|
|
|
17,147 |
|
|
|
22,442 |
|
Expenses (excluding depreciation, amortisation and finance costs)(2)(3) |
|
|
13,516 |
|
|
|
10,032 |
|
|
|
11,978 |
|
Depreciation and amortisation |
|
|
4,087 |
|
|
|
3,034 |
|
|
|
3,52 |
|
Net finance costs |
|
|
936 |
|
|
|
695 |
|
|
|
880 |
|
Profit before income tax expense |
|
|
4,561 |
|
|
|
3,386 |
|
|
|
6,055 |
|
Profit for the year |
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
Basic earnings per share(4) |
|
|
0.26 |
|
|
|
0.19 |
|
|
|
0.35 |
|
Dividends paid(5) |
|
|
4,970 |
|
|
|
3,689 |
|
|
|
4,124 |
|
Dividends declared for the fiscal year |
|
|
4,224 |
|
|
|
3,135 |
|
|
|
4,970 |
|
Dividends declared per share |
|
|
0.34 |
|
|
|
0.25 |
|
|
|
0.40 |
|
Total income comprises |
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue |
|
|
22,750 |
|
|
|
16,888 |
|
|
|
22,161 |
|
Other revenue |
|
|
22 |
|
|
|
16 |
|
|
|
20 |
|
Other income |
|
|
328 |
|
|
|
243 |
|
|
|
261 |
|
Finance income |
|
|
66 |
|
|
|
49 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,166 |
|
|
|
17,196 |
|
|
|
22,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
36,175 |
|
|
|
26,853 |
|
|
|
35,211 |
|
Current borrowings |
|
|
1,969 |
|
|
|
1,462 |
|
|
|
1,507 |
|
Non current borrowings |
|
|
11,409 |
|
|
|
8,469 |
|
|
|
10,941 |
|
Share capital |
|
|
5,569 |
|
|
|
4,134 |
|
|
|
5,536 |
|
Equity/net assets |
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
|
(1) |
|
Unless otherwise noted, all amounts have been translated at the noon buying rate on 30 June
2006 of A$1.00 = US$0.7423. |
|
(2) |
|
For a breakdown of operating revenue by product group and a breakdown of operating expenses by
expense category, see Operating and Financial Review and Prospects. |
38
|
|
|
(3) |
|
Includes our share of net (profit)/loss from jointly controlled and associated entities. |
|
(4) |
|
Calculated based on the weighted average number of issued ordinary shares that were outstanding
during the fiscal year. Refer to note 3 in our consolidated financial statements for further
details. Basic earnings per share for each year was materially consistent with diluted earnings per
share. As at 30 June 2006, we had issued ordinary shares of 12,443,074,357 (2005: 12,443,074,357).
During fiscal 2005, we completed a share buy-back of 185,284,669 ordinary shares. |
|
(5) |
|
During fiscal 2006, we paid dividends of A$4,970 million, being the previous years final
dividend of A$1,739 million, a special dividend of A$746 million paid with the previous years
final dividend, the fiscal 2006 interim dividend of A$1,739 million and a special dividend of A$746
million paid with the interim dividend. |
Financial data in accordance with US-GAAP for the five-year period ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2006 (1) |
|
2005(4) |
|
2004(4) |
|
2003(4) |
|
2002(4) |
|
|
A$ |
|
US$ |
|
A$ |
|
A$ |
|
A$ |
|
A$ |
|
|
(In millions, except per share amounts) |
Income Statement data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
22,779 |
|
|
|
16,909 |
|
|
|
22,167 |
|
|
|
20,737 |
|
|
|
20,495 |
|
|
|
20,196 |
|
Net income, before cumulative effect of change in
accounting principle |
|
|
2,718 |
|
|
|
2,019 |
|
|
|
4,204 |
|
|
|
1,265 |
|
|
|
3,847 |
|
|
|
3,922 |
|
Cumulative effect of change in accounting principle(2) |
|
|
(245 |
) |
|
|
(181 |
) |
|
|
|
|
|
|
4 |
|
|
|
(309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
2,473 |
|
|
|
1,838 |
|
|
|
4,204 |
|
|
|
1,269 |
|
|
|
3,538 |
|
|
|
3,922 |
|
Basic earnings per share, before cumulative effect of change
in accounting principle |
|
|
0.22 |
|
|
|
0.16 |
|
|
|
0.34 |
|
|
|
0.10 |
|
|
|
0.29 |
|
|
|
0.31 |
|
Cumulative effect of change in accounting principle(2) |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share(3) |
|
|
0.20 |
|
|
|
0.15 |
|
|
|
0.34 |
|
|
|
0.10 |
|
|
|
0.27 |
|
|
|
0.31 |
|
Proforma net income(2) |
|
|
2,718 |
|
|
|
2,019 |
|
|
|
4,184 |
|
|
|
1,228 |
|
|
|
3,569 |
|
|
|
3,936 |
|
Proforma basic earnings per share(2) |
|
|
0.22 |
|
|
|
0.16 |
|
|
|
0.34 |
|
|
|
0.10 |
|
|
|
0.28 |
|
|
|
0.31 |
|
Balance Sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
35,777 |
|
|
|
26,557 |
|
|
|
37,040 |
|
|
|
35,670 |
|
|
|
40,529 |
|
|
|
42,948 |
|
Current borrowings |
|
|
1,984 |
|
|
|
1,473 |
|
|
|
1,524 |
|
|
|
3,246 |
|
|
|
1,323 |
|
|
|
1,866 |
|
Non current borrowings |
|
|
11,734 |
|
|
|
8,710 |
|
|
|
11,641 |
|
|
|
9,095 |
|
|
|
11,580 |
|
|
|
12,372 |
|
Share capital |
|
|
5,954 |
|
|
|
4,420 |
|
|
|
5,921 |
|
|
|
6,164 |
|
|
|
6,568 |
|
|
|
6,536 |
|
Equity/net assets |
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
15,082 |
|
|
|
17,899 |
|
|
|
18,363 |
|
|
|
|
(1) |
|
Unless otherwise noted, all amounts have been translated at the noon buying rate on 30
June 2006 of A$1.00 = US$0.7423. |
|
(2) |
|
During fiscal 2006, we changed our accounting principles under US-GAAP in relation to mobile
handset subsidies and capitalisation of pension costs. Refer to note 37(b) in our financial
statement for further details.
The proforma amounts for net income and basic earnings per share assume that these changes
in accounting principle were applied retroactively. |
|
(3) |
|
Calculated based on the weighted average number of issued ordinary shares that were outstanding
during the fiscal year. Refer to note 3 in our consolidated financial statements for further
details. Basic earnings per share for each year was materially consistent with diluted earnings per
share. As at 30 June 2006, we had issued ordinary shares of 12,443,074,357. As at 30 June 2005, we
had issued ordinary shares of 12,443,074,357 after completing a share buy-back of 185,284,669
ordinary shares. As at 30 June 2004, we had issued ordinary shares of 12,628,359,026 after
completing a share buy-back during fiscal 2004 of 238,241,174 ordinary shares. As at 30 June 2003
and 30 June 2002, we had 12,866,600,200 issued ordinary shares. |
|
(4) |
|
Certain US-GAAP amounts in 2005, 2004, 2003 and 2002 have been restated as a result of a number
of immaterial adjustments that were identified as part of our adoption of A-IFRS. Refer to note
37(a) in our consolidated financial statements for further details. |
39
Statistical Data as at the end of the period (except for traffic data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
Billable Traffic Data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local calls (number of calls) |
|
|
7,432 |
|
|
|
8,469 |
|
|
|
9,397 |
|
|
|
9,794 |
|
|
|
10,269 |
|
National long distance minutes(1) |
|
|
7,215 |
|
|
|
7,743 |
|
|
|
8,520 |
|
|
|
9,161 |
|
|
|
9,170 |
|
Fixed to mobile minutes |
|
|
4,491 |
|
|
|
4,375 |
|
|
|
4,226 |
|
|
|
3,944 |
|
|
|
3,691 |
|
International direct minutes |
|
|
534 |
|
|
|
580 |
|
|
|
651 |
|
|
|
740 |
|
|
|
781 |
|
Mobile voice telephone minutes(2) |
|
|
7,311 |
|
|
|
6,746 |
|
|
|
6,145 |
|
|
|
6,335 |
|
|
|
5,780 |
|
Inbound Calling Products B Party minutes |
|
|
2,922 |
|
|
|
2,773 |
|
|
|
2,708 |
|
|
|
2,655 |
|
|
|
3,345 |
|
Inbound Calling Products A Party minutes |
|
|
1,012 |
|
|
|
940 |
|
|
|
938 |
|
|
|
918 |
|
|
|
N/A |
|
Number of short messaging service (SMS) sent |
|
|
3,019 |
|
|
|
2,289 |
|
|
|
1,944 |
|
|
|
1,413 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network and Operations Data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access lines in service(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
5.46 |
|
|
|
5.60 |
|
|
|
5.87 |
|
|
|
6.20 |
|
|
|
6.35 |
|
Business |
|
|
2.32 |
|
|
|
2.45 |
|
|
|
2.57 |
|
|
|
2.71 |
|
|
|
2.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail customers |
|
|
7.78 |
|
|
|
8.05 |
|
|
|
8.44 |
|
|
|
8.91 |
|
|
|
9.07 |
|
Domestic wholesale |
|
|
2.16 |
|
|
|
2.07 |
|
|
|
1.84 |
|
|
|
1.55 |
|
|
|
1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basic access lines in service |
|
|
9.94 |
|
|
|
10.12 |
|
|
|
10.28 |
|
|
|
10.46 |
|
|
|
10.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN access (basic lines equivalents) (in thousands)(4) |
|
|
1,214 |
|
|
|
1,208 |
|
|
|
1,288 |
|
|
|
1,213 |
|
|
|
1,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Services in Operation (SIO) (in thousands)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3G |
|
|
317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSM |
|
|
6,468 |
|
|
|
6,894 |
|
|
|
6,653 |
|
|
|
5,812 |
|
|
|
5,346 |
|
CDMA |
|
|
1,703 |
|
|
|
1,333 |
|
|
|
951 |
|
|
|
757 |
|
|
|
596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services in operation |
|
|
8,488 |
|
|
|
8,227 |
|
|
|
7,604 |
|
|
|
6,569 |
|
|
|
5,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wholesale mobile SIOs (in thousands) |
|
|
119 |
|
|
|
83 |
|
|
|
61 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online subscribers (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband subscribers |
|
|
1,027 |
|
|
|
1,205 |
|
|
|
1,194 |
|
|
|
1,158 |
|
|
|
1,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadband subscribers Retail |
|
|
1,476 |
|
|
|
856 |
|
|
|
427 |
|
|
|
121 |
|
|
|
168 |
|
Broadband subscribers Wholesale(6) |
|
|
1,427 |
|
|
|
888 |
|
|
|
379 |
|
|
|
240 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Broadband subscribers |
|
|
2,903 |
|
|
|
1,744 |
|
|
|
806 |
|
|
|
361 |
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total online subscribers |
|
|
3,930 |
|
|
|
2,949 |
|
|
|
2,000 |
|
|
|
1,519 |
|
|
|
1,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FOXTEL subscribers (in thousands) |
|
|
1,130 |
|
|
|
1,023 |
|
|
|
904 |
|
|
|
836 |
|
|
|
800 |
|
Employee Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic full time staff(7) |
|
|
37,599 |
|
|
|
39,680 |
|
|
|
36,159 |
|
|
|
37,169 |
|
|
|
40,427 |
|
Full-time staff and equivalents(8) |
|
|
44,452 |
|
|
|
46,227 |
|
|
|
41,941 |
|
|
|
41,941 |
|
|
|
44,977 |
|
Total workforce(9) |
|
|
49,443 |
|
|
|
52,705 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
(1) |
|
Includes national long distance minutes from our public switched telephone network (PSTN)
and independently operated payphones. Excludes minutes related to calls from non-PSTN networks,
such as ISDN and virtual private networks. |
|
(2) |
|
Includes all calls made from mobile telephones including long distance and international calls;
excludes data, messagebank, international roaming and CSL New World. |
40
|
|
|
(3) |
|
Excludes Incontact service (a free service with restrictive calling access) and advanced access
services, such as ISDN services. |
|
(4) |
|
Expressed in equivalent number of clear voice channels. Comparatives have been restated to
reflect updated assessment of channels per SIO on ISDN 10/20/30. The previous assessment was based
on a calculation of channel configurations across sample services. The revised assessment is based
on the entire customer base. |
|
(5) |
|
Excludes CSL New World SIOs. |
|
(6) |
|
Within Broadband, retail products include cable, satellite, BigPond Wireless, HyperConnect,
ADSL and Symmetrical HDSL, while wholesale products include DSL Layer 1, DSL Layer 2, DSL Layer 3,
Spectrum Sharing and vISP Broadband. Total Broadband subscribers exclude Broadband component of ULL
and Mobile Broadband which form part of intercarrier services and mobiles revenue respectively. |
|
(7) |
|
Excludes offshore, casual and part-time employees. |
|
(8) |
|
Includes all domestic and offshore employees, including controlled entities. |
|
(9) |
|
Includes all domestic and offshore employees, including controlled entities, as well as
contractors and agency staff. |
41
Operating and Financial Review and Prospects
The following discussion should be read in conjunction with the annual consolidated financial
statements, including the notes to these consolidated financial statements, which are included with
this International Offering Memorandum. These annual consolidated financial statements have been
prepared for the first time in accordance with Australian equivalents to International Financial
Reporting Standards (A-IFRS). Our comparatives have been restated to reflect the adoption of
A-IFRS, with the exception of the accounting standards on financial instruments that were subject
to an exemption and adopted from 1 July 2005. A-IFRS differs in certain respects from Generally
Accepted Accounting Principles in the United States (US-GAAP). A discussion of the principal
differences between A-IFRS and US-GAAP as they relate to us and a detailed reconciliation of net
income and equity to US-GAAP, is provided in note 37 to our consolidated financial statements.
Refer to the 2005 Annual Report for the financial results of the prior periods determined under
previous Australian Generally Accepted Accounting Principles (AGAAP).
The Operating and Financial Review and Prospects includes statements of future expectations
and forward-looking statements that are based on managements current views and assumptions, and
involve known and unknown risks and uncertainties that could cause actual results, performance or
events to differ materially from those in the forward-looking statements. For a discussion of some
of the principal risks that could affect our business is presented in this Institutional Offering
Memorandum refer to Risk Factors and Cautionary Statement Regarding Forward-Looking Statements.
In this section, we refer to our fiscal years ended 30 June 2006 and 30 June 2005 as fiscal
2006 and fiscal 2005 respectively. We have referred to the two fiscal years ended 30 June 2006 as
the two-year period.
Our transformation strategy
At the beginning of fiscal 2006, our new CEO and management team initiated a comprehensive
review of our operations and strategies. Based on this review, we determined that our networks,
systems and products and service offerings were outdated and lagging behind our international peers
and that our costs were escalating due to increasing costs of goods and labour costs as well as
rising costs associated with maintaining and supporting complex legacy systems. In addition,
revenues from our traditional high margin PSTN products and services have been declining due to a
combination of increased competition and customers migrating to lower margin emerging products and
services.
In November 2005, we decided to implement wholesale changes to our networks, systems and
operations under a five-year transformation strategy. The key elements of this transformation
strategy are:
|
|
|
building a next generation fixed network to support IP-based services; |
|
|
|
|
rolling out next generation wireless services over our recently launched NEXT GTM
wireless network; |
|
|
|
|
implementing market-based management and using customer research to differentiate our
product offerings; |
|
|
|
|
providing customers with integrated services across fixed, wireless and Internet platforms; |
|
|
|
|
simplifying systems and operations to reduce costs; |
|
|
|
|
expanding and enhancing our Sensis advertising, search and information services business; and |
|
|
|
|
instituting cultural changes through business reform and increased training. |
We believe that if we can successfully transform our business, it will improve our
competitiveness and financial results.
Our transformation strategy is significantly more extensive than similar initiatives
undertaken by other telecommunications companies, involves significant capital spend and is subject
to significant execution risks. In addition, we are endeavouring to accomplish this transformation
on an accelerated timetable. As a result, during the early years of the transformation our earnings
and cash flows will be significantly reduced, and we have needed to increase borrowings to fund our
capital expenditures, investments and dividends. However, we believe that we need
42
to undertake these major changes now and under our proposed timetable in order to remain
competitive and improve the financial results and position of our company in the future.
Strategic Management Objectives
Together with the announcement of our transformation strategy in November 2005, our Board set
strategic management objectives to measure the successful implementation of our five year
transformation strategy. We have linked our remuneration structure to the transformation strategy,
with the aim of increasing the focus and understanding by senior executives of the key strategic
objectives and motivating employees to execute on the strategy. In October 2006, our Board revised
these strategic targets in order to reflect the current regulatory environment and market
conditions and the experience of the first year of our transformation plan, and approved the
following:
|
|
|
revenue compound annual growth in the range of 2.0% to 2.5% (to fiscal 2010 from the fiscal
2005 base level), to be achieved by offsetting the expected substantial deterioration in
traditional PSTN revenues with revenues from new products and services delivered through our
next-generation networks; |
|
|
|
|
new product revenue exceeding 30% of sales revenue by fiscal 2010; |
|
|
|
|
limiting compound annual growth of operating expenses (excluding depreciation and
amortisation) to 2.0% to 3.0% (to fiscal 2010 from the fiscal 2005 base level); |
|
|
|
|
EBITDA compound annual growth in the range of 2.0% to 2.5% (to fiscal 2010 from the
fiscal 2005 base level) and EBITDA margins of between 46% to 48% by fiscal 2010. We are
expecting EBITDA during the five year transformation strategy to decrease in the early
years of the transformation, and are then targeting improvement in the later years of the
transformation; |
|
|
|
|
cash capital expenditure falling to a range of 10% to 12% of sales revenue by fiscal
2010; |
|
|
|
|
free cash flow increasing to between A$6,000 million and A$7,000 million by fiscal
2010; and |
|
|
|
|
work force reductions of approximately 12,000 over five years of the transformation
strategy. |
It is important to understand that these are internal objectives set by our Board in order to
measure our managements performance in implementing the transformation strategy, and are not
financial forecasts or projections and should not be regarded as such. The strategic management
objectives are primarily based on:
|
|
|
our decision not to roll-out an FTTN network, and instead offer high-speed broadband products
and services through our existing networks; |
|
|
|
|
successfully rolling out our NEXT GTM wireless network services and migrating CDMA
customers to the new network; |
|
|
|
|
successfully deploying our next-generation fixed line network; |
|
|
|
|
existing regulatory settings, including the ACCC interim determination establishing ULLS
pricing of A$17.70 per month in band 2, and no mandated competitor access to our NEXT GTM
wireless network; |
|
|
|
|
successfully implementing short, medium and long-term revenue initiatives in key PSTN, mobile
and broadband markets and customer segments; |
|
|
|
|
our ability to differentiate ourselves and obtain new revenues from our new networks and new
products and services to replace declining revenues from our traditional high-margin PSTN
products and services; |
|
|
|
|
rationalising our operational support systems (OSS) and business support systems (BSS), and
achieving an 80% reduction in the number of such systems by the end of fiscal 2010; |
|
|
|
|
key vendors in connection with our transformation performing on-time and as contracted; |
|
|
|
|
growing our Sensis business organically and by targeted acquisitions; |
43
|
|
|
competitors not engaging in sustained and extreme price competition or investing in
substantial new infrastructure or disruptive technologies; and |
|
|
|
|
our workforce embracing our cultural transformation. |
The strategic management objectives are based on the current regulatory environment and market
and competitive conditions, which are expected to change over time. Our ability to achieve our
strategic management objectives is subject to significant risks. See Risk Factors for a
description of these key risks. Investors should note that many of these risks are outside of our
control, and that no assurance can be given that we will successfully complete our transformation
or achieve our strategic management objectives.
Revenue and products
During the two-year period, our increase in sales revenues was due mainly to revenue growth in
mobiles, Internet and IP solutions, advertising and directory services, and pay TV bundling. Our
challenge moving forward will be to continue and to consolidate the growth in these areas, while
controlling costs, minimising margin erosion and managing the decline in our PSTN revenues.
Competition has continued to intensify and, as a result, we have seen our revenues decline in a
number of areas despite increasing volumes. We have continued to focus on maximising returns from
our higher margin traditional products such as PSTN products, while managing the shift in customer
demand for our lower margin emerging products, such as mobiles, broadband and other Internet based
products. We have aligned our investment strategies with our growth products and continue to focus
on simplifying our existing processes to identify cost efficiencies and protect operating margins,
while improving our customer service levels. Our overall operating margins are under constant
pressure from the product mix change to lower margin products. However, we are building a
software-based cost efficient infrastructure that we expect will enable us to deliver new products
at low incremental costs and good margins.
Most of our revenues are generated from basic access, fixed and mobile call charges,
specialised data, Internet and IP solutions, advertising and directories services, solution
management services and our international operations. We are focusing on a range of key products
and services within these categories in order to grow our revenues. This is further described
below:
|
|
|
PSTN products: We first experienced a significant decline in overall PSTN revenues in
the second half of fiscal 2005. Performance in this market has been depressed by
competition and product substitution. Our PSTN revenue was also adversely impacted by ULL
as carriers have reached customer density thresholds to be able to undertake viable ULL
investment, which has further been assisted by falling equipment prices reducing the
capital required. |
|
|
|
|
This market remains a focal point and a significant part of our company in terms of sales
revenue. It continues to provide us with strong cash flows. |
|
|
|
|
We continue to focus on maximising returns and improving customer service in this area by
offering a broad range of product packages that include bundling traditional products with
new products. In addition, in June 2006 we introduced new capped calling plans on our basic
access lines, which includes untimed local and national long distance calls. Despite a
positive response to these initiatives, total PSTN revenues declined in fiscal 2006, led by
competitive pricing pressures and the continued migration of customers to mobiles and other
products and services. |
|
|
|
|
Mobiles: While the rate of growth has slowed, mobile revenue growth has been driven
by low access fee plans, value added services including mobile data and the increasing
popularity of prepaid offerings. We continue to increase revenues by providing more
innovative products on our mobile networks including access to a wide range of Internet
products and content through mobile handsets and the provision of high-speed wireless
services, including 3G mobile services. In addition, revenues continue to increase with
the higher number of mobile users. |
|
|
|
|
Internet and IP services: Growth in this area was attributable to an increase in both
retail and wholesale broadband subscribers. We expect the Internet and IP solutions
products to continue their expansion as a result of large increases in the number of
broadband subscribers and robust competition as providers compete for market share. This
market is in a growth phase and our strategy to capitalise on this growth |
44
|
|
|
involves the provision of high speed, innovative Internet products such as the launch of
Australias first legal movie download service. The ability to offer a suite of product and
services, combined with value based pricing, is a key to our strategy. |
|
|
|
|
We expect take up of ADSL and other emerging broadband Internet services via HFC cable and
satellite to increase in future reporting periods as the market becomes more aware of their
performance capabilities. |
|
|
|
|
Advertising and directories: Growth in our Sensis business has been led by an
increase in revenue from our Yellow® and White Pages® printed and online advertising
solutions. This was predominantly driven by product innovation and customer demand. In
addition, we have continued to grow our Yellow® and White Pages® Online directory
businesses. |
|
|
|
|
As telecommunications, computing and media technologies continue to converge, we are focused
on enhancing our capabilities to provide new and innovative application and content services
and to expand further into these converging markets. |
|
|
|
|
Solutions management: We have continued to strengthen our position in the managed
services and information and communication technology (ICT) market. During fiscal 2005, we
acquired KAZ, a provider of business process outsourcing, systems integration, consulting,
applications development and IT management services. During fiscal 2005, we also acquired
PSINet, a provider of e-business infrastructure solutions and corporate IP based
communication services. These acquisitions expanded our IT services capability to both our
Australian and international customers, complementing our core strength in
telecommunications. These acquisitions combined with our pre-existing solutions management
business have significantly broadened our solutions management services, which we believe
will assist us to achieve our goal of becoming an Australian leader in the ICT market. |
|
|
|
|
International operations: Our offshore controlled entities contributed 7.7% of our
total sales revenue in fiscal 2006 and 7.3% in fiscal 2005. This is primarily attributable
to the CSL New World Mobility Group operations in Hong Kong and the TelstraClear
operations in New Zealand, which generate revenues mainly from the mobile market and from
fixed network services respectively. |
|
|
|
|
During fiscal 2006, we merged our 100% owned Hong Kong mobile operations (CSL) with the Hong
Kong mobile operations of New World Mobility Group to form the CSL New World Mobility Group
(CSLNW). Under the merger agreement, CSL issued new shares to New World Mobility Holdings
Limited in return for 100% of the issued capital of the New World Mobility Group and A$42
million in net proceeds. The share issue diluted our ownership in the merged group to 76.4%.
This merger was undertaken because the two entities have complementary services in providing
mobile telecommunication products and services in Hong Kong. We believe CSLNW will be able to
leverage their strong brand recognition and common network to improve its operating
performance. The merged entity is now the largest wireless service provider in the Hong Kong
market. |
|
|
|
|
During fiscal 2006, TelstraClear unveiled a new strategic focus for growth through the
delivery of differentiated services and investment in high value voice and data services. New
Zealand is a strategically important market for our trans-Tasman customers and the
combination of TelstraClear and Telstra enables us to provide customers on both sides of the
Tasman with seamless communication and IT solutions. |
We have maintained our attention on managing the performance of our individual product and
service categories. However, as a fully integrated telecommunications company, we are building on
our existing customer base and capturing the market trend towards integrated access and seamless
voice, data and content offerings. To achieve this, we continue to bundle our individual products
and provide customers with price discounts. In addition, we are expanding the integrated content
services provided through our BigPond® and Sensis applications to enable our customers to access
content across multiple devices including mobiles, personal computers and home phones.
In fiscal 2006, we implemented a number of revenue initiatives, particularly in our PSTN,
mobile and broadband businesses. These initiatives include subscription pricing plans, targeted
win-back campaigns, differentiated customer propositions and distribution channel optimisation.
Achievement of our strategic
45
management objectives, particularly during the later years of our transformation, depends in part
on our success in implementing these initiatives.
On 31 August 2006, we announced our acquisition of a 51.0% shareholding (on a fully diluted
basis) in SouFun Holdings Limited (SouFun) for a total cash consideration of US$254 million
(approximately A$334 million plus acquisition costs). SouFun is a leading real estate and home
furnishing and improvement website in China. It provides information, advertising and listing
services to Chinas growing online real estate and home furnishing and improvement sectors. This
investment is integral to Sensis growth strategy of expanding into new geographic markets through
the pursuit of partnerships or acquisitions that can deliver value to our shareholders. On 31
August 2006, we also announced the sale of Australian Administration Services (AAS), the
superannuation administration business of our subsidiary KAZ, for A$235 million, giving rise to a
profit on sale of A$55 million. The sale followed our comprehensive review that determined that
superannuation administration services were no longer strategic to our business in future reporting
periods. As a result of these transactions, we have divested a non core asset and redeployed the
funds into one of our growth areas.
Costs and operational efficiency
In fiscal 2006 we began our transformation program as outlined by the strategic review. During
this review, we identified complexity in the business involving our cost and operational structure,
resulting in an upward pressure on costs. The transformation program will occur over a five-year
period, with cost reduction being a major objective of the overall program.
Our total expenses grew during the two-year period, led by the recognition of additional
expenses incurred as part of the transformation program, including a provision at year end for
restructuring and redundancy costs of A$427 million. We also experienced expense growth across
various categories to support our emerging business areas such as broadband, 3G mobile services and
pay television, as well as to meet our customer service requirements, partly offset by previous
cost reduction programs. In addition, our depreciation and amortisation expense increased
reflecting the impact of a review of the service lives of our assets as part of the transformation
strategy. The accelerated depreciation and amortisation was mainly in relation to adjusting the
service lives of the CDMA network, our switching systems, certain business and operational support
systems and related software.
We are committed to continuing our review of areas of the business where cost and operational
efficiencies can be achieved, while improving the customer experience. We believe opportunities to
achieve this include:
|
|
|
rationalising our various IT and network
platforms; |
|
|
|
|
streamlining our business operations; |
|
|
|
|
obtaining better value from our capital
expenditure; |
|
|
|
|
extracting synergies from our recent investment
acquisitions; |
|
|
|
|
improving network efficiency; and |
|
|
|
|
managing total labour costs more efficiently. |
During the two-year period, we have devoted increased capital expenditure to upgrade our
telecommunications networks, eliminate components that are no longer useful and improve the systems
used to operate our networks. We continue to upgrade and simplify our telecommunications networks
to meet customer demands, particularly for new growth product areas such as broadband.
As part of our strategic review, we have introduced the one factory approach to consolidate
and simplify the way we operate at all levels of the business. The company is very dependent on
business and operational support systems. Historically, significant time and investment has been
required to meet changing market conditions. The IT transformation will provide an integrated
platform that is much more flexible and is expected to require lower costs to maintain. The
objective is an 80% reduction in the number of systems over five years from November 2005. In
addition to operational efficiency, overall effectiveness is expected to improve. We believe the
deployment of our new IP core network will reduce the cost of installing new applications and will
provide our customers with better
46
and faster services. We believe incremental change is not enough to meet our strategic objectives
and as a result we are looking to transform our IT capability.
On 6 October 2006, we launched our new NEXT GTM wireless network. This network will
replace our existing CDMA network, and over time we will migrate all of our mobile customers onto
the NEXT GTM wireless network. The move will reduce duplication of both capital and
operational expenditure and the digital divide between our regional and metropolitan customers. In
addition to current services already experienced on existing networks, we believe our NEXT GTM
wireless network customers will enjoy access to a greater range of content and services, as
well as many enhanced features, such as improved video calling services and faster broadband access
speeds, in addition to better in-building coverage. We plan for the CDMA network to be available
until replacement services and coverage provided by our NEXT GTM wireless network are
the same as or better than the CDMA network and in any event at least until January 2008.
Customer service
We strive to continually improve our customer service. During fiscal 2006, we announced a
A$210 million training initiative to ensure our staff have the best available training to enable
and maintain next generation networks. In addition, we are achieving service delivery innovations
that cater to the needs of our customers such as providing and improving our online billing
facilities. Our focus for continual improvement in customer service is in the following key areas:
|
|
|
upgrading our networks and reducing fault incidence; |
|
|
|
|
placing additional trained staff in our call centres to directly deal with our
customers; |
|
|
|
|
providing tools to sales representatives that help them consult with
customers; |
|
|
|
|
improving the self service technology; |
|
|
|
|
enhancing the skills of our staff, enabling them to solve a customers problem on the
first call; |
|
|
|
|
ensuring customer appointments are met and reducing response times and queue
lengths; and |
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further improving our performance under the customer service guarantees. |
Business segments
During fiscal 2006, we changed our business segments to improve the way our business is
structured and operates to meet the needs of our customers. We have restated all our comparative
segment information to reflect the current financial reporting position as if all our new business
segments and segment accounting policies existed in the prior year. Our significant changes
included:
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the creation of a new business segment named Telstra Business to specifically cater for the
full provision of telecommunication products and services to small and medium enterprises; |
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the creation of a new business segment named Telstra Operations. This group consolidated
Telstra Services (formerly known as Infrastructure Services), Telstra Technology, Innovation
and Products and Operations Support, which was previously reported within our corporate areas.
The consolidation of these operational areas reflects our move to the one factory approach; |
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the creation of the Telstra Product Management Group within Telstra Operations to focus on
the management and performance of our existing and future products; and |
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the creation of the Strategic Marketing Group to implement the market based management
approach adopted to better understand the needs of our customers and provide better products
and services to meet their requirements. |
The Telstra Country Wide® business unit ensures we continue to have a strong commitment to
telecommunication services in the major rural, minor rural and remote areas of Australia. In
addition, under the USO regime, we deliver the standard telephone service and prescribed carriage
services to all people, wherever they reside or
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carry on business. Through our continued focus on providing excellent customer service, we aim to
satisfy our existing customers and drive future revenue growth by providing quality services to all
our customers.
Refer to Information on the Company Organisational structure for details on our
organisational structure.
Returns to shareholders
During the two-year period, in addition to continuing ordinary dividends, we have also
returned A$2,988 million to shareholders through special dividends and share buy-backs as part of
our capital management program. During fiscal 2006, we announced that the third year of the capital
management program, whereby A$1,500 million was to be returned each year to shareholders through
special dividends and share buy-backs, would not occur to allow the funds to be diverted to our
transformation program.
In fiscal 2006, we paid special dividends totalling A$1,492 million (A$0.12 per share). In
fiscal 2005, we paid a special interim dividend of A$746 million (A$0.06 per share) and also
undertook a share buy-back that resulted in the buy-back of 185,284,669 ordinary shares. In total,
1.47% of our total issued ordinary shares, or 3.00% of our non-Commonwealth owned ordinary shares,
were bought back. The cost of the share buy-back comprised the purchase consideration of A$750
million and associated transaction costs of A$6 million. The shares bought back were subsequently
cancelled, reducing the number of fully paid ordinary shares on issue. The Commonwealth did not
participate in the share buy-back and as a result its shareholding increased from 51.0% before the
buy-back to 51.8%. The share buy-back improved our earnings per share as we have fewer shares
outstanding and has not hindered our ability to take advantage of profitable investment
opportunities when they arise.
Outlook
Overview
Whether our future financial performance will improve is largely dependent on our ability to
implement and execute our transformation strategy successfully and generate the increased volumes
and usage rates for our products and services we seek to achieve. In addition, our transformation
is a five-year plan, with the early years involving the deployment of large amounts of capital, the
roll-out of new networks and systems and the incurrence of additional operating costs and
provisions associated with the fundamental changes we are implementing throughout our systems and
operations. Our ability to successfully implement our transformation strategy is subject to
significant risks. See Risk Factors.
We are involved in continuing discussions over the current and future regulatory environment
impacting the Australian telecommunications industry in general and us in particular. There are
several key regulatory issues, which include:
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regulated wholesale access pricing; |
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retail price controls; |
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any potential competitor access to our NEXT GTM wireless network; and |
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the use by the ACCC of the conduct rules in the Trade Practices Act to affect the way we
price our products and services. |
Some of the key factors that we believe may impact our future financial results include:
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our ability to implement and execute our transformation strategy, including the deployment of
our NEXT GTM wireless services, and the rationalisation of our various IT and
network platforms; |
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our ability to introduce new value-added products and services to compensate for lower
prices, volumes and earnings we expect to realise from our traditional higher margin product
and service lines; |
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the difficulties for us in predicting regulatory outcomes and, in our view, the unpredictable
actions of the key regulators; and |
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changes to our competitive environment as markets and technologies evolve and competition
intensifies, and the actions and initiatives of our major competitors. |
48
General trends
Our traditional high margin PSTN revenues have been and will continue to be negatively
affected by both intense competitive pressure and customers migrating to alternative platforms,
such as wireless, high bandwidth Internet, IP telephony, and web and managed services. We expect
these trends to continue. The overall volume of telecommunications services purchased in Australia
has continued to increase and the range of products and services offered has continued to expand.
One of the central objectives of our transformation is to position the company to have the
networks, systems and capabilities to meet the evolving needs of our customer base. With our
planned next-generation networks, we are building the infrastructure to reduce our reliance on our
traditional high-margin PSTN revenue stream and to grow our mobile, Internet and other
next-generation revenues.
We intend to streamline our businesses, systems and operations to reduce the high operating
costs associated with maintaining and supporting complex legacy IT systems, products and services.
However, we expect depreciation and amortisation to increase as we invest heavily in transforming
our IT base, together with the acceleration of depreciation for certain assets that are being
phased out.
A number of key regulatory decisions and determinations are still unresolved. In August 2006,
for example, the ACCC made several interim determinations reducing ULLS access pricing for some of
our largest wholesale customers to A$17.70 per month in band 2 (representing the metropolitan area,
where the greatest number of ULLS services will be provided). These decisions are only interim
determinations by the ACCC and the ACCCs final determinations can be higher or lower than this
price. We are uncertain as to the ACCCs timeframe for making these final determinations. We no
longer propose to build an FTTN network because we disagreed with the ACCC as to the costs which
could be taken into account in setting a price at which our competitors could use that network.
Fiscal 2007 outlook
We are currently in the early years of our transformation, which has required increased
capital and operating expenditures to roll out new networks and implement our planned system and
operational changes, resulting in significant reductions to our earnings and cash flow.
Accordingly, we expect that our fiscal 2007 financial results will show:
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reported revenue (total income) growth of between 1.5% and 2.0% compared with our fiscal 2006
total income of A$23,100 million; |
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reported earnings before interest and income tax expense (EBIT) growth in the range of 2.0%
and 4.0% compared with our fiscal 2006 EBIT of A$5,497 million, but we expect fiscal 2007
reported EBIT will be in the range of 18% to 20% lower than fiscal 2005 EBIT of A$6,935
million. Note 7(b) of our 2006 audited financial statements discloses that in explaining our
fiscal 2006 financial performance, it is relevant to note that expenses associated with the
implementation of the strategic review initiatives of A$1,126 million were incurred. We expect
similar net costs of approximately A$800 million to be incurred in fiscal 2007; and |
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reported cash capital expenditure (excluding investments) in the range of A$5,400 million to
A$5,700 million. |
Importantly, our ability to achieve the fiscal 2007 outlook described above, as well as our
outlook for the first and second halves of fiscal 2007 described below, is subject to a number of
key assumptions, including:
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not building an FTTN network; |
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a band 2 ULLS price of A$17.70 per month applying to all wholesale customers for the
remainder of fiscal 2007; |
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no additional redundancy and restructuring provision; |
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slowing the decline in PSTN revenues; |
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retail volume growth in mobiles voice and data traffic, dependent in part on the successful
roll-out of our NEXT GTM wireless network services; |
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growth in the retail broadband market and in our market share; |
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growth in Sensis print and online revenues; |
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not exceeding budgeted net transformation related operating expenditure costs of
approximately A$500 million; and |
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general productivity gains from our reduced workforce. |
Our ability to achieve our fiscal 2007 outlook is also subject to significant risks. Refer to
Risk Factors for a description of these key risks.
We expect fiscal 2007 to be the largest transformation spend year in terms of operating and
capital expenditure. Provided there are no further material adverse regulatory outcomes and we
continue to be successful in implementing our transformation strategy, we expect our free cash flow
to improve in fiscal 2008 compared with fiscal 2007.
It is the current intention of the Board to declare fully franked ordinary dividends of A$0.28
per share for fiscal 2007. This assumes that we continue to be successful in implementing our
transformation strategy and there are no further material adverse regulatory outcomes during fiscal
2007. The Board will make its final decision on the future amount of dividends in its normal cycle
having regard to, among other factors, our earnings and cash flow, as well as regulatory impacts on
our business and all other factors that affect our operations. On 10 August 2006, the directors
declared a fully franked final dividend of A$0.14 per share (A$1,739 million), which will be
recognised in our accounts for fiscal 2007.
Two months ended 31 August 2006 review
Our unaudited operating results for the two-month period ended 31 August 2006 compared with
the prior corresponding period show the following:
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sales revenue growth of 3.3% reflecting continued growth in retail broadband of 41.0%,
mobiles of 9.0% and advertising and directories revenue of 10.6%. This growth was partially
offset by the decline in PSTN revenues of 5.9% as the market continues its trend from
high-margin PSTN products and services to lower-margin emerging telecommunication products and
services. In addition, the rise in sales revenue reflected the inclusion of revenues for the
New World Mobility Group. |
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EBIT decline of 8.6% as our income growth during the two months was offset by higher
expenses mainly due to an increase in cost of good sold led by additional take up of our
3G mobile handsets and a rise in the number of subscribers to our services and higher
depreciation and amortisation expenses attributable to our transformation initiatives. The
increase in expenses was partially offset by lower labour expenses reflecting a reduction
in the number of staff. |
We believe that our results for the first two operating months of fiscal 2007 are consistent
with the trends identified during fiscal 2006 and we are on track to achieve our fiscal 2007
outlook. Investors should note, however, that these results are only for two months and are not
necessarily indicative of what our results will be for the year.
First half fiscal 2007 outlook
We expect that our reported results for the first half of fiscal 2007 will be impacted by the
following factors:
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revenue will be impacted by the distribution of Melbourne Yellow® being completed in the
second half of fiscal 2007, therefore the revenue will be recognised in the second half of
fiscal 2007. In fiscal 2006, distribution of Melbourne Yellow® was completed in the first half
of fiscal 2006 and as a result, the revenue was recognised in the first half of fiscal 2006; |
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expenses will include significant transformation related costs in the first half of fiscal
2007 compared with no transformation expenses in the first half of fiscal 2006; |
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revenue and expenses for the CSL New World Mobility Group will be included for the full year
in fiscal 2007; and |
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accelerated depreciation and amortisation expenses in the range of A$150 million to A$175
million will be reported in the first half of fiscal 2007, reflecting our transformation,
compared with no accelerated depreciation and amortisation in the first half of fiscal 2006. |
As a result of these factors, we expect our reported EBIT to be 17% to 20% lower in the first
half of fiscal 2007 compared with the first half of fiscal 2006.
Second half fiscal 2007 outlook
We expect that our reported results for the second half of fiscal 2007 will be impacted by the
following factors:
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revenue will be impacted by the distribution of Melbourne Yellow® being completed in the
second half of fiscal 2007, therefore the revenue will be recognised in the second half of
fiscal 2007. In fiscal 2006, distribution of Melbourne Yellow® was completed in the first half
of fiscal 2006 and as a result, the revenue was recognised in the first half of fiscal 2006; |
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expenses will reduce in the second half of fiscal 2007 compared with the second half of
fiscal 2006. During fiscal 2006, transformation costs were only incurred in the second half of
fiscal 2006 including the redundancy and restructuring provision. We do not expect to raise a
redundancy and restructuring provision during fiscal 2007; and |
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revenue and expenses for the CSL New World Mobility Group will be included for the full year
in fiscal 2007. |
As a result of these factors, we expect our EBIT to be 37% to 40% higher in the second half of
fiscal 2007 compared with the second half of fiscal 2006.
Due to the combination of our expected first half and second half reported results for fiscal
2007, we expect reported EBIT for fiscal 2007 to increase between 2.0% and 4.0% compared with
fiscal 2006 as previously outlined.
Management estimates and judgements in the application of our critical accounting policies
Our consolidated financial statements have been prepared in accordance with A-IFRS. Our basis
of preparation and significant accounting policies are fully described in note 1 and note 2 to our
consolidated financial statements respectively.
During fiscal 2006, we adopted A-IFRS in the preparation and presentation of our consolidated
financial statements. Our accounting policies for both fiscal 2006 and fiscal 2005 are compliant
with all aspects of A-IFRS. As a result, we remeasured and restated our fiscal 2005 comparative
financial information to be consistent with A-IFRS. We have taken the exemption available under
AASB 1: First time adoption of Australian Equivalents to International Financial Reporting
Standards to only apply AASB 132: Financial Instruments: Disclosure and Presentation and AASB
139: Financial Instruments: Recognition and Measurement from 1 July 2005. In addition, we elected
to early adopt AASB 7: Financial Instruments: Disclosures, which supersedes the disclosure
requirements of AASB 132.
In all material respects, our accounting policies are applied consistently across the Telstra
Group of companies and to all business segments. Where there is no conflict with A-IFRS, we align
our accounting policies with US-GAAP to reduce the number of A-IFRS/US-GAAP reconciliation
differences required to be adjusted in note 37 to our consolidated financial statements.
The preparation of our consolidated financial statements requires management to make estimates
and judgements that impact the reported amounts of assets, liabilities, revenues and expenses and
the disclosure of off balance sheet arrangements, including commitments and contingent liabilities.
We continually evaluate our estimates and judgements. We base our estimates and judgements on
historical experience, various other assumptions we believe to be reasonable under the
circumstances and, where appropriate, practices adopted by international telecommunications
companies. Actual results may differ from these estimates in the event that the scenarios on which
our assumptions are based proves to be different.
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The following are the critical accounting estimates and judgements we have applied in
producing our A-IFRS consolidated financial statements:
Carrying value and amortisation of investments, goodwill and acquired intangible assets
We assess the carrying value of our goodwill and other indefinite useful life assets for
impairment annually at each reporting date. In respect of other assets, an assessment of the
carrying value is only required in instances where there is some indication of impairment. Our
assessment of the carrying value covers both goodwill and other assets, as it would be difficult to
separate the cash flows generated from the other assets as distinct from the cash flows supporting
the carrying value of goodwill. In addition, we have allocated goodwill and intangible assets with
an indefinite useful life to cash generating units (CGUs) for the purposes of undertaking
impairment testing.
Our assessment of the carrying value generally applies the discounted cash flow analysis
approach, except in the case of listed investments, where we use market prices. The discounted cash
flow analysis is based on the value in use calculation, representing the present value of the
future amount expected to be recovered through the cash inflows and outflows arising from the
assets continued use and subsequent disposal, discounted to its present value by an applicable
discount rate.
In determining our value in use, we apply management judgement in establishing our forecasts
of future operating performance of the assets in their current condition, as well as the selection
of an appropriate discount rate and terminal value growth rate. These judgements are based on past
experience and expectations for the future. The discount rate reflects the market determined
discount rate adjusted for specific risks relating to the CGU and the country in which it operates.
Our terminal value growth rate represents the growth rate applied to extrapolate our cash flows
beyond the five year forecast period.
We acquire intangible assets either as part of a business combination or through separate
acquisition. Intangible assets acquired in a business combination are recorded at fair value at the
date of acquisition and recognised separately from goodwill. On initial acquisition, we apply
management judgement to determine the appropriate allocation of purchase consideration to the
assets being acquired, including goodwill and identifiable intangible assets.
The carrying value of goodwill was A$2,073 million as at 30 June 2006 compared with A$2,037
million as at 30 June 2005. On initial acquisition, and at each subsequent reporting date, we
assess the useful life of goodwill and other acquired intangible assets as part of our assessment
of the carrying value of our investments. The increase in the carrying value of goodwill was mainly
attributable to the acquisition of controlled entities and foreign exchange movements.
The carrying value of our investments in jointly controlled and associated entities was A$23
million as at 30 June 2006 compared with A$48 million as at 30 June 2005. The carrying amount has
reduced during fiscal 2006 due to the sale of our 35.0% shareholding in Xantic B.V.
The carrying value of our acquired intangible assets including patents, trademarks, licences,
brandnames, customer bases and mastheads was A$1,686 million as at 30 June 2006 compared with
A$1,702 million as at 30 June 2005. The carrying value of these intangible assets are assessed
annually and adjusted down where it exceeds recoverable amount.
Our acquired intangible assets are amortised on a straight-line basis over the period of
expected benefit starting from the commencement date of use, with the exception of assets assessed
as having an indefinite useful life (predominately relating to mastheads). We apply management
judgement to determine the amortisation period based on the expected useful lives of the respective
assets. In some cases, the useful lives are supported by external valuation advice at the time of
acquisition. As at 30 June 2006, the remaining amortisation period of our acquired intangible
assets was reviewed and deemed appropriate. The mastheads of A$447 million were acquired as part of
our acquisition of the Trading Post®. The mastheads are deemed to have an indefinite life, the
appropriateness of which is reassessed at each reporting date.
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If our forecasts and assumptions prove to be incorrect or circumstances change, we may be
required to impair the carrying value of our investments, goodwill and acquired intangible assets.
In applying our assessments, we have not written down significant amounts of these assets during
the two-year period. We believe that as at 30 June 2006 our investments, goodwill and acquired
intangible assets are recoverable at the amounts at which they are stated in the consolidated
financial statements.
Carrying value and depreciation of property, plant and equipment
Property, plant and equipment assets made up 65.3% of our total assets in fiscal 2006 compared
with 65.0% in fiscal 2005. We therefore consider our accounting policies in relation to the
carrying value and depreciation of these assets to be critical. We have adopted the cost basis of
recording our property, plant and equipment, rather than the fair value basis. Land and buildings
are subject to valuation at least every three years, except properties that are on a disposal
program, which are subject to valuation each year.
We assess whether there is an indicator of impairment in our property, plant and equipment at
each reporting date. Where assets can be shown to be working together to generate net cash flows,
this assessment is performed over the group of assets rather than individually. When considering
this assessment we exclude the HFC cable network, as we do not consider this network to be
integrated with the rest of our ubiquitous telecommunications infrastructure in Australia. As at 30
June 2006, our assessment of the ubiquitous network and the HFC cable network did not identify any
impairment triggers and therefore it was not necessary to perform a recoverable amount test in
relation to the carrying value of the network assets.
We assess the appropriateness of the service lives of our property, plant and equipment assets
on an annual basis. This assessment includes a comparison against international trends for other
telecommunications companies. In relation to communications assets, our assessment includes a
determination of when the asset may be superseded technologically. We use a end date lifing
methodology where we believe technologies will be replaced by a certain date. Assets are grouped
into classes based on technologies when making the assessment of useful lives.
The review of service lives was carried out at the commencement of the year and updated in
November 2005 to take into account the impacts associated with the transformation. As part of our
review, certain assets are reassessed with lives being extended or in some cases being reduced. The
net effect of the reassessment for fiscal 2006 was an increase in our depreciation expense of A$66
million compared with a decrease of A$60 million in fiscal 2005. The fiscal 2006 net increase
comprised a reduction in depreciation of A$196 million based on the review of services lives at 1
July 2005 and accelerated deprecation of A$262 million as a result of our transformation
initiatives. Any reassessment in a particular year will affect the depreciation expense (either
increasing or decreasing) for both that current year and future years through to the end of the
reassessed useful life.
If our forecasts and assumptions prove to be incorrect or circumstances change, we may be
required to impair the carrying value of our property, plant and equipment. Our impairment for
property, plant and equipment was A$69 million in fiscal 2006 compared with A$17 million in fiscal
2005. The increase in fiscal 2006 was mainly due to our decision to shut down certain networks and
platforms that are no longer considered recoverable as part of our transformation program. This
also includes our decision to cancel certain projects relating to the construction of property,
plant and equipment. We believe that as at 30 June 2006 our items of property, plant and equipment
are recoverable at the amounts at which they are stated in our consolidated financial statements.
Capitalisation of costs
Costs are classified as either operating or capital expenditure. We expense operating
expenditure to the income statement as it is incurred. We capitalise expenditure where it is
expected to generate future economic benefits. Capital costs are recorded as assets and reported in
our balance sheet based on the asset class considered most
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appropriate to those costs. Management judgement is applied in determining costs to be
capitalised in relation to the following major asset categories:
Capitalisation of costs related to construction activities
The cost of our constructed property, plant and equipment includes directly attributable costs
such as purchased materials, direct labour and direct overheads required to bring the asset to the
location and condition necessary for its intended use. Satisfying the directly attributable
criteria requires an assessment of those unavoidable costs that, if not incurred, would result in
the asset not being constructed or installed.
The cost of our constructed property, plant and equipment also includes an allocation of
indirect overheads. Indirect overhead costs are directly attributable to the construction of
assets, but can only be allocated to specific projects on an arbitrary basis, as they do not
usually vary with construction activity volumes. Examples of indirect overhead costs include
planning and design of construction projects and the management of construction contracts.
Management judgement is applied in determining the indirect cost pool and allocating it to each
project.
Capitalisation of software assets developed for internal use
We capitalise costs associated with the development of network and business software for
internal use where future benefits embodied in the particular asset will eventuate and can be
reliably measured. Management applies judgement to assess the costs to be capitalised in the
development of software assets and the amortisation period applied.
Costs capitalised as software assets for internal use include:
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payroll and direct payroll related costs for employees associated with a project; and |
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internal indirect costs directly attributable to the software asset being developed. |
Capitalised software assets totalled A$1,782 million as at 30 June 2006 compared with A$1,970
million as at 30 June 2005. The recoverability of capitalised software assets is assessed
semi-annually at each reporting date. If our estimates prove to be incorrect or circumstances
change, we may be required to impair the carrying value of our software assets.
The service lives of software assets are reviewed each year with reference to global industry
practices. Software assets have a weighted average life of six years in both fiscal 2006 and fiscal
2005, despite the changes resulting from the impact of transformation on certain software asset
lives in the current year. Major systems such as certain billing systems may have a longer life.
The net effect of the reassessment of the useful life of software assets for fiscal 2006 resulted
in an increase in amortisation expense of A$160 million in fiscal 2006 compared with A$nil in
fiscal 2005, reflecting the impact of transformation initiatives in the current year.
If these assumptions prove to be incorrect or circumstances change, we may be required to
impair the carrying value of capitalised software assets. Our impairment for capitalised software
assets was A$65 million in fiscal 2006 compared with A$nil in fiscal 2005. The increase in fiscal
2006 was led by our decision to shut down certain networks and platforms that are no longer
considered recoverable as part of our transformation program. This also includes our decision to
cancel certain projects relating to the development of software. We believe that as at 30 June
2006, our capitalised software assets are recoverable at the amounts at which they are stated in
our consolidated financial statements.
Deferred expenditure
Our deferred expenditure relates to costs deferred for basic access installation and
connection, major service solution contracts and the generation of Yellow® and White Pages®
revenue. In addition, incentive and administration fees associated with acquisition of certain
mobile subscribers are also recorded as deferred expenditure.
We defer expenditure where it is probable that the future benefits embodied in the particular
asset will eventuate and can be reliably measured. As a result, we are required to identify future
benefits expected to arise
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from the deferral of expenses, which relate to the revenue that is to be recognised in future
periods. Each year we use management judgement to determine the average period over which the
related benefits of our deferred expenditure are expected to be realised. We also review
expenditure deferred in previous periods to determine the amount, if any, that is no longer
recoverable. The amount of deferred expenditure that is no longer recoverable is recorded as an
expense immediately in the income statement.
A substantial portion of our deferred expenditure relates to basic access installation and
connection costs. These costs are taken to the income statement in line with the release of
installation and connection fee revenues, which are deferred and recognised over the average
estimated customer life. Based on our reviews of historical information and customer trends, we
have determined that the average estimated customer life is five years for both fiscal 2006 and
fiscal 2005. Our deferred expenditure after amortisation was A$582 million as at 30 June 2006
compared with A$620 million as at 30 June 2005.
Defined benefit assets and actuarial gains/losses
We currently sponsor two post employment defined benefit plans. The Telstra Entity and some of
our Australian controlled entities participate in the Telstra Superannuation Scheme (Telstra
Super). Our controlled entity, CSL, participates in the HK CSL Retirement Scheme. We recognise a
defined benefit asset for the net surplus recorded in each of our post employment defined benefit
plans. The net surplus represents the fair value of the plan assets less the present value of the
defined benefit obligations, adjusted for contributions tax. The fair value of plan assets
approximates its net market values. Defined benefit obligations are based on expected future
payments required to settle the obligations arising from current and past employee services. This
obligation is significantly influenced by factors such as estimates on final salaries and employee
turnover.
All of the actuarial gains/losses associated with our defined benefit plans are recognised
directly in retained profits in the period in which they occur. For financial reporting purposes,
we engage an actuary to assist in the determination of our net defined benefit asset and the
associated actuarial gains/losses at each reporting date. The following represent the main
assumptions used in the actuarial calculations of the pension expense, plan assets and defined
benefit obligations:
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the discount rate to determine the defined benefit plan expense; |
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the discount rate used for reporting defined benefit obligations; |
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the rate of increase on future salary levels for both the defined benefit plan expense and
the defined benefit obligations; and |
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the expected long term rate of return on plan assets. |
The assumptions applied in our calculation have a significant impact on the reported amount of
our defined benefit plan assets of A$1,029 million as at 30 June 2006 and A$247 million as at 30
June 2005. In fiscal 2006, the increase was mainly due to higher investment returns than expected
and a reduction in accrued benefits as a result of a large number of defined benefit members
leaving the scheme, mainly reflecting the redundancies during the current year. In applying our
estimates, we have recorded an actuarial gain of A$962 million in fiscal 2006, compared with an
actuarial loss of A$90 million in fiscal 2005, directly in retained profits in accordance with the
applicable accounting standard. Refer to note 28 to our consolidated financial statements for
details on the assumptions applied to each of our defined benefit plans, the method of determining
these assumptions and sensitivity analysis of a one percentage point decline in these key
assumptions on our defined benefit expense and asset.
If our current estimates proves to be incorrect, the carrying value of our defined benefit
assets as at 30 June 2006 may be materially impacted in the next reporting period. Additional
volatility may also be recorded in retained profits to reflect differences between actuarial
assumptions of future outcomes applied at the current reporting date and the actual outcome in the
next annual reporting period. Based on the assumptions applied at year end, we believe that as at
30 June 2006, our defined benefit assets are fairly stated in our consolidated financial
statements.
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Valuation of receivables
We maintain allowances for doubtful debts based on an estimate of the inability of our
customers to pay amounts due to us for services rendered to them. These allowances are based on
historical trends and managements assessment of general economic conditions. An allowance for
doubtful debts is raised when it is considered that there is a credit risk, insolvency risk or
incapacity to pay a legally recoverable debt. We have adopted a number of methodologies depending
on the different customer portfolio to determine the appropriate allowance for doubtful debts in
each of our business segments. If the financial condition of our customers deteriorates, these
provisions may not be sufficient and may lead to an increase in bad and doubtful debt expenses. We
have no reason to believe that the allowances raised will not sufficiently cover bad debts arising
from the receivables we currently have on hand.
Our allowance for doubtful debts was A$144 million as at 30 June 2006 compared with A$159
million as at 30 June 2005. Trade debtors before any allowance for doubtful debts was A$2,565
million as at 30 June 2006 compared with A$2,434 million as at 30 June 2005.
Included in our receivables is the loan to REACH of A$210 million as at 30 June 2006 and A$204
million as at 30 June 2005. We fully provided for this loan to REACH in both fiscal 2006 and fiscal
2005 due to the uncertainty of repayment in the medium term.
Provisions
Our provision for employee benefits predominantly relates to the provisions for annual leave
and long service leave entitlements. The calculation of annual leave entitlements should be based
on remuneration rates expected to be paid when the obligation is settled. Ordinarily this would
require the provision for annual leave entitlements to use estimated remuneration rates at the time
leave is expected to be settled or taken. We use nominal remuneration rates in determining the
annual leave provision on the basis that the difference between the nominal rates and applying the
estimated future rates would not be material to our provision.
We accrue for long service leave entitlements not expected to be paid or settled within one
year of balance date at present values of the future amounts expected to be paid. The calculation
is actuarially determined and includes the following estimates:
|
|
|
the projected increases in wage and salary rates over an average of ten years; |
|
|
|
|
the probability of employees reaching their long service leave entitlement at year
10; |
|
|
|
|
the employee leave taking rate; and |
|
|
|
|
the weighted average discount rate. |
In relation to the discount rate, we apply the weighted average government bond rate for the
one year period ended 30 June, rather than the government bond rate as at 30 June. This approach is
taken to limit the impact of volatility in government bond rates. Our provision for employee
benefits was A$892 million as at 30 June 2006 compared with A$946 million as at 30 June 2005.
We self-insure for workers compensation liabilities. A provision is taken up for the present
value of the estimated liability, based on an actuarial review of the liability. This review
includes an assessment of actual accidents and estimated claims incurred but not yet reported. Our
provision for workers compensation was A$216 million as at 30 June 2006 compared with A$214
million as at 30 June 2005.
Our provision for redundancy of A$186 million and provision for restructuring of A$209 million
was recorded in fiscal 2006 as part of our transformation program. A provision has been raised for
only those redundancy and restructuring costs where a detailed formal plan has been approved and we
have raised a valid expectation in those affected that the plan will be carried out. Management
judgement was applied in determining the extent that future transformation activities were likely
to result in restructuring costs and in estimating those future costs. These provisions extend
beyond a period of 12 months, and as a result we applied the pre-tax government bond rate for the
redundancy provision and the Telstra pre-tax weighted average cost of capital for the restructuring
provision as the discount rate to reflect the present value of these provisions as at 30 June 2006.
56
Derivative financial instruments and hedge accounting
Under A-IFRS, we are required to recognise the fair value of all our derivative financial
instruments on the balance sheet from 1 July 2005. As a result, we apply management judgement to
determine the application of an appropriate valuation technique, which includes references to
prices quoted in active markets, discounted cash flow analysis, recent arms length transactions
involving the same or similar instruments and option pricing models.
When using a discounted cash flow analysis, our assumptions are based on market conditions
existing at balance date and we use an appropriate market based yield curve, which is independently
derived and representative of our cost of borrowing.
We use various derivative financial instruments to hedge the following risks:
|
|
|
changes in the fair value of our financial assets and liabilities; |
|
|
|
|
variability of future cash flows attributable to foreign currency fluctuations; and |
|
|
|
|
the foreign currency risk when we translate the net assets of our foreign investments. |
Revenue recognition
We recognise revenues when they are earned through the delivery of a product or service.
Telecommunications revenues are recorded at amounts billed plus an appropriate accrual for calls
made since the last billing date. Revenues that relate to more than one period are deferred and
amortised into sales revenue over the expected period of benefit.
All
of our Yellow® and White Pages® print directory advertising revenues are recognised on
delivery of the published directories. We apply our management judgement to determine that our
directories are delivered when they have been published and delivered to our customers premises.
Revenue from online directories is recognised over the life of service agreements, which is on
average one year. Voice directory revenues are recognised at the time of providing the service to
customers.
Accrued revenue comprises mainly the recognition of unbilled amounts relating to telephone
usage, service and maintenance. Our major billing system generates most of the accrued revenue and
automatically accrues revenue for billing cycles that remain unbilled as at the reporting date.
Where multiple revenue generating deliverables are sold under a single arrangement each
deliverable that is considered to be a separate unit of accounting is accounted for separately. We
allocate the consideration from the revenue arrangement to the separate units based on the relative
fair values of each unit. If the fair value of the delivered item is not readily available, revenue
is allocated based on the difference between the total arrangement consideration and the fair value
of the undelivered items. We currently have a number of arrangements that are considered to be
distinguishable into separate units of accounting, including mobile handsets offered as part of a
mobile network contract or sold as part of a prepaid package, broadband Internet installation kits
where the modem is provided and advertising in the Yellow® printed and online directories.
Management estimates and judgements applied in our US-GAAP reconciliation
We disclose our A-IFRS/US-GAAP reconciliation differences in detail in note 37 to our
consolidated financial statements. During fiscal 2006, the conversion to A-IFRS required us to
restate our fiscal 2005 comparative financial information, including our US-GAAP reconciliation.
The management estimates and judgments that we believe have the most significant impact on the
US-GAAP reconciliation are as follows:
Capitalisation of indirect costs and borrowing costs before 1 July 1996 for property, plant and
equipment
Under previous AGAAP, we did not capitalise indirect costs and borrowing costs prior to 1 July
1996. In addition, under A-IFRS we no longer capitalise borrowing costs. However, under US-GAAP we
are required to capitalise borrowing costs and those indirect costs associated with operations and
personnel directly involved in the construction of our communication assets. This involved the use
of estimation techniques and the reconstructing of records as far back as 1980. Due to the fact
that we used estimation techniques to reconstruct the balances, the actual
57
balance may have been greater or less than the adjustment calculated. This impacts the
adjustment made to property, plant and equipment each fiscal year and the resulting annual
depreciation expense in our US-GAAP reconciliation.
Property, plant and equipment with a net book value of A$834 million as at 30 June 2006 and
A$894 million as at 30 June 2005 was capitalised for US-GAAP purposes, which was not capitalised
under A-IFRS. Additional depreciation and disposals have also been recorded of A$147 million in
fiscal 2006 and A$168 million in fiscal 2005 as a result of this difference.
Net pension asset/liability and actuarial gains/losses
We engage an actuary to assist in the determination of our prepaid pension asset/liability and
retirement benefit gains and losses. Many of the assumptions used under A-IFRS are also applied
under US-GAAP. These assumptions have a significant impact on the calculations and adjustments
made. The discount rate applied under US-GAAP is different to the discount rate applied under
A-IFRS due to the differing treatment of investment tax, with A-IFRS accounting for investment tax
of the fund by adjusting the pre-tax discount rate.
Under A-IFRS we have elected to recognise all our actuarial gains/losses directly in retained
profits. Under US-GAAP, the recognition of certain gains/losses are delayed in the income statement
using the corridor approach. Under this approach, the aggregated unrecorded gains and losses
exceeding 10% of the greater of the aggregated projected benefit obligation or the market value of
the plan assets are amortised over the average expected service period of active employees expected
to receive benefits under the plan.
As at 30 June 2006, the net pension liability for US-GAAP was A$167 million, comprising the
net deficit of Telstra Super of A$172 million, partially offset by a surplus of A$5 million in
relation to the HK CSL Retirement Scheme. Refer to note 37(f) for further details on the accounting
treatment under US-GAAP.
Impairment of goodwill
During fiscal 2006, the balance of our goodwill in CSL was impaired prior to the merger with
New World Mobility Group. Due to historical US-GAAP adjustments, our CSL goodwill balance for
US-GAAP has always been higher than under A-IFRS and previous AGAAP. For the purposes of recording
the impairment, we have applied management judgement with the assistance of external advisers, in
calculating an implied fair value of CSL and allocating that fair value to CSLs identifiable
assets and liabilities, including the intangible assets. The impairment of CSLs goodwill for
US-GAAP purposes does not impact the carrying value assessment of the goodwill recognised under
A-IFRS.
Changes in accounting policies
Australian entities reporting under the Corporations Act 2001 must prepare their financial
reports for financial years commencing on or after 1 January 2005 under A-IFRS as adopted by the
Australian Accounting Standards Board (AASB). This involved preparing our first full year set of
consolidated financial statements applying A-IFRS for the financial year ended 30 June 2006.
The transitional rules for first time adoption of A-IFRS require that we restate our
comparative financial report using A-IFRS applied as of 1 July 2004, except for AASB 132:
Financial Instruments: Disclosure and Presentation and AASB 139: Financial Instruments:
Recognition and Measurement, where comparative information was not required to be restated. In
addition, we have elected to early adopt AASB 7: Financial Instruments: Disclosures, which
supersedes the disclosure requirements of AASB 132.
For reporting in the current year, comparatives were remeasured and restated for the financial
year ended 30 June 2005. Most of the adjustments on transition were made to opening retained
profits at the beginning of the first comparative period (i.e., at 1 July 2004).
Our adoption of A-IFRS has significantly impacted the accounting policy and reported amounts
of the following items:
58
|
|
|
business combinations; |
|
|
|
|
income
taxes; |
|
|
|
|
property, plant and
equipment; |
|
|
|
|
leases; |
|
|
|
|
employee
benefits; |
|
|
|
|
changes in foreign
exchange rates; |
|
|
|
|
borrowing costs; |
|
|
|
|
investments in associates and joint
ventures; |
|
|
|
|
impairment of assets; and |
|
|
|
|
intangible assets. |
Under A-IFRS, our net profit after tax may be more volatile compared with previous Australian
accounting standards. The volatility in net profit after tax could be caused by the accounting
requirements in areas such as impairment of goodwill balances and hedging. However, the adoption of
A-IFRS has not affected our net cash flows, our ability to borrow funds or our capacity to pay
dividends to our shareholders. In note 36 to our consolidated financial statements, we have:
|
|
|
identified and explained the key differences in accounting policy; |
|
|
|
|
provided our differences on the date of transition (i.e., 1 July 2004) and for the current
comparative period (i.e., 30 June 2005); |
|
|
|
|
provided full reconciliations of our reported results under previous AGAAP to those
comparatives reported in our current year consolidated financial statements under A-IFRS; and |
|
|
|
|
provided qualitative information on the exemptions applied under AASB 1 on first time
adoption of A-IFRS. |
Other than the adoption of A-IFRS, we have had no significant change in accounting policy
during the two-year period.
59
Results of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Sales revenue |
|
|
22,750 |
|
|
|
22,161 |
|
|
|
589 |
|
|
|
2.7 |
% |
Other revenue (excl. finance income) |
|
|
22 |
|
|
|
20 |
|
|
|
2 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
22,772 |
|
|
|
22,181 |
|
|
|
591 |
|
|
|
2.7 |
% |
Other income |
|
|
328 |
|
|
|
261 |
|
|
|
67 |
|
|
|
25.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (excl. finance income) |
|
|
23,100 |
|
|
|
22,442 |
|
|
|
658 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (excl. interest expense and depreciation and
amortisation |
|
|
13,521 |
|
|
|
11,884 |
|
|
|
1,637 |
|
|
|
13.8 |
% |
Share of net (gain)/loss from jointly controlled and associated
entities |
|
|
(5 |
) |
|
|
94 |
|
|
|
(99 |
) |
|
|
(105.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and
amortisation (EBITDA)(1) |
|
|
9,584 |
|
|
|
10,464 |
|
|
|
(880 |
) |
|
|
(8.4 |
)% |
Depreciation & amortization |
|
|
4,087 |
|
|
|
3,529 |
|
|
|
558 |
|
|
|
15.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest & income tax expense (EBIT)(1) |
|
|
5,497 |
|
|
|
6,935 |
|
|
|
(1,438 |
) |
|
|
(20.7 |
)% |
Net finance costs |
|
|
936 |
|
|
|
880 |
|
|
|
56 |
|
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
4,561 |
|
|
|
6,055 |
|
|
|
(1,494 |
) |
|
|
(24.7 |
)% |
Income tax expense |
|
|
1,380 |
|
|
|
1,746 |
|
|
|
(366 |
) |
|
|
(21.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year |
|
|
3,181 |
|
|
|
4,309 |
|
|
|
(1,128 |
) |
|
|
(26.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
30.3 |
% |
|
|
28.8 |
% |
|
|
|
|
|
|
1.5 |
% |
EBITDA margin on sales revenue |
|
|
42.1 |
% |
|
|
47.2 |
% |
|
|
|
|
|
|
(5.1 |
)% |
EBIT margin on sales revenue |
|
|
24.2 |
% |
|
|
31.3 |
% |
|
|
|
|
|
|
(7.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
A$ (cents) |
|
A$ (cents) |
|
A$ (cents) |
|
% change |
Basic earnings per share(2) |
|
|
25.7 |
|
|
|
34.7 |
|
|
|
(9.0 |
) |
|
|
(25.9 |
)% |
Diluted earnings per share(2) |
|
|
25.7 |
|
|
|
34.6 |
|
|
|
(8.9 |
) |
|
|
(25.7 |
)% |
Dividends paid or declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim dividend paid |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
Special dividend paid with interim dividend |
|
|
6.0 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
Final dividend declared (2005 paid) |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
Special dividend to be paid with final dividend (2005 paid) |
|
|
|
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBITDA reflects our profit prior to including the effect of interest revenue, borrowing costs,
income taxes, depreciation and amortisation. We believe that EBITDA is a relevant and useful
financial measure used by management to measure our operating profit. Our management uses EDITDA,
in combination with other financial measures, primarily to evaluate our operating performance
before financing costs, income tax and non-cash capital related expenses. In consideration of the
capital intensive nature of our business, EBITDA is a useful supplement to net income in
understanding cash flows generated from operations that are available for payment of income taxes,
debt service and capital expenditure. In addition, we believe EBITDA is useful to investors because
analysts and other members of the investment community largely view EBITDA as a key and widely
recognised measure of operating performance. EBITDA is not a US-GAAP measure of income or cash flow
from operations and should not be considered an alternative to net income as an indication of our
financial performance, or as an alternative to cash flow from operating activities as a measure of
our liquidity. EBIT is a similar measure to EBITDA, but takes into account the effect of
depreciation and amortisation. |
|
(2) |
|
Basic and diluted earnings per share are impacted by the effect of shares held in trust for
employee share plans and instruments held under executive remuneration plans. |
60
In fiscal 2006, sales revenue growth was driven by Internet & IP solutions, mobile revenues,
advertising & directories, CSLs merger with New World PCS and pay TV bundling. Growth was
partially offset by a decline in revenues mainly from PSTN calling products, specialised data and
ISDN products. Sales revenue grew by 2.7% as we continue to manage the shift in customer demand
from our traditional products such as PSTN to our emerging products such as broadband.
In April 2006, CSL and New World Mobile Holdings Limited merged, however this had minimal
impact on the overall sales revenue in fiscal 2006. Apart from this transaction, there was little
activity in the mergers and acquisitions area in 2006.
Sales growth was marginally impacted by acquisitions that took place in fiscal 2005, with
current year revenue figures including a full twelve months of operation for acquired entities KAZ,
PSINet, Universal Publishers Pty Ltd (Universal Publishers) and Telstra Business Systems Pty Ltd
(formerly known as Damovo (Australia) Pty Ltd).
Our expenses have been impacted by the initial stages of our transformation strategy and our
focus continues to be on executing our strategy as announced to the market in November 2005. Our
total expenses increased due to higher labour costs, in particular redundancy costs, higher goods
and services purchased supporting revenue growth, and higher other expenses, primarily as a result
of the transformation program. These expense categories were also impacted by the recognition of a
provision at year end for redundancy and restructuring of A$427 million to cover activity in future
years relating to our business transformation. Depreciation and amortisation also increased,
primarily due to accelerated depreciation after a review of asset service lives impacted by our
transformation strategy.
As a result of these factors, our profit before income tax expense was A$4,561 million in
fiscal 2006 compared with A$6,055 million in fiscal 2005, and our net profit decreased by 26.2% in
fiscal 2006.
Operating revenues
In the following discussion, we analyse revenue for each of our major products and services.
The principal areas of operating revenue growth for fiscal 2006 were:
|
|
|
mobiles; |
|
|
|
|
internet and IP solutions; |
|
|
|
|
advertising and directories;
and |
|
|
|
|
pay TV bundling. |
In fiscal 2006, our sales revenue growth was partially offset by a 6.7% decline in PSTN
product revenues as customers continue to move towards new products and services to satisfy their
requirements and competition further intensifies in the market.
Competition has continued to intensify and, as a result, we have seen our revenues decline in
a number of areas despite increasing volumes. We have also experienced a continued shift in revenue
from our traditional higher margin retail operations (such as our PSTN products) to our lower
margin retail products (such as mobiles and broadband). We have continued to concentrate on product
bundling initiatives and managing the migration of customers to other products. In the second half
of fiscal 2006, we introduced our first subscription price based offers into the consumer market to
help address the decline of our traditional product revenues and to make pricing easier for our
customers. We have also introduced market based management to enable us to better serve our
customers needs.
We expect that there will be continued competitive pressure in some of our traditional product
areas. However, the volume of telecommunications services purchased in Australia has increased and
the range of products and services offered continues to expand.
61
Categorisation of our operating revenue
We categorise revenue from the products and services we derive from wholesale customers
according to the nature of the product or service provided. For example, we categorise operating
revenue from interconnect and access charges relating to PSTN and mobiles, within those categories
as appropriate. Products resold are also within the relevant product categories. This is a revised
approach from how interconnect and access charge revenues were presented in the prior year.
We are actively promoting alternative access services that are faster and have more
capabilities than our basic access service. As more of our customers purchase these alternative
services, operating revenue will continue to move from one category to another. For example, as our
customers continue to switch from buying basic access services to buying other forms of access
services, such as ADSL, operating revenue from some customers will shift from the basic access
category to the Internet and IP solutions category.
The rates we charge our retail customers are subject to regulated retail price controls
The rates we charge our retail customers for selected fixed network telephony products are
subject to retail price controls. The retail price control regime, set by the Commonwealth, applies
to us and no other telecommunications provider. The new price control regime commenced on 1 January
2006.
These retail price controls require us to:
|
|
|
ensure parity in the local call prices offered to regional and metropolitan customers; |
|
|
|
|
ensure there is a package of PSTN services targeted and available to low income customers; |
|
|
|
|
notify and seek the consent of the ACCC when price increases to residential line rental rates
are proposed; and |
|
|
|
|
report on compliance to the ACCC no later than three months after 30 June 2007 and
subsequently each year until 30 June 2009. |
In addition, we are required to apply the following price controls:
|
|
|
the price of a bundle of services including basic access, local calls, national long distance
calls, fixed-to-mobile calls and international calls will not increase; |
|
|
|
|
basic residential and business access charges will not increase by more than the consumer
price index (CPI) with current basic residential access charges maintained until 30 June 2007; |
|
|
|
|
charges for connections capped to increases in CPI; |
|
|
|
|
the charge for charity organisations not to be increased to a level which exceeds the price
of the standard residential line rental rate; |
|
|
|
|
the price for local calls made from one of our public payphones will not exceed A$0.50 (GST
included) per call; and |
|
|
|
|
the price for untimed local calls and dial-up Internet calls are capped at A$0.22 (GST
included) per call, except for untimed local or dial-up calls which form part of a subscription
pricing package or a discounted line rental arrangement. |
Despite these restrictions, we have been able to innovate and recently introduced a range of
calling plan options, including new capped calling plans. We continue to reduce prices on a range
of telephony services in order to respond to customer needs and market conditions. We also monitor
our pricing to ensure that we comply with the price control requirements.
The previous price control determination that applied up until 31 December 2005 had required
our revenues from line rentals and calling products to be separately measured. These price controls
imposed a cap of CPI plus 4% for line rental, and CPI minus 4.5% on a basket of calls comprising
local, long distance, international and fixed-to-mobile. The previous regime also required the
price for local calls made from one of our public payphones not to exceed A$0.40 (GST included) per
call. Business customers on negotiated contractual arrangements are excluded from the new price
controls.
62
Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
PSTN Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
3,318 |
|
|
|
3,362 |
|
|
|
(44 |
) |
|
|
(1.3 |
)% |
Local calls |
|
|
1,023 |
|
|
|
1,284 |
|
|
|
(261 |
) |
|
|
(20.3 |
)% |
PSTN value added services |
|
|
246 |
|
|
|
250 |
|
|
|
(4 |
) |
|
|
(1.6 |
)% |
National long distance calls |
|
|
913 |
|
|
|
1,013 |
|
|
|
(100 |
) |
|
|
(9.9 |
)% |
Fixed to mobile |
|
|
1,491 |
|
|
|
1,566 |
|
|
|
(75 |
) |
|
|
(4.8 |
)% |
International direct |
|
|
201 |
|
|
|
234 |
|
|
|
(33 |
) |
|
|
(14.1 |
)% |
Fixed interconnection |
|
|
286 |
|
|
|
309 |
|
|
|
(23 |
) |
|
|
(7.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PSTN |
|
|
7,478 |
|
|
|
8,018 |
|
|
|
(540 |
) |
|
|
(6.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services Retail |
|
|
3,846 |
|
|
|
3,736 |
|
|
|
110 |
|
|
|
2.9 |
% |
Mobile services Wholesale |
|
|
36 |
|
|
|
24 |
|
|
|
12 |
|
|
|
50.0 |
% |
Mobile services Interconnection |
|
|
623 |
|
|
|
547 |
|
|
|
76 |
|
|
|
13.9 |
% |
Mobile handsets |
|
|
467 |
|
|
|
381 |
|
|
|
86 |
|
|
|
22.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mobiles |
|
|
4,972 |
|
|
|
4,688 |
|
|
|
284 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet and IP solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrowband |
|
|
220 |
|
|
|
275 |
|
|
|
(55 |
) |
|
|
(20.0 |
)% |
Retail broadband |
|
|
730 |
|
|
|
463 |
|
|
|
267 |
|
|
|
57.7 |
% |
Wholesale broadband |
|
|
461 |
|
|
|
261 |
|
|
|
200 |
|
|
|
76.7 |
% |
Internet direct |
|
|
143 |
|
|
|
123 |
|
|
|
20 |
|
|
|
16.3 |
% |
IP solutions |
|
|
285 |
|
|
|
207 |
|
|
|
78 |
|
|
|
37.7 |
% |
Other |
|
|
68 |
|
|
|
48 |
|
|
|
20 |
|
|
|
41.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Internet and IP solutions |
|
|
1,907 |
|
|
|
1,377 |
|
|
|
530 |
|
|
|
38.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN products |
|
|
807 |
|
|
|
890 |
|
|
|
(83 |
) |
|
|
(9.3 |
)% |
Specialised data |
|
|
884 |
|
|
|
966 |
|
|
|
(82 |
) |
|
|
(8.5 |
)% |
Advertising and directories |
|
|
1,711 |
|
|
|
1,585 |
|
|
|
126 |
|
|
|
7.9 |
% |
Intercarrier services |
|
|
351 |
|
|
|
290 |
|
|
|
61 |
|
|
|
21.0 |
% |
Inbound calling products |
|
|
449 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
Solutions management |
|
|
989 |
|
|
|
931 |
|
|
|
58 |
|
|
|
6.2 |
% |
HKCSL New World |
|
|
830 |
|
|
|
734 |
|
|
|
96 |
|
|
|
13.1 |
% |
TelstraClear |
|
|
620 |
|
|
|
625 |
|
|
|
(5 |
) |
|
|
(0.8 |
)% |
Offshore services revenue |
|
|
295 |
|
|
|
252 |
|
|
|
43 |
|
|
|
17.1 |
% |
Payphones |
|
|
104 |
|
|
|
121 |
|
|
|
(17 |
) |
|
|
(14.0 |
)% |
Pay TV bundling |
|
|
320 |
|
|
|
263 |
|
|
|
57 |
|
|
|
21.7 |
% |
Customer premises equipment |
|
|
274 |
|
|
|
231 |
|
|
|
43 |
|
|
|
18.6 |
% |
Other sales & service |
|
|
759 |
|
|
|
741 |
|
|
|
18 |
|
|
|
2.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales revenue |
|
|
22,750 |
|
|
|
22,161 |
|
|
|
589 |
|
|
|
2.7 |
% |
Other revenue |
|
|
22 |
|
|
|
20 |
|
|
|
2 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
22,772 |
|
|
|
22,181 |
|
|
|
591 |
|
|
|
2.7 |
% |
Other income |
|
|
328 |
|
|
|
261 |
|
|
|
67 |
|
|
|
25.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
23,100 |
|
|
|
22,442 |
|
|
|
658 |
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
PSTN Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Basic access revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
2,592 |
|
|
|
2,725 |
|
|
|
(133 |
) |
|
|
(4.9 |
)% |
Domestic wholesale |
|
|
726 |
|
|
|
637 |
|
|
|
89 |
|
|
|
14.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total basis access revenue |
|
|
3,318 |
|
|
|
3,362 |
|
|
|
(44 |
) |
|
|
(1.3 |
)% |
Local call revenue |
|
|
1,023 |
|
|
|
1,284 |
|
|
|
(261 |
) |
|
|
(20.3 |
)% |
PSTN value added services revenue |
|
|
246 |
|
|
|
250 |
|
|
|
(4 |
) |
|
|
(1.6 |
)% |
National long distance call revenue |
|
|
913 |
|
|
|
1,013 |
|
|
|
(100 |
) |
|
|
(9.9 |
)% |
Fixed to mobile revenue |
|
|
1,491 |
|
|
|
1,566 |
|
|
|
(75 |
) |
|
|
(4.8 |
)% |
International direct revenue |
|
|
201 |
|
|
|
234 |
|
|
|
(33 |
) |
|
|
(14.1 |
)% |
Fixed interconnection |
|
|
286 |
|
|
|
309 |
|
|
|
(23 |
) |
|
|
(7.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PSTN revenue |
|
|
7,478 |
|
|
|
8,018 |
|
|
|
(540 |
) |
|
|
(6.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access lines in service (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
5.46 |
|
|
|
5.60 |
|
|
|
(0.14 |
) |
|
|
(2.5 |
)% |
Business |
|
|
2.32 |
|
|
|
2.45 |
|
|
|
(0.13 |
) |
|
|
(5.3 |
)% |
Total Retail |
|
|
7.78 |
|
|
|
8.05 |
|
|
|
(0.27 |
) |
|
|
(3.4 |
)% |
Domestic wholesale |
|
|
2.16 |
|
|
|
2.07 |
|
|
|
0.09 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total access lines in service |
|
|
9.94 |
|
|
|
10.12 |
|
|
|
(0.18 |
) |
|
|
(1.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of local calls (in millions) |
|
|
7,432 |
|
|
|
8,469 |
|
|
|
(1,037 |
) |
|
|
(12.2 |
)% |
National long distance minutes (in millions)(1) |
|
|
7,215 |
|
|
|
7,743 |
|
|
|
(528 |
) |
|
|
(6.8 |
)% |
Fixed to mobile minutes (in millions) |
|
|
4,491 |
|
|
|
4,375 |
|
|
|
116 |
|
|
|
2.7 |
% |
International direct minutes (in millions) |
|
|
534 |
|
|
|
580 |
|
|
|
(46 |
) |
|
|
(7.9 |
%) |
|
|
|
Note: statistical data represents managements best estimates. |
|
(1) |
|
Includes national long distance minutes from our public switched telephone network (PSTN) and
independently operated payphones. Excludes minutes related to calls from non-PSTN networks, such as
ISDN and virtual private networks. |
Total PSTN products revenue in fiscal 2006 was A$7,478 million, which declined by 6.7% or
A$540 million from fiscal 2005. This compares with a decline of 3.6% in fiscal 2005 (inclusive of
fixed interconnection).
There has been a general reduction in PSTN volumes, with a decline in retail basic access
lines, and volume reductions across local calls, national long distance calls, international direct
calls and fixed interconnection. Yields have also declined in local calls, national long distance,
fixed-to-mobile, international direct and fixed interconnection due to competitive pricing
pressure. The decline in the first half of the fiscal year was 7.6% which was slowed to 5.8% for
the second half of the fiscal year.
Work continues on the integration of mobile, fixed and broadband services to add value to the
fixed line. This is aimed at arresting the decline in fixed line use.
Late in the second half of the year, we introduced subscription pricing plans for our PSTN
customers, which offer greater choice and value from the home phone, including untimed national
long distance calls and low or no charge local calls. These plans did not have any significant
impact on our PSTN revenues in fiscal 2006 with the benefits expected to be seen in the next fiscal
year.
64
Basic access
Our basic access revenue includes monthly rental fees, installation charges and connection
charges, from telephone service connections between a customers premises and our PSTN network.
Basic access revenues are affected by:
|
|
|
housing growth; |
|
|
|
|
competition; |
|
|
|
|
demand for telephone services and additional lines; |
|
|
|
|
regulatory constraints in relation to wholesale basic access; |
|
|
|
migration to other products such as Broadband and mobiles;
and |
|
|
|
|
price changes. |
Under our basic access pricing structure, we have a range of access and call pricing packages
to give our residential and business customers choice in the plan they select, along with a range
of reward options. These pricing packages are reviewed regularly to reflect the changing needs of
customers. For the most part, wholesale customers receive the pricing plan which only incorporates
the basic telephone service with local call rates, excluding long distance and fixed-to-mobile
calls (with a residential and business differentiation still applying).
Our operating revenue from basic access services was also affected by competition during
fiscal 2006. During fiscal 2006, the number of retail residential and business basic access lines
decreased due to strong competition and migration to alternative products such as broadband and
mobiles. Domestic wholesale basic access lines in service grew, reflecting the increased
penetration of our competitors into the retail basic access market. In the retail segment, we saw a
decline of 270,000 lines in service or 3.4%, mainly driven by the migration to other technologies
which is underpinning the retail trend across PSTN revenues. This decline was partially offset by
an increase of 90,000 lines in service or 4.3% in the wholesale market.
Overall our operating revenue from basic access services decreased by A$44 million or 1.3%.
During fiscal 2006, we introduced various basic access packages, which reduced the decline in
revenue in this area, despite an overall decrease in basic access lines in service.
Rental revenue increased due to a rise in line rental price charges from December 2005, which
included a rise in basic access prices for wholesale and non preselected retail residential
customers. In addition, penetration of higher value HomeLine plans including HomeLine Ultimate, a
new subscription based plan introduced in April 2006, is also expected to contribute positively.
Partly offsetting this was an increase in the discounts to Whole of Business customers and
pensioners.
Local calls
Our local call revenue from local call charges, consists of revenue from local calls on our
PSTN network and includes revenue from our megapop product which allows ISPs to offer untimed local
call PSTN dial up access for their customers via a single national dial up 019 number. For the most
part we charge for local calls without a time limit.
Our local call revenue is affected by:
|
|
|
the number of basic access lines in service and customers moving from our basic access
service to our other access services, such as mobiles and broadband; |
|
|
|
|
competition; |
|
|
|
|
increasing use of email; |
65
|
|
|
customers migrating to mobile and fixed-to-mobile calling; and |
|
|
|
|
pricing changes and regulatory retail price restrictions. |
Local call revenue decreased by A$261 million or 20.3% in fiscal 2006, with both our retail
and wholesale revenues being negatively impacted by ongoing product substitution from fixed calling
to mobile voice calls and SMS, which is accelerated by the take up of capped mobile plans currently
being heavily promoted by competitors. Substitution of data local calls continues to occur due to
the migration of dial up Internet customers to broadband. The price in the wholesale market also
declined as a result of a rise in volume discounts.
Generally, call volumes have continued to fall during fiscal 2006, reflecting the impact of
customers migrating to other products, such as mobiles, fixed-to-mobile, and broadband products,
and fewer basic access lines in service. This is highlighted by the fact that the number of local
calls reduced by 12.2% during the year.
PSTN value added services
Our revenue from PSTN value added services declined by A$4 million or 1.6% during fiscal 2006.
This decrease was driven by a reduction in a number of mature products, such as Indial, Siteline,
Enhanced faxstream and other access products nearing the end of their lifecycle. Customers are also
migrating to product offerings such as Internet products and premium voice communication
applications.
Messaging and call completion products increased marginally during fiscal 2006. Calling number
display continued to grow due to attractive packaging discounts resulting in subscriber numbers
increasing by 10%. This has been partially offset by call return revenue which declined by 14% due
to lower overall call volumes and substitution to other products.
National long distance calls
Our operating revenue from national long distance consists of revenue from national long
distance calls made from our PSTN network to the fixed network.
We generally charge for national long distance calls based on the time of day, day of week,
destination and duration of the call, but packages are also offered on a capped price basis and
under subscription pricing arrangements. A variety of promotions and pricing options are offered to
encourage our customers to use our service and to inform them about the price and value of our
service. The majority of our operating revenue from national long distance calls comes from our
residential and small business customers.
General economic conditions and customer perceptions about the cost and value of our service
relative to competitor alternatives, largely drive our national long distance call revenue.
Competitive activity continues to negatively affect this revenue category directly through override
and preselection, and indirectly through competition for access lines. In addition, national long
distance calls are impacted by customers migrating to mobile, broadband and fixed-to-mobile
calling.
Our operating revenue from national long distance calls declined by A$100 million or 9.9% in
fiscal 2006 compared with fiscal 2005. Competitor activity in the fixed line market continues to be
high and most carriers have a fixed or mobile cap, or a combination of both, in the market. This is
having a direct impact on our national long distance revenues, particularly where competitors are
bundling these calls with broadband offerings. Volumes are down as a result of lower basic access
services in operation and the impact of fixed-to-mobile substitution and other calling options
available to customers. We have increased discounts compared to fiscal 2005 in order to retain and
win back customers.
We continue to respond to competition with competitively priced packages. However, with the
strong growth in mobile and Internet services in the Australian market, we expect national long
distance call revenue to continue to be negatively impacted by ongoing migration of customers to
mobile and Internet products, and by the continued growth of subscription pricing plans.
66
Fixed-to-mobile calls
Our fixed-to-mobile revenue is generated by calls originating on our fixed networks and
terminating on any mobile network. We generally charge for fixed-to-mobile calls based on time of
day and mobile carrier, however packages are also offered on a capped price basis. Our operating
revenue for fixed-to-mobile calls is approximately split evenly between business and residential
customers. The growth of the Australian mobile telecommunications market has driven revenue
expansion in this product category in recent times. However, the introduction of capped plans in
the mobile market has now impacted the volume of fixed-to-mobile activity as customers continue to
slowly move their usage from our PSTN products. The fixed-to-mobile environment is influenced by
fixed-to-mobile preselection, whereby the carriage service provider (CSP) selected by a customer
for national long distance calls automatically becomes the customers provider for fixed-to-mobile
calls.
During fiscal 2006, fixed-to-mobile revenue declined by A$75 million or 4.8%. We experienced a
decline of A$114 million due to lower revenue per minute resulting from higher discounts from
ongoing competitive pressure, including incorporating fixed-to-mobile calls in reward offerings and
the changing mix in services in operation (SIOs) from PSTN to ISDN and CustomNet. This increase
in the level of discounting is representative of our increased campaign activity aimed at reducing
customer churn to other providers and win customers in the market place.
This decline in revenue was partially offset by growth in call volumes mainly due to the
continued expansion of mobile services in the Australian market. The positive volume growth for
fiscal 2006 contributed A$38 million due to higher calls and minutes of use. This growth is
consistent with the growth in the total market mobile SIOs, meaning there is a higher number of
mobiles on which fixed calls can terminate, and hence a higher number of calls.
International direct calls
Our operating revenue from international direct relates to revenue we generate from
international calls made from Australia to a destination outside Australia (outbound). This revenue
is largely driven by general economic conditions, customer perceptions about the cost and value of
our service, competition, migration to broadband alternatives and promotion and advertising.
Our international direct revenue declined by 14.1% to A$201 million in fiscal 2006 primarily
as a result of lower volumes and continued competitive pressure on price. Factors which have
influenced this trend include the competitive pressures from calling cards, fixed-to-mobile
substitution and the growth of Voice over IP in the market place. Despite major international
events and the occurrence of unfortunate circumstances which have provided short term stimulus to
call traffic, international direct minutes declined 7.9% for the year.
Fixed Interconnection
Fixed interconnection is made up of local and non local PSTN/ISDN access interconnection
services provided to other carriers. This category is a highly regulated area of the Australian
telecommunication market. Our operating revenue from fixed interconnection decreased by 7.4% to
A$286 million during fiscal 2006 driven by reduction in both volume and price. Volume declines are
in line with cross company trends in PSTN traffic and have been particularly impacted by migration
to mobiles and, to a smaller degree, ULL build.
Mobiles
Our operating revenue from mobiles consists of revenue from access fees and call charges, as
well as value added services comprising international roaming, mobile
MessageBank® and mobile data.
It also includes revenue from the sale of mobile handsets and interconnection charges where calls
from other carriers customers terminate on our network.
During fiscal 2006, we commenced the construction of our new NEXT GTM wireless
network. We launched this network on 6 October 2006. Until recently, we operated two primary mobile
networks, GSM and CDMA. Over time we will migrate our customers from our old networks onto our new
NEXT GTM wireless network. We continue to offer 3G services to our customers over our
existing 3G 2100 network, a network jointly owned through our joint venture with Hutchison
Telecommunication (Australia) Limited (Hutchison).
67
The mobile telecommunications market continued to grow during fiscal 2006, although at a lower
rate of growth than in the prior year. The growth was slowed by the increase in capped price plans
by all the major mobile competitors, heightened campaign activity particularly around 3G services,
and the increasing use of mobile data services such as Blackberry and EVDO. While voice continues
to be the largest contributor to mobiles revenue, value added services, including mobile data, is
the fastest growing, now representing 25.4% of mobile services revenue in fiscal 2006. With
competition intensifying, we have introduced a comprehensive and broad reaching program of segment
based customer management to enable us to provide the best service and solutions to all of our
customers.
Mobiles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Access fees and call charges |
|
|
2,703 |
|
|
|
2,765 |
|
|
|
(62 |
) |
|
|
(2.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value added services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International roaming |
|
|
266 |
|
|
|
243 |
|
|
|
23 |
|
|
|
9.5 |
% |
Mobile messagebank |
|
|
199 |
|
|
|
187 |
|
|
|
12 |
|
|
|
6.4 |
% |
Short message service (SMS) |
|
|
494 |
|
|
|
457 |
|
|
|
37 |
|
|
|
8.1 |
% |
Other mobile data |
|
|
184 |
|
|
|
84 |
|
|
|
100 |
|
|
|
119.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value added services |
|
|
1,143 |
|
|
|
971 |
|
|
|
172 |
|
|
|
17.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mobile services revenue retail |
|
|
3,846 |
|
|
|
3,736 |
|
|
|
110 |
|
|
|
2.9 |
% |
Mobile services revenue wholesale |
|
|
36 |
|
|
|
24 |
|
|
|
12 |
|
|
|
50.0 |
% |
Mobile services revenue mobiles interconnection |
|
|
623 |
|
|
|
547 |
|
|
|
76 |
|
|
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mobile services revenue |
|
|
4,505 |
|
|
|
4,307 |
|
|
|
198 |
|
|
|
4.6 |
% |
Mobile handset sales |
|
|
467 |
|
|
|
381 |
|
|
|
86 |
|
|
|
22.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mobile goods and services revenue(1) |
|
|
4,972 |
|
|
|
4,688 |
|
|
|
284 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3G mobile SIO (thousands) |
|
|
317 |
|
|
|
|
|
|
|
317 |
|
|
|
|
|
GSM mobile SIO (thousands) |
|
|
6,468 |
|
|
|
6,894 |
|
|
|
(426 |
) |
|
|
(6.2 |
)% |
CDMA mobile SIO (thousands) |
|
|
1,703 |
|
|
|
1,333 |
|
|
|
370 |
|
|
|
27.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mobile SIO (thousands) |
|
|
8,488 |
|
|
|
8,227 |
|
|
|
261 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Wireless EVDO SIO (thousands) (included in CDMA SIO
above) |
|
|
60 |
|
|
|
19 |
|
|
|
41 |
|
|
|
215.8 |
% |
Prepaid mobile SIO (thousands) |
|
|
3,597 |
|
|
|
3,570 |
|
|
|
27 |
|
|
|
0.8 |
% |
Postpaid mobile SIO (thousands) |
|
|
4,891 |
|
|
|
4,657 |
|
|
|
234 |
|
|
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mobile SIO (thousands) |
|
|
8,488 |
|
|
|
8,227 |
|
|
|
261 |
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDMA wholesale mobile SIO (thousands) |
|
|
73 |
|
|
|
62 |
|
|
|
11 |
|
|
|
17.7 |
% |
GSM wholesale mobile SIO (thousands) |
|
|
46 |
|
|
|
21 |
|
|
|
25 |
|
|
|
119.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total wholesale mobile SIO (thousands) |
|
|
119 |
|
|
|
83 |
|
|
|
36 |
|
|
|
43.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of SMS sent (in millions) |
|
|
3,019 |
|
|
|
2,289 |
|
|
|
730 |
|
|
|
31.9 |
% |
Deactivation rate |
|
|
23.4 |
% |
|
|
19.2 |
% |
|
|
|
|
|
|
4.2 |
% |
Mobile voice telephone minutes (in millions)(2) |
|
|
7,311 |
|
|
|
6,746 |
|
|
|
565 |
|
|
|
8.4 |
% |
Average revenue per user per month A$s(3) |
|
|
38.35 |
|
|
|
39.33 |
|
|
|
(0.98 |
)% |
|
|
(2.5 |
)% |
Average prepaid revenue per user per month A$s(3) |
|
|
10.85 |
|
|
|
12.24 |
|
|
|
(1.39 |
) |
|
|
(11.4 |
)% |
Average postpaid revenue per user per month A$s(3) |
|
|
58.99 |
|
|
|
59.06 |
|
|
|
(0.07 |
) |
|
|
(0.1 |
)% |
Average mobile data revenue per user per month(4) |
|
|
6.77 |
|
|
|
5.70 |
|
|
|
1.07 |
|
|
|
18.8 |
% |
|
|
|
Note: |
|
statistical data represents managements best estimates. |
68
(1) |
|
Excludes revenue from: |
|
|
|
calls from our fixed network which we categorise as fixed-to-mobile; and |
|
|
|
|
CSL New World which is recognised separately as controlled entity
revenue. |
(2) |
|
Includes all calls made from mobile telephones including long distance and international calls,
excludes data, MessageBank®, international roaming and CSL New World. |
|
(3) |
|
Average retail revenue per user per month is calculated using average retail SIO and includes
mobile data, MessageBank® and roaming revenues. It excludes interconnection and wholesale revenue. |
|
(4) |
|
Includes mobile wireless EVDO revenue, excludes BigPond® wireless. |
During fiscal 2006, mobile service revenue increased by A$198 million or 4.6% mainly due to
the continued growth in the number of mobile telephone subscribers and expanding minutes of use,
offset by continued pressure on prices. In addition, we experienced strong growth in our value
added services revenue for example MessageBank®, SMS, Blackberry and EVDO.
Access fees and call charges declined by 2.2% to A$2,703 million in fiscal 2006 reflecting a
decrease in GSM revenues partially offset by an increase in CDMA revenues. Both technology
categories have been impacted during the year by the competitive environment and the growth in
capped price plans which has directly impacted yields. CDMA prepaid was also impacted by lower
revenues attributable to a promotion which gave CDMA subscribers half price calls for a year.
During the year we moved from 1% of our mobile customers on capped plans to 4.3% on capped plans.
SIOs increased overall, but it was CDMA that drove the growth with a 27.8% increase while GSM
(including 3G) reduced marginally by 1.6%. The CDMA revenues benefited from a increased activations
during the first half of fiscal 2006 and the availability of more competitively priced handsets.
Call minutes generally increased for each technology, but these benefits did not outweigh the
impact on price for the period. Average revenue per user (ARPU) dropped by A$0.98 over the year led
by a reduction in prepaid ARPUs by 11.4% or A$1.39, with postpaid ARPUs stable.
Revenue from international roaming grew by 9.5% to A$266 million in fiscal 2006. The rise was
primarily due to an increase in outbound roaming minutes and a marginal increase in revenue per
call. In addition, inbound roaming revenue remained steady as price increases offset decreased
usage.
Revenue from MessageBank® increased by 6.4% to A$199 million in fiscal 2006 primarily due to
growth in minutes resulting from higher mobile usage and SIOs.
During fiscal 2006, SMS and Multimedia Messaging Services (MMS) revenues increased by 8.1% to
A$494 million after a significant increase in the number of messages sent. There is a component of
migration from voice communication to message communication which is evident in the reported growth
rates. This was stimulated by a A$0.01 text offer and other rewards and bonus options offered
during the year. In addition, mobile data growth was also experienced in the corporate segment
through the Blackberry and Telstra Mobile BroadbandTM products on the CDMA network. This
is reflected in the average mobile data revenue per user per month increasing over fiscal 2006.
Revenue from handset sales increased by 22.6% to A$467 million in fiscal 2006 primarily due to
growth in the number of GSM mobile handsets sold. This growth was attributed to an increase in
marketing campaign activity focusing on the sale of 3G handsets, particularly in the second half of
the year.
Mobiles interconnection revenue has grown 13.9% to A$623 million during fiscal 2006. The main
product driving this growth is GSM wholesale domestic roaming which grew in fiscal 2006 by A$43
million after Hutchison 3G roaming commencing in April 2005. This corresponds directly to an A$8
million drop in CDMA roaming after Hutchison introduced their 3G product as an alternative to CDMA.
SMS interconnect has grown A$17 million due to an increase in traffic resulting from growth in
mobile SIOs as well as a continued increase in the popularity of text messaging as a cheaper
alternative to mobile voice calling. In addition, mobiles terminating revenue grew by A$24 million
due to a 12% increase in termination volumes, partially offset by price reductions resulting from
regulatory pricing pressures on mobile terminating rates. The increase in termination volumes has
resulted from growth in retail SIOs, particularly in CDMA and pre-paid services.
69
Wholesale mobile service revenue increased in fiscal 2006 by 50.0% or A$12 million due to
growth in the wholesale GSM resale product introduced in fiscal 2005. It enabled resellers to
develop and market their own branded mobile solutions including voice, text, multimedia messaging
and MessageBank® on the GSM network which they could only previously do on the CDMA network.
Minutes of use have grown significantly since this product was introduced.
The level of deactivations increased by 4.2% which was driven by prepaid activity. After we
changed systems for managing prepaid SIOs in fiscal 2005, all relevant prepaid SIOs were
automatically given a recharge period of 12 months, extended from the normal 6-month period, to
ensure no customers were disadvantaged while we consolidated the new system. In the last quarter of
fiscal 2006, these SIOs reached the end of this period and many were subsequently deactivated. This
contributed to the deactivation of 1.1 million prepaid SIOs in fiscal 2006. This change in recharge
period has not impacted the year on year growth rate but has impacted the timing of deactivations
occurring throughout the year.
Internet and IP solutions
Our operating revenue from Internet and IP solutions is driven primarily by:
|
|
|
demand for capacity to support business networking; |
|
|
|
|
the increased use of IP services by business customers (small to medium
enterprises); |
|
|
|
|
the introduction of new products to meet customer needs; |
|
|
|
|
the movement of our customers from basic access and associated calling products to other
access services such as ADSL; and |
|
|
|
|
demand for greater bandwidth services such as broadband. |
While the IP and Internet markets have been experiencing growth, competition has put pressure
on our prices. We expect that these trends will continue.
Internet and IP solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Narrowband |
|
|
220 |
|
|
|
275 |
|
|
|
(55 |
) |
|
|
(20.0 |
)% |
Retail broadband(1) |
|
|
730 |
|
|
|
463 |
|
|
|
267 |
|
|
|
57.7 |
% |
Wholesale broadband |
|
|
461 |
|
|
|
261 |
|
|
|
200 |
|
|
|
76.6 |
% |
Internet direct |
|
|
143 |
|
|
|
123 |
|
|
|
20 |
|
|
|
16.3 |
% |
IP solutions |
|
|
285 |
|
|
|
207 |
|
|
|
78 |
|
|
|
37.7 |
% |
Other |
|
|
68 |
|
|
|
48 |
|
|
|
20 |
|
|
|
41.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total internet & IP solutions revenue |
|
|
1,907 |
|
|
|
1,377 |
|
|
|
530 |
|
|
|
38.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadband subscribers retail (in thousands)(1) |
|
|
1,476 |
|
|
|
856 |
|
|
|
620 |
|
|
|
72.4 |
% |
Broadband subscribers wholesale (in thousands) |
|
|
1,427 |
|
|
|
888 |
|
|
|
539 |
|
|
|
60.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total broadband subscribers (in thousands) |
|
|
2,903 |
|
|
|
1,744 |
|
|
|
1,159 |
|
|
|
66.5 |
% |
Narrowband subscribers retail (in thousands) |
|
|
1,027 |
|
|
|
1,205 |
|
|
|
(178 |
) |
|
|
(14.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total online subscribers |
|
|
3,930 |
|
|
|
2,949 |
|
|
|
981 |
|
|
|
33.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average revenue per retail broadband subscriber per month
(A$s) |
|
|
52.16 |
|
|
|
60.10 |
|
|
|
(7.94 |
) |
|
|
(13.3 |
)% |
|
|
|
Note: |
|
statistical data represents managements best estimates. |
|
(1) |
|
Telstra mobile broadband and Telstra internet direct (Retail ADSL) are not included in retail
broadband revenue and subscriber numbers. |
70
Our narrowband products allow customers to connect to the Internet from any telephone
line in Australia. Our broadband products allow customers to experience an always on connection
to the Internet, although this is not available to all lines due to technology limitations. In
fiscal 2006, continued demand for capacity combined with competitive pricing has resulted in
customers migrating their narrowband services to broadband. This trend placed additional price
pressure on our dial-up products and resulted in a decline in our narrowband revenues.
We offer a range of Internet products and packages under our BigPond® brand. Telstra
BigPond®
home and business packages offer dial-up modem services to residential and business customers
across Australia. Telstra BigPond® broadband provides broadband Internet services to consumer and
business customers via HFC cable, ADSL, satellite and mobile access technologies.
During fiscal 2006, our Internet and IP solutions revenue grew by 38.5% or A$530 million to
A$1,907 million, despite a reduction in prices. The subscriber base for our broadband products grew
significantly during this time, partially due to migration from narrowband products but also due to
growth in the overall online market. As at 30 June 2006, we had approximately 2.9 million broadband
customers of which nearly 1.5 million were retail customers. There has been a significant rise in
demand resulting from competitive pricing strategies.
Narrowband revenue decreased by 20.0% to A$220 million in fiscal 2006. This decline highlights
the growing impact of dial-up to broadband migration as the dial-up market proceeds with its
decline. We expect this trend to continue with further price adjustments likely to occur as
broadband prices fall and customers require higher speeds.
Retail broadband revenue increased by 57.7% to A$730 million in fiscal 2006, mainly due to
strong increases in SIOs. SIO growth has occurred across all technologies but ADSL has been the key
driver of the growth. We have introduced a number of key price and value campaigns to stimulate
broadband take up including a combination of discounting access and installation offers. We have
also introduced new products and plans including a wireless EVDO offer and enhanced focus on our
cable offerings. The Australian Governments Higher Bandwidth Incentive Scheme (HiBIS) and
broadband regional connect packages have also enabled affordable broadband and higher bandwidth to
be provided to regional and remote locations and encourage take up in those areas. Given this
strong take up, increased competition and resultant price offerings, average revenue per user has
declined.
Wholesale broadband revenue increased by 76.6% to A$461 million in fiscal 2006 driven by a
continuing strong market demand for high bandwidth services and increased demand at the retail
level. Wholesale DSL Internet grade has grown by A$180 million driven by volume increases with a
60.7% growth in SIOs.
Internet direct is our business oriented Internet access product with a range of data access
options and features to meet the needs of business. Internet direct revenue increased by 16.3%
during fiscal 2006 to A$143 million. The result was driven by our virtual ISP product which
increased by A$14 million, mainly because of a new commercial deal signed resulting in a
significant increase in data usage. SIOs for this product category increased by 258% in fiscal
2006.
IP solutions revenue increased by 37.7% to A$285 million in fiscal 2006, mainly due to the
products in this category being in the growth phase of their lifecycle. Fiscal 2006 saw an increase
of A$48 million in IP MAN/ Ethernet, our next generation data access services which provide high
speed IP and Ethernet access solutions respectively for large and medium corporate enterprises. The
government sector has been the key user and driver of this product. IP WAN grew by A$29 million,
after growth was stimulated through competitive pricing and improved network performance. It is
also evident that customers now appear more willing to move towards IP based solutions.
Other Internet and IP solutions revenue grew by A$20 million in fiscal 2006 due to growth in
wholesale Internet and data traffic, in particular in our Wholesale Ethernet product, and increased
revenue from our wholly owned entity, Chief Entertainment, which is a media production house that
provides
Internet content.
ISDN
ISDN is a flexible, switched network based on digital technology. It can support many
applications at one time (such as voice, data and video) while using a single access point to the
network. ISDN services are offered to residential and business customers across Australia. Our ISDN
products revenue is impacted by offerings and
71
packages in the broadband market, growth in the number of DSL enabled exchanges and migration to
advanced data products such as IP solutions.
ISDN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Access |
|
|
418 |
|
|
|
421 |
|
|
|
(3 |
) |
|
|
(0.7 |
)% |
Data calls |
|
|
118 |
|
|
|
165 |
|
|
|
(47 |
) |
|
|
(28.5 |
)% |
Voice calls |
|
|
271 |
|
|
|
304 |
|
|
|
(33 |
) |
|
|
(10.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total calls |
|
|
389 |
|
|
|
469 |
|
|
|
(80 |
) |
|
|
(17.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ISDN revenue |
|
|
807 |
|
|
|
890 |
|
|
|
(83 |
) |
|
|
(9.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISDN access lines (basic access line equivalents
(in thousands))(1) |
|
|
1,214 |
|
|
|
1,208 |
|
|
|
6 |
|
|
|
0.5 |
% |
|
|
|
Note: statistical data represents managements best estimates. |
|
(1) |
|
Statistical data we have adjusted comparative data to show a more accurate
reflection of the market. Conversion factors have been adjusted in calculating ISDN access
lines. |
ISDN access revenue has declined marginally to A$418 million in fiscal 2006. Growth in access
lines has slowed in recent years from 3.3% in fiscal 2005 to 0.5% in the current year. Data access
line declines in the consumer segment have been driven by customer movement to broadband, while
declines in the business segment have arisen as a result of the migration to alternative
technologies such as ADSL and symmetrical HDSL. Data access line declines have been offset by voice
access line growth, driven by customers taking up ISDN as a stepping stone towards a full IP
environment. Whole of customer discounts in the enterprise segment have also impacted the result in
the current year.
ISDN voice calls revenue, which is made up of local, national and international voice calls
made on the integrated services digital network, declined by 10.9% or A$33 million in fiscal 2006,
mainly due to declines in the local and national categories. National voice calls revenue was
negatively impacted by competitor price pressure during the year. Local voice calls revenue was
negatively impacted by a decrease of 14% in minutes of use primarily because calls on our Priority®
One3 and 1300 A Party products have been reclassified from ISDN to inbound calling revenues. This
reclassification amounted to A$13 million in fiscal 2006.
ISDN data calls revenue declined in fiscal 2006 by 28.5% or A$47 million. Both ISDN local and
national data calls contributed to the decline. ISDN local data and ISDN national local data calls
revenue
declined by 28% and 32% respectively due to customers migrating to alternative products such
as ADSL and symmetrical HDSL, as a result of improved bandwidths at reduced prices in each of these
products.
72
Specialised data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Frame Relay |
|
|
305 |
|
|
|
351 |
|
|
|
(46 |
) |
|
|
(13.1 |
)% |
ATM |
|
|
90 |
|
|
|
89 |
|
|
|
1 |
|
|
|
1.1 |
% |
Digital data services |
|
|
198 |
|
|
|
227 |
|
|
|
(29 |
) |
|
|
(12.8 |
)% |
Leased lines |
|
|
229 |
|
|
|
235 |
|
|
|
(6 |
) |
|
|
(2.6 |
)% |
International private lines |
|
|
30 |
|
|
|
26 |
|
|
|
4 |
|
|
|
15.4 |
% |
Other specialised data |
|
|
32 |
|
|
|
38 |
|
|
|
(6 |
) |
|
|
(15.8 |
)% |
Total data revenue |
|
|
884 |
|
|
|
966 |
|
|
|
(82 |
) |
|
|
(8.5 |
)% |
Domestic Frame access ports (in thousands) |
|
|
30 |
|
|
|
34 |
|
|
|
(4 |
) |
|
|
(11.8 |
%) |
|
|
|
Note: statistical data represents managements best estimates. |
Specialised data revenue is comprised mainly of revenue from frame relay, digital data
services and leased lines. Frame relay offers high speed data transmission from 64kb to 45Mb per
second to customers connecting any number of sites to other national or international locations. It
is frequently used as a building block to construct corporate wide area networks. Digital data
services provide high quality, leased line digital data transmission offering dedicated bandwidth
from 1.02Kb to 1,984Kb per second, which may be used for communication between all major capital
cities, and most regional and country areas in Australia. Analogue leased lines provide high
quality, low cost, low bandwidth and dedicated end-to-end connections between customer sites.
During fiscal 2006, total specialised data revenue decreased to A$884 million, reflecting a
decline in mature products such as frame relay, digital data and leased line services. This decline
has been driven by product substitution to more technologically advanced IP and DSL based product
options, included with our Internet and IP solutions revenue category.
Frame relay revenue decreased as this product enters the declining stages of its product life
cycle with customers migrating to new technologies such as Business DSL which offers the same
coverage and similar assurance, but at a lower price. In addition, we introduced price discounting
to retain existing customers. Reduced frame relay revenue was due to a combination of a reduction
in ports by 11.8% with a similar reduction in revenue per customer.
Digital data services are mature products that declined 12.8% to A$198 million during fiscal
2006 primarily due to customers transferring to newer technologies and price pressures experienced
from alternative products.
Leased line revenues experienced a 2.6% reduction to A$229 million, mainly due to customers
with voice graded dedicated lines moving to DSL, wireless or IP telephony based solutions. Other
high capacity products such as wideband have grown. New business has also been generated by
offering premium packages in combination with Internet Direct but they tend to be short distance
services which are low revenue generating.
Advertising and directories
Our advertising and directories revenue is predominantly derived from our wholly owned Sensis
group. Sensis provides innovative advertising and local search solutions through a print, online,
voice, wireless and satellite navigation network.
The majority of Sensis revenue is derived from its print and online directories Yellow® and
White Pages® which have grown steadily overall due to the introduction of new print and directory
advertising initiatives.
Product innovation and customer demand continue to drive growth in our broader online and
electronic advertising and non-directories advertising business.
73
Advertising and directories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Advertising and Directories revenue |
|
|
1,711 |
|
|
|
1,585 |
|
|
|
126 |
|
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yellow® revenue increased by 5.8% to A$1,172 million in fiscal 2006, primarily due to the
strong performance in our non-metropolitan books and 54% growth in Yellow® OnLine revenue to A$124
million. The growth in non-metropolitan books has been driven by new category guides and
subheadings, higher uptake of half page advertisements and the release of three new local
directories. Online performance was driven by a 25% rise in Yellow OnLine display customer numbers
and higher uptake of Platinum advertising, leading to increased revenue per customer.
During fiscal 2006, White Pages® revenue grew by 12.2% to A$302 million, reflecting
continued
growth in both print and online, with improved sales force effectiveness through better go to
market strategies. Growth has continued with the success of coloured listings and logos resulting
in higher revenue per customer.
Our emerging businesses delivered 17.1% revenue growth, driven by strong growth in Whereis®
location-based search revenues and in MediaSmart®. Fiscal 2006 includes a full year of revenue for
our mapping and travel related products company Universal Publishers (purchased December 2005).
Overall revenue performance was impacted by a decline in classifieds revenue over the period.
This was driven by competition and economic weakness in the Sydney and Melbourne markets. However,
we regard our advertising and directories business as a growth area, with improving margins
especially online, and strong market presence accounting for almost 14% of the Australian main
media advertising market.
Sensis Trading Post® business is experiencing strong growth in online classifieds
revenues
while print based classifieds revenues are declining. This trend is expected to continue, and as a
result the achievement of continued online revenue growth is critical to the future performance of
the business.
Intercarrier services
Our operating revenue from intercarrier services comprises a number of products and services
relating to the provision of telecommunications services to other carriers (including REACH), CSPs
and ISPs. The majority of this revenue base is derived from interconnect and access services which
is a highly regulated area of the Australian telecommunications market. Interconnection revenues
relating to our PSTN and mobile products are included in those product categories.
The remaining revenue component in intercarrier services is derived from wholesale specific
product offerings such as facilities access, wholesale transmission and ULL which, while they are
subject to significant price pressures resulting from ongoing oversupply of capacity in the market
place, are a focus for delivering incremental revenue growth for us in the coming years. This
growth, however, will be negatively impacted by the recent interim determinations by the ACCC
regarding a reduction in the amount we can charge wholesale customers for ULL access.
Intercarrier services revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Intercarrier services revenue |
|
|
351 |
|
|
|
290 |
|
|
|
61 |
|
|
|
21.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercarrier Services revenue has grown by 21.0% to A$351 million during fiscal 2006 due to
increases in facilities access, wholesale transmission solutions and other wholesale revenues
mainly consisting of ULL.
74
Our growth in facilities access was 39.8% or A$24 million during fiscal 2006 for the year
largely driven by demand for equipment building and mobile tower access as other carriers and
service providers have sought to expand their infrastructure over time.
Growth in wholesale transmission relates to leased transmission services led by a rise in
demand from Internet service providers for backhaul transmission to expand their DSL network
coverage. Partly offsetting these increases in intercarrier revenue was the unfavourable impact of
a backdated rate adjustment for MCI Worldcom in September 2005 as well as a decline in services
leased by the same customer.
Other wholesale intercarrier revenue growth of A$18 million was due to ULL driven by a number
of factors such as:
|
|
|
carriers have reached customer density thresholds on wholesale DSL and resale PSTN to
be able to undertake viable ULL; and |
|
|
|
|
falling equipment prices have reduced the capital required by carriage service
providers to undertake ULL build. |
Inbound calling products
Our operating revenue from inbound calling products consists principally of the fees we charge
our business customers for the provision of inbound calling numbers:
|
|
|
for FreecallTM 1800, the cost of the call, charged to the party called,
with no cost incurred by the caller; |
|
|
|
|
for Priority® 1300 and Priority® One3: |
|
|
|
the calling party from a PSTN service incurs a cost of A$0.25
(including GST) from anywhere in Australia. Different charges apply for calls made
from ISDN, mobiles and payphones; and |
|
|
|
|
the service owner incurs the other components of the call charges as
applicable. |
Also included is revenue from enhanced call centre products using network voice processing,
which provides access to advanced call handling capabilities, without customers having to purchase
and maintain their own networks.
Our inbound calling products revenue therefore is driven by two different streams, the caller
(A party) and the lessee of the inbound service (B party). The A party revenues are affected by
substitution to other voice products such as mobiles and the Internet. B party revenues are
affected by increased customer competition impacting prices.
Revenue from inbound calling products remained steady at A$449 million in fiscal 2006 mainly
due to an increase in Priority® One3 and 1300 A Party products offset by Priority® One3 and 1300 B
Party products.
Inbound calling products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Inbound calling products revenue |
|
|
449 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B Party minutes (in millions) |
|
|
2,922 |
|
|
|
2,773 |
|
|
|
149 |
|
|
|
5.4 |
% |
A Party calls (in millions) |
|
|
1,012 |
|
|
|
940 |
|
|
|
72 |
|
|
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,934 |
|
|
|
3,713 |
|
|
|
221 |
|
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates. |
Our overall revenue from Priority® One3 and 1300 B Party products declined in fiscal 2006 due
to very competitive market pressures resulting in lower returns. Minutes of use and services in
operation have actually increased in this category of calls, but large customers are being won or
retained at lower prices resulting in reduced revenues. This is offset by higher call volumes on
our Priority® One3 and 1300 A Party products after calls from our
75
ISDN and Siteline products to these numbers were reclassified in the current year to inbound
calling. This amounted to A$13 million in fiscal 2006. There is also an increasing trend for calls
to these numbers from mobile phones which are recorded as mobiles revenue.
Revenue from FreecallTM 1800 has declined mainly due to intense price competition
leading to reduced price and a declining customer base. Our other inbound calling products, such as
Enterprise Speech Solutions, have continued to grow strongly throughout fiscal 2006.
Solutions management
Our operating revenue from solutions management is derived from managing all or part of a
customers communications and IT solutions and services covering:
|
|
|
managed network services, which is network based voice and data products, including
IP based networks and IP telephony, CPE management, radio networks and new wireless based
technologies; |
|
|
|
|
IT services, which is managed customer infrastructure (e.g. desktop and end user
devices), managed storage and security services, in addition to hosting and application
development. IT services also includes the provision of professional consulting and
deployment services; and |
|
|
|
|
other refers to our eBusiness solutions and global data centre. |
Solutions management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Managed network services |
|
|
337 |
|
|
|
337 |
|
|
|
|
|
|
|
|
|
IT services |
|
|
632 |
|
|
|
572 |
|
|
|
60 |
|
|
|
10.5 |
% |
Other |
|
|
20 |
|
|
|
22 |
|
|
|
(2 |
) |
|
|
(9.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solutions management revenue |
|
|
989 |
|
|
|
931 |
|
|
|
58 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2006, solutions management revenue increased 6.2% or A$58 million mainly due to
increases in IT services.
IT services grew by 10.5% or A$60 million in the current year, mainly due to our wholly owned
entity KAZ winning major contracts, one of which was a five-year contract for an estimated A$200
million to provide the Department of Defences Central Office IT Infrastructure Support Services.
Fiscal 2006 IT services revenue also included an additional A$12 million due to a full 12 months of
results for KAZ compared to only 11 months in the previous fiscal year. Managed professional
services revenue also contributed to the growth in IT services, with an increase of A$16 million
due mainly to increased project work on an existing contract.
In addition to increases in IT services, managed data, managed WAN and managed radio, which
are in managed network services, all contributed positively to the revenue growth due mainly to
increases in a number of contracts. Managed voice however offset this growth in revenue, declining
due to a reduction in contracts in this area.
Offshore controlled entities
The offshore controlled entities category relates to our offshore subsidiaries, which provide
a variety of products and services within their various regions of operation. Included in this
category are the following significant offshore controlled entities:
|
|
|
CSLNW, which generates its revenues from the Hong Kong mobiles market. CSLNW was
formerly known as CSL. In March 2006, this entity merged with Hong Kong based mobile
company New World PCS. As result of this transaction, we now own 76.4% of the merged
entity; |
76
|
|
|
TelstraClear, which generates its revenues from providing full integrated services to
the New Zealand market; and |
|
|
|
|
other offshore controlled entities predominantly in the Telstra Enterprise and
Government segment, which mainly generate revenues from the provision of global
communication solutions to multinational corporations through our interests in the United
Kingdom, Asia and North America. |
Offshore controlled entities revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
CSL New World |
|
|
830 |
|
|
|
734 |
|
|
|
96 |
|
|
|
13.1 |
% |
TelstraClear |
|
|
620 |
|
|
|
625 |
|
|
|
(5 |
) |
|
|
(0.8 |
)% |
Other offshore controlled entities |
|
|
295 |
|
|
|
252 |
|
|
|
43 |
|
|
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total offshore controlled entities revenue |
|
|
1,745 |
|
|
|
1,611 |
|
|
|
134 |
|
|
|
8.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenue from offshore controlled entities increased in fiscal 2006 by 8.3% to
A$1,745 million primarily due to the following factors:
|
|
|
CSLNWexperienced revenue growth across the majority of its revenue streams, except
for local voice which continues to be impacted by sustained pricing pressure. The merger
between CSL and New World PCS resulted in increased revenue in the current year of A$66
million. Excluding this component, revenue has grown in both prepaid and postpaid
categories after increased subscribers and handset revenue due to recent promotional
activity. Revenue growth was also assisted by a A$11 million favourable foreign exchange
rate impact. |
|
|
|
|
TelstraClear experienced a net decline in revenue of 0.8% to A$620 million. There
were significant declines in calling revenues largely due to price erosion and pricing
plan reductions in the Internet and IP business due to heavy retail competition. Revenue
was also negatively impacted by the NZ$/A$ exchange rate, causing a A$22 million decline.
These declines were mostly offset by strong growth in the business sector and an increased
contribution from a full years ownership of the Sytec business. There were also a number
of one-off implementation revenues from the provision of new and/or additional services to
a number of key customers. |
|
|
|
|
The 17.1% growth in revenue to A$295 million from other offshore controlled entities
was mainly due to growth in Europe, Asia and the US. In Europe, the inclusion of a full 12
months ownership of PSINet contributed A$15 million in revenue growth. Both Telstra
Singapore and Telstra Hong Kong started to grow revenue by selling the full suite of
international data products in the Asian market. KAZ also exhibited strong growth in the
same region due to the synergies gained by combining this business with our
telecommunications business in one bundle to customers. Growth in the US of A$15 million
was mainly the result of a major contract to provide telecommunications solutions over an
integrated global IP-based network, contributing A$12 million to revenue growth. |
For further detail regarding our major off shore subsidiaries CSLNW and TelstraClear refer to
the business summaries that follow.
77
Payphones
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Payphone revenue |
|
|
104 |
|
|
|
121 |
|
|
|
(17 |
) |
|
|
(14.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra owned and operated payphones (thousands) |
|
|
30 |
|
|
|
31 |
|
|
|
(1 |
) |
|
|
(3.2 |
)% |
Privately owned and operated payphones (thousands) |
|
|
27 |
|
|
|
30 |
|
|
|
(3 |
) |
|
|
(10.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of payphones (in thousands) |
|
|
57 |
|
|
|
61 |
|
|
|
(4 |
) |
|
|
(6.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates. |
Payphone revenue declined by 14.0% to A$104 million in fiscal 2006, impacted by substitution
to other products, particularly prepaid mobile phones and competitors prepaid calling cards. As a
result of this migration, we removed a number of low usage phones resulting in a 3.2% reduction in
the number of Telstra owned and operated payphones.
There has also been a decline in privately owned and operated payphones of 10.0%, as private
operators removed their support for unprofitable payphones. Telstra owned and operated payphones
also reduced due to the loss of some payphones to private operators and lower demand in new growth
locations.
Pay TV bundling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Pay TV Bundling revenue |
|
|
320 |
|
|
|
263 |
|
|
|
57 |
|
|
|
21.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Pay TV Bundling subscribers (thousands) |
|
|
292 |
|
|
|
280 |
|
|
|
12 |
|
|
|
4.3 |
% |
Austar Pay TV Bundling subscribers (thousands) |
|
|
51 |
|
|
|
55 |
|
|
|
(4 |
) |
|
|
(7.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pay TV Bundling subscribers (thousands) |
|
|
343 |
|
|
|
335 |
|
|
|
8 |
|
|
|
2.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates. |
Total pay TV bundling revenue grew by A$57 million, comprising increases in revenue for FOXTEL
of A$46 million and AUSTAR of A$11 million.
FOXTEL bundled services revenue grew by 20.0% or A$46 million during fiscal 2006 after an
increase in subscribers and higher revenue per user. As customers have migrated from analogue to
digital services, discount plans have been phased out and customers are upgrading their packages.
It is intended that full customer migration will be completed by March 2007. The growth in
subscribers was driven by low price installation/upgrade offers made to the market along with the
FOXTEL 10th Anniversary promotion, which targeted both new customers and existing customers through
digital migration. FOXTEL IQ, an interactive digital feature available to all FOXTEL digital
subscribers also performed well, aided by a low installation price point campaign. At 30 June 2006,
analogue services in operation represented 14.7% of FOXTEL bundled customers compared with 36.8% at
the start of the year.
Austar bundled services revenue growth for fiscal 2006 of A$11 million was driven by an
increase in the average revenue per user after a change in the subscription offerings.
Subscriptions, however, fell due to lower advertising activity, which resulted in slower sales
rates while the disconnection rate remained consistent.
78
Customer premises equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Customer premises equipment revenue |
|
|
274 |
|
|
|
231 |
|
|
|
43 |
|
|
|
18.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CPE revenue increased by 18.6% to A$274 million during fiscal 2006 mainly driven by strong
growth in the sales of PBX equipment and communication packages known as Telstra Business Systems
(TBS) packages. TBS sales more than tripled in the current fiscal year due to an expansion of the
vendor base combined with new carriage pricing plans and investment made in support tools that
enabled improved processing and reduced transaction time.
The current years revenue also includes a full 12 months of operations for Telstra Business
Systems Pty Ltd (formerly known as Damovo (Australia) Pty Ltd) as it was acquired September 2004.
We also acquired Converged Networks Pty Ltd, Western Australias largest CPE dealer in April 2006.
This growth was partially offset by an A$11 million decline in first phones/extensions due to
continued substitution of rental phones due to sales of CPE and mobiles.
Other sales and services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Telstra information and connection services |
|
|
120 |
|
|
|
134 |
|
|
|
(14 |
) |
|
|
(10.4 |
)% |
Customnet and spectrum |
|
|
110 |
|
|
|
112 |
|
|
|
(2 |
) |
|
|
(1.8 |
)% |
Virtual private network |
|
|
17 |
|
|
|
15 |
|
|
|
2 |
|
|
|
13.3 |
% |
Card services |
|
|
50 |
|
|
|
59 |
|
|
|
(9 |
) |
|
|
(15.3 |
)% |
Security products |
|
|
34 |
|
|
|
33 |
|
|
|
1 |
|
|
|
3.0 |
% |
HFC cable usage |
|
|
84 |
|
|
|
65 |
|
|
|
19 |
|
|
|
29.2 |
% |
Conferlink |
|
|
48 |
|
|
|
47 |
|
|
|
1 |
|
|
|
2.1 |
% |
Commercial and recoverable works |
|
|
57 |
|
|
|
58 |
|
|
|
(1 |
) |
|
|
(1.7 |
)% |
External construction |
|
|
108 |
|
|
|
85 |
|
|
|
23 |
|
|
|
27.1 |
% |
Other |
|
|
131 |
|
|
|
133 |
|
|
|
(2 |
) |
|
|
(1.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other sales and services revenue |
|
|
759 |
|
|
|
741 |
|
|
|
18 |
|
|
|
2.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2006, operating revenue from other sales and services increased by 2.4% or A$18
million mainly due to HFC cable usage and external construction revenue.
HFC cable usage includes revenue received from FOXTEL for carriage services, cable
installations and service calls. Revenue increased by A$19 million this year due to FOXTEL
promotional activity which resulted in an increase in services in operation. There was also a
scheduled FOXTEL contract rate increase during the period.
External construction, which delivers communications network infrastructure solutions, had
revenue growth of 27.1% or A$23 million in fiscal 2006. This growth can be mainly attributed to
increased activity relating to the construction of the 3G 2100 network in conjunction with our
joint venture partner, Hutchison.
The above increases were partially offset by a A$14 million decline in information and
connection services revenue as a result of lower call volumes. Also, card services declined by
15.3% or A$9 million. This was due to products such as Homelink 1800 and telecard being mature
products and impacted by
substitution to more cost effective convenient products such as pre-paid cards and mobiles.
79
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Proceeds from sale of property, plant and equipment |
|
|
46 |
|
|
|
51 |
|
|
|
(5 |
) |
|
|
(9.8 |
)% |
Proceeds from sale of investments |
|
|
93 |
|
|
|
252 |
|
|
|
(159 |
) |
|
|
(63.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset/investment sales |
|
|
139 |
|
|
|
303 |
|
|
|
(164 |
) |
|
|
(54.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of property, plant & equipment |
|
|
(23 |
) |
|
|
(42 |
) |
|
|
19 |
|
|
|
(45.2 |
)% |
Cost of investment |
|
|
(31 |
) |
|
|
(173 |
) |
|
|
142 |
|
|
|
(82.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of asset/investment sale |
|
|
(54 |
) |
|
|
(215 |
) |
|
|
161 |
|
|
|
(74.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain/loss on assets/investment sale |
|
|
85 |
|
|
|
88 |
|
|
|
(3 |
) |
|
|
(3.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO Levy Receipts |
|
|
58 |
|
|
|
63 |
|
|
|
(5 |
) |
|
|
(7.9 |
)% |
Government subsidies |
|
|
135 |
|
|
|
71 |
|
|
|
64 |
|
|
|
90.1 |
% |
Miscellaneous income |
|
|
50 |
|
|
|
39 |
|
|
|
11 |
|
|
|
28.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
243 |
|
|
|
173 |
|
|
|
70 |
|
|
|
40.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income |
|
|
328 |
|
|
|
261 |
|
|
|
67 |
|
|
|
25.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2006, total other income increased by 25.7% or A$67 million.
In fiscal 2006 proceeds from sale of investments of A$93 million were due mainly to the sale
of Xantic B.Vand Fundi Software Pty Ltd, with Xantic yielding a net gain of approximately A$58
million. In fiscal 2005, proceeds from the sale of our investments was mainly made up of the sale
of our interests in Intelsat Limited, Infonet Services Corporation and the redemption of the
convertible note issued by PCCW.
The majority of the growth in government subsidy revenue was sourced from Higher Bandwidth
Incentive Scheme (HiBIS) receipts and the broadband Connect Australia scheme, which can be
attributed to an increase in the provision of broadband services to regional, rural and remote
areas of Australia. Refer to the Internet and IP products section for further details regarding
HiBIS.
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Labour expense |
|
|
4,364 |
|
|
|
3,858 |
|
|
|
506 |
|
|
|
13.1 |
% |
Goods and services purchased |
|
|
4,730 |
|
|
|
4,211 |
|
|
|
519 |
|
|
|
12.3 |
% |
Other expenses |
|
|
4,427 |
|
|
|
3,815 |
|
|
|
612 |
|
|
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,521 |
|
|
|
11,884 |
|
|
|
1,637 |
|
|
|
13.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net (gain)/loss from jointly controlled and associated
entities |
|
|
(5 |
) |
|
|
94 |
|
|
|
(99 |
) |
|
|
(105.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,516 |
|
|
|
11,978 |
|
|
|
1,538 |
|
|
|
12.8 |
% |
Depreciation and amortization |
|
|
4,087 |
|
|
|
3,529 |
|
|
|
558 |
|
|
|
15.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
17,603 |
|
|
|
15,507 |
|
|
|
2,096 |
|
|
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2006, our total operating expenses (including share of net (gain)/loss from jointly
controlled and associated entities) was A$17,603 million, compared with A$15,507 million in fiscal
2005. One of the major drivers of the 13.5% increase was the inclusion of a restructuring and
redundancy provision of A$427 million, which has impacted all three of the expense categories. Our
operating expenses have been impacted by the following factors:
|
|
|
costs associated with transformational initiatives and certain project write-offs; |
80
|
|
|
increased costs associated with network rehabilitation; |
|
|
|
|
higher redundancy expense as a result of reduced staff numbers as efficiencies have
been implemented; |
|
|
|
|
higher goods and services purchased costs due to increased marketing campaign
activities and new offers aiming to stimulate sales growth in a range of our products and
services; |
|
|
|
|
the benefit of ongoing cost control programs, including the consolidation of vendors
and IT systems; |
|
|
|
|
growth in our communications plant asset base, along with the impact of a service
life review of our asset base to align with the transformation program, has increased our
depreciation and amortisation expense during fiscal 2006; and |
|
|
|
|
the consolidation of additional operating expenses in fiscal 2006 from our
acquisition activity, including the merger between CSL and New World PCS, as well as the
inclusion of a full fiscal year of expenses relating to entities we acquired in fiscal
2005. These included Universal Publishers from December 2004, Telstra Business Systems
(formerly Damovo (Australia) Pty Ltd) from September 2004, PSINet from August 2004, and
KAZ from July 2004. |
Labour expense
|
|
|
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 |
|
|
|
|
restructuring costs, including 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 employees in our offshore subsidiary entities, or casual and
part time employees. 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.
Labour expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Labour expense |
|
|
4,364 |
|
|
|
3,858 |
|
|
|
506 |
|
|
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic full time employees (whole numbers)(1) |
|
|
37,599 |
|
|
|
39,680 |
|
|
|
(2,081 |
) |
|
|
(5.2 |
)% |
Full-time employees and employed equivalents (whole
numbers)(2) |
|
|
44,452 |
|
|
|
46,227 |
|
|
|
(1,775 |
) |
|
|
(3.8 |
)% |
Total workforce, including contractors and agency staff (whole
numbers)(3) |
|
|
49,443 |
|
|
|
52,705 |
|
|
|
(3,262 |
) |
|
|
(6.2 |
)% |
Reduction in total workforce in fiscal 2006 |
|
|
(3,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in total workforce in fiscal 2006 excluding impact of
New World merger |
|
|
(3,859 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: statistical data represents managements best estimates |
|
(1) |
|
Excludes offshore, casual and part time employees. |
|
(2) |
|
Includes all domestic and offshore employees, including those of our subsidiary entities. |
|
(3) |
|
Includes all domestic and offshore employees, including subsidiary entities as well as
contractors and agency staff. |
81
During fiscal 2006, our total workforce decreased by 6.2% or 3,262 full time equivalent staff,
contractors and agency staff. This decrease is predominantly due to specific efforts across the
business to rationalise the number of people working for the Telstra Group as part of our business
transformation initiatives. During the year, CSL merged with New World PCS, which resulted in the
Telstra Group acquiring 597 new employees. Excluding the impact of the New World PCS merger on
staff numbers, our total full time equivalent staff, contractors and agency staff reduced by 3,859
full time equivalent staff.
We incurred redundancy expenses of A$348 million in fiscal 2006 compared with A$91 million in
fiscal 2005. The higher redundancy expense reflects the implementation of cost control initiatives
to improve the efficiency of our operational structure. In addition, a further A$186 million of
redundancy expense is included as part of a restructuring and redundancy provision as at year end
to account for redundancies expected to occur as part of the restructuring over the next two years.
Our labour expense increased by 13.1% in fiscal 2006 mainly due to:
|
|
|
the increased levels of redundancy and the redundancy provision referred to above; |
|
|
|
|
salary increases averaging between 2% and 4% for employees as specified in our
enterprise agreements and as per the normal annual salary review process; and |
|
|
|
|
a full year of ownership of several subsidiaries acquired part way through fiscal
2005 (such as KAZ and Telstra Business Systems), and acquisition of new entities such as
the New World Mobility group and a controlling interest in Adstream. |
The above increases in labour expense were partially offset by cost reductions associated with
the 6.2% decrease in the number of employed staff, contractors and agency staff.
Excluding the impact of redundancy expense, labour expense increased by 1.7%.
Based on the latest detailed actuarial report provided on the financial position of Telstra
Super as at 30 June 2003, we have reported that a surplus in this superannuation fund continues to
exist. In accordance with the recommendations within the actuarial investigation, we were not
expected to, and did not make employer contributions to Telstra Super during fiscal 2006 and fiscal
2005. The detailed actuarial report is undertaken every three years. The next detailed actuarial
investigation of Telstra Super is due to be completed by 30 June 2007 based on the schemes
financial position as at 30 June 2006.
As at 30 June 2006, the vested benefits index (the ratio of fund assets to members vested
benefits) of the defined benefit divisions of Telstra Super was 115%. Our contributions to Telstra
Super will recommence when the vested benefit index of the defined benefit divisions falls to 103%.
The continuance of our contribution holiday is dependent on the performance of the fund and the
level of contributions required to meet employer obligations, and we are monitoring the situation
on a monthly basis. Based on the latest actuarial advice, we do not expect to make any
contributions to Telstra Super during fiscal 2007.
In fiscal 2006, we recognised A$185 million of pension costs in our labour expenses compared
with A$203 million in fiscal 2005. This expense is due to the relevant A-IFRS standard requiring us
to recognise the actuarially determined movement in our defined benefit pension plans in our
operating results.
Goods and services purchased
Goods and services purchased includes core costs of our business that vary according to
business activity. The largest component of this expense category is network payments, which are
payments made to other carriers to terminate international and domestic outgoing calls and
international transit traffic. Other significant items include the costs of mobile handsets and
Internet modems, costs of mobile sales (including subsidy costs, usage commissions and dealer
incentives), managed services costs (including service contractors, sub-contractors and leases),
service fees (predominantly in relation to our pay television services) and paper purchases and
printing costs.
82
Goods and services purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Cost of goods sold |
|
|
917 |
|
|
|
726 |
|
|
|
191 |
|
|
|
26.3 |
% |
Usage of commissions |
|
|
281 |
|
|
|
289 |
|
|
|
(8 |
) |
|
|
(2.8 |
)% |
Handset subsidies |
|
|
504 |
|
|
|
424 |
|
|
|
80 |
|
|
|
18.9 |
% |
Network payments |
|
|
2,002 |
|
|
|
1,904 |
|
|
|
98 |
|
|
|
5.1 |
% |
Service fees |
|
|
319 |
|
|
|
273 |
|
|
|
46 |
|
|
|
16.8 |
% |
Managed Services |
|
|
242 |
|
|
|
190 |
|
|
|
52 |
|
|
|
27.4 |
% |
Dealer performance commissions |
|
|
113 |
|
|
|
41 |
|
|
|
72 |
|
|
|
175.6 |
% |
Paper purchases and printing |
|
|
147 |
|
|
|
159 |
|
|
|
(12 |
) |
|
|
(7.5 |
)% |
Other |
|
|
205 |
|
|
|
205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goods and services purchased |
|
|
4,730 |
|
|
|
4,211 |
|
|
|
519 |
|
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our goods and services purchased increased by 12.3% to A$4,730 million in fiscal 2006 mainly
due to higher cost of goods sold, mobile handset subsidies, network payments and dealer performance
commissions. Increases were experienced across most categories within goods and services purchased
except for usage commissions and paper costs. Additionally, a restructuring provision of A$54
million has been raised in relation to the replacement of EVDO cards and additional customer and
dealer costs associated with the shut down of our CDMA network in the future.
Our goods and services purchased increased by 12.3% to A$4,730 million in fiscal 2006 due to
the following factors:
|
|
|
the inclusion of the full financial year of expenses relating to our subsidiary
entities acquired part way through the prior fiscal year, including KAZ, Telstra Business
Systems (formerly Damovo (Australia) Pty Ltd), PSINet and Universal Publishers. In fiscal
2006, CSL merged with New World PCS, the consolidation of which has caused an increase of
goods and services purchased expense of A$29 million; |
|
|
|
|
a rise in cost of goods sold mainly due to higher sales volumes for mobile handsets,
primarily driven by increased market campaign activity, strong BigPond® broadband demand,
costs of supporting the Commonwealth Games, together with sales growth in other product
categories such as EVDO, CPE for small business customers, Managed WAN equipment and voice
related
products. Also contributing to the increase are payments made to Brightstar, in accordance
with our procurement agreement with them to centrally source wireless devices from global
suppliers with a view to achieving cost savings. Inclusive of these payments, the
Brightstar arrangement has provided net savings of approximately A$70 million, primarily
relating to handset costs; |
|
|
|
|
an increase in mobile handset subsidies, attributable to a rise in the take up of
handsets on subsidised plans as well as higher average subsidies offered, especially
following a significant campaign undertaken in the last quarter, whereby a greater range
of handsets are being subsidised. As a result, our average subscriber acquisition cost has
increased from A$120 to A$137. In addition, the CSLNW has implemented a more aggressive
handset subsidy policy in order to increase handset sales. In fiscal 2006, we have also
made an A-IFRS accounting policy change to expense handset subsidies as incurred, as
opposed to previously deferring and amortising them over the contract period. The prior
year comparative figure has been adjusted to allow a like for like comparison; |
|
|
|
|
network payments continued to grow due to volume increases of domestic mobile and SMS
traffic terminating on other carriers networks, partially offset by a reduction in the
average mobile terminating rate. Additionally, expansion and growth in our UK, USA and
Asian operations, which drove both growth in our offshore outpayments and higher outbound
roaming revenue, partly offset by a reduction of costs through routing traffic to overseas
carriers that offer lower prices and favourable foreign exchange variations |
83
|
|
|
in our New Zealand operations. Additional Network Access Charges were also incurred as a result
of our 3G 2100 partnership activities with Hutchison; |
|
|
|
|
service fees increased by 16.8% to A$319 million in fiscal 2006 led by a rise in
bundling of pay TV services due to growth in bundled FOXTEL subscribers; |
|
|
|
|
managed services costs grew by 27.4% to A$242 million in fiscal 2006, mainly
attributable to increased third party maintenance and service costs for the support of
customer contracts. There are also a number of reclassifications from other expenses such
as service contracts, service fees and consultancy amounting to A$26 million. Offsetting
these increases are decreases due to lease renegotiations; |
|
|
|
|
increase in dealer performance commissions, mainly attributable to increased
proactive sales activity in our personal calling program. New dealer payments resulting
from the implementation of the new dealer remuneration model have also contributed to the
growth; and |
|
|
|
|
an increase in other goods and services purchased due to the inclusion of a
restructuring provision of A$54 million in fiscal 2006, offset by a decrease in commercial
project payments as described below. |
These increases were partially offset by a decrease in other goods and services expenses such
as usage commissions, commercial project payments and paper purchases and printing costs.
|
|
|
usage commissions decreased by A$8 million mainly as a result of the discontinuation
of commission payments to Keycorp following our acquisition of their Transaction Network
Solutions business during the year. This was partly offset by increased dealer commissions
mainly associated with non-mobile related products, including BigPond® products; |
|
|
|
|
commercial project payments declined from A$59 million in fiscal 2005 to A$34 million
in fiscal 2006 mainly relating to a lower level of deferral and amortisation of its basic
access installation costs. The expense fluctuates in accordance with our installations
over the five prior years. An equivalent amount is amortised into revenue and hence there
is no EBIT impact. Also contributing to the decline was a change in the line usage billing
arrangement for outsourced faxstream costs; and |
|
|
|
|
paper purchase and printing costs decreased from A$159 million in fiscal 2005 to
A$147 million in fiscal 2006 due to savings achieved through printing contract discounts,
together with a reclassification of expenses into cost of goods sold. There was also a
reduction in printing costs relating to superannuation industry contracts after a push
towards the use of online notifications. |
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Property and IT rental expense |
|
|
559 |
|
|
|
572 |
|
|
|
(13 |
) |
|
|
(2.3 |
)% |
Net foreign currency conversion losses/(gains) |
|
|
2 |
|
|
|
(40 |
) |
|
|
42 |
|
|
|
(105.0 |
)% |
Audit fees |
|
|
8 |
|
|
|
7 |
|
|
|
1 |
|
|
|
14.3 |
% |
Service contracts and other agreements |
|
|
1,836 |
|
|
|
1,556 |
|
|
|
280 |
|
|
|
18.0 |
% |
Promotion and advertising |
|
|
356 |
|
|
|
330 |
|
|
|
26 |
|
|
|
7.9 |
% |
General and administration |
|
|
793 |
|
|
|
806 |
|
|
|
(13 |
) |
|
|
(1.6 |
)% |
Other operating expenses |
|
|
544 |
|
|
|
394 |
|
|
|
150 |
|
|
|
38.1 |
% |
Impairment and diminution expenses |
|
|
329 |
|
|
|
190 |
|
|
|
139 |
|
|
|
73.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses |
|
|
4,427 |
|
|
|
3,815 |
|
|
|
612 |
|
|
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our other expenses were A$4,427 million in fiscal 2006 and A$3,815 million in fiscal 2005,
representing a 16.0% increase year on year. A restructuring provision of A$137 million was raised
at year end mainly relating to property rationalisation, cancellation of server leases, the
decommissioning of certain IT platforms and operational
84
and business support systems and related stock obsolescence. Excluding the impact of the provision,
our total other expenses grew by 12.5% to A$4,290 million.
Our other expenses in fiscal 2006 include an additional A$17 million of expenses attributable
to the merger of CSL with New World PCS during the period. In addition, a full twelve months of
expenses have been included in fiscal 2006 for KAZ, PSINet, Universal Publishers, and Telstra
Business Systems (formerly Damovo (Australia) Pty Ltd), which were acquired part way through fiscal
2005.
The movement in the significant categories of other expenses is discussed below.
The largest component within this expense category is service contracts and other agreements.
This expense increased from A$1,556 million in fiscal 2005 to A$1,836 million in fiscal 2006,
mainly driven by the following factors:
|
|
|
increased network maintenance and rehabilitation activity; |
|
|
|
|
costs associated with transformational initiatives; |
|
|
|
|
maintenance of the existing 3G 2100 MHZ network and the operational expenditure
relating to the construction of our new NEXT GTM wireless network; |
|
|
|
|
volume based increases including installations for digital pay television, as well as
increased activations and fault rectifications for BigPond® products due to product
growth; and |
|
|
|
|
a rise in consultancy costs associated with our transformation strategy and increased
market research activity due to a focus on understanding customer needs. |
The above increases are partly offset by savings from the renegotiation of a major vendor
contract, a reduction in mainframe server lease charges as well as the completion of consulting
work from fiscal 2005.
General and administration expenses decreased from A$806 million in fiscal 2005 to A$793
million in fiscal 2006. This was driven by lower IT costs resulting from savings achieved in
repairs and maintenance through continued infrastructure consolidation. The closure of an IT system
and the decommissioning of an IT platform have also contributed to reduced IT related costs.
Discretionary costs such as seminars and
conferences, travel and entertainment costs have decreased in fiscal 2006 as a result of a
strong focus on cost reduction. Legal costs have however risen in the year due to increased
litigation and other legal work, especially around the C7 case (refer to note 27 of the annual
report for further details), operational separation issues and various project initiatives.
Other operating expenses increased from A$394 million to A$544 million during fiscal 2006
primarily due to the provision for restructuring of A$105 million raised in this category.
Excluding the impact of the provision, our other operating expenses increased by A$45 million. This
was largely driven by lower construction activity resulting in higher operations and maintenance
activity being expensed.
Property and IT rental expense decreased by 2.3% to A$559 million during fiscal 2006, mainly
due to reduced PC leasing costs driven through a consolidation of server leases, which has enabled
us to negotiate contracts at a more competitive rate. The decommissioning of an old IT platform and
the consolidation of various vendor contracts have also contributed to the decrease in IT rental
costs.
Our promotion and advertising costs increased by 7.9% to A$356 million during fiscal 2006
mainly due to increased spend during the Commonwealth Games, as well as more marketing activity in
the face of increased competition and efforts to stimulate revenue.
Our impairment and diminution expense has increased from A$190 million in fiscal 2005 to A$329
million in fiscal 2006, mainly attributable to the retirement of a number of IT assets and
increased costs associated with the cancellation of partially completed capital projects after a
review of project direction as part of our transformation strategy. Also included in fiscal 2006
was a provision relating to business restructure of A$32 million. Our inventory write down expense
also rose due to increased write-offs in our construction business, as well as the impact of our
active promotion of mobile handsets, causing slow moving stock to be written off more quickly. This
increase was partly offset by the decrease in our bad and doubtful debts, which decreased from
A$150 million in fiscal 2005 to
85
A$139 million in fiscal 2006. Improved credit management performance has led to lower provision
requirements and write-offs, as well as fewer payments to external debt collection agents.
Net foreign currency conversion costs represents the remaining foreign currency exposure after
taking into account our hedging activities. The loss of A$2 million in fiscal 2006 compared with a
gain of A$40 million in fiscal 2005 is mainly due to an A-IFRS accounting adjustment relating to
the REACH capacity prepayment, which was processed in fiscal 2005.
Share of net (gain)/loss from jointly controlled and associated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Share of net (gain)/loss from jointly controlled and
associated entities |
|
|
(5 |
) |
|
|
94 |
|
|
|
(99 |
) |
|
|
(105.3 |
)% |
Our share of net (gain)/loss from jointly controlled and associated entities includes our
share of both profits and losses from equity accounted investments.
In fiscal 2005, we entered into an agreement with our joint venture entity, REACH, which
included a commitment to fund half of REACHs committed capital expenditure for a period until
2022. Under A-IFRS, this transaction was deemed to be part of our investment in REACH and resulted
in equity accounted losses being recognised in fiscal 2005. REACH contributed A$102 million in
equity accounted losses in fiscal 2005.
The current year equity accounting gain has arisen after improved performance from our joint
venture entity Xantic prior to its sale.
Depreciation and amortisation
Our depreciation and amortisation expense remains a major component of our cost structure,
reflecting our expenditure on capital items.
Depreciation and amortisation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Depreciation |
|
|
3,183 |
|
|
|
2,876 |
|
|
|
307 |
|
|
|
10.7 |
% |
Amortisation |
|
|
904 |
|
|
|
653 |
|
|
|
251 |
|
|
|
38.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization |
|
|
4,087 |
|
|
|
3,529 |
|
|
|
558 |
|
|
|
15.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our depreciation and amortisation expense has risen by 15.8% to A$4,087 million in fiscal
2006. During fiscal 2006, we have undertaken a strategic review of the service lives of our assets
as part of the transformation strategy. As a result, we have accelerated depreciation and
amortisation by A$422 million mainly in relation to adjusting service lives of the CDMA network,
our switching systems, certain business and operational support systems and related software.
Excluding the impact of the accelerated depreciation, our depreciation and amortisation grew
by 3.9% to A$3,665 million, mainly attributable to:
|
|
|
growth in our communications plant asset base, which is consistent with our level of
capital expenditure over recent years; and |
|
|
|
|
consolidation of A$16 million of depreciation and amortisation expenses from our
newly merged entity, CSLNW, along with the inclusion of a full 12 months of depreciation
and amortisation expenses relating to entities acquired in fiscal 2005. |
86
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Finance costs |
|
|
1,002 |
|
|
|
963 |
|
|
|
39 |
|
|
|
4.0 |
% |
Finance income |
|
|
(66 |
) |
|
|
(83 |
) |
|
|
17 |
|
|
|
(20.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance costs |
|
|
936 |
|
|
|
880 |
|
|
|
56 |
|
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our borrowing costs are influenced by:
|
|
|
our debt level; |
|
|
|
|
interest rates; |
|
|
|
|
our debt maturity profile; |
|
|
|
|
our interest payment profile; and |
|
|
|
|
our level of cash assets (affects net debt). |
In fiscal 2006, our net debt levels increased from A$11,771 million to A$13,057 million. This
increase was driven by our cash requirements to fund the payment of the fiscal 2005 final dividend
and the fiscal 2006 interim dividend, both of which included a 14c per share ordinary dividend and
a 6c per share special dividend. This level of dividend payments is higher than in previous periods
and hence, required an increase in our borrowing levels.
The higher level of net debt has driven an increase in our net finance costs despite the fact
that our net cost of debt has declined marginally during the year. The reason for the decline in
average cost of debt is that long term bonds which were issued at historically high interest rates
are maturing and being refinanced at the current, comparatively lower, interest rates.
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
Income Tax Expense |
|
|
1,380 |
|
|
|
1,746 |
|
|
|
(366 |
) |
|
|
(21.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate |
|
|
30.3 |
% |
|
|
28.8 |
% |
|
|
|
|
|
|
1.5 |
% |
In fiscal 2006, our income tax expense decreased by 21.0% to A$1,380 million. The primary
driver of the reduction in tax expense is lower profits for the year compared to fiscal 2005.
In fiscal 2006, the effective tax rate increased to 30.3% compared with the effective tax rate
of 28.8% in fiscal 2005. The higher effective tax rate is due to a change in the taxation
adjustments for items that have different treatments for accounting and taxation purposes, such as
equity accounted FOXTEL losses and the depreciation of certain items of plant and equipment. In
addition, the current year tax expense includes an amount for under provision of tax in the prior
year that is A$34 million higher than the amount included in fiscal 2005 for under provision in
fiscal 2004.
Major subsidiaries financial summaries
Below is a summary of the major reporting lines for our three largest subsidiaries: Sensis,
TelstraClear and CSLNW. This information is in addition to the product analysis previously provided
in the document and is intended to show these businesses as stand alone entities.
87
Sensis financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Sales revenue |
|
|
1,826 |
|
|
|
1,708 |
|
|
|
118 |
|
|
|
6.9 |
% |
Total income |
|
|
1,827 |
|
|
|
1,708 |
|
|
|
119 |
|
|
|
7.0 |
% |
Total expenses |
|
|
(917 |
) |
|
|
(863 |
) |
|
|
(54 |
) |
|
|
6.3 |
% |
EBITDA |
|
|
1,001 |
|
|
|
908 |
|
|
|
92 |
|
|
|
10.2 |
% |
EBIT |
|
|
910 |
|
|
|
845 |
|
|
|
65 |
|
|
|
7.7 |
% |
CAPEX |
|
|
100 |
|
|
|
83 |
|
|
|
17 |
|
|
|
20.5 |
% |
EBITDA margin |
|
|
54.8 |
% |
|
|
53.2 |
% |
|
|
|
|
|
|
1.6 |
% |
|
Amounts included for Sensis represent the contribution included in Telstras consolidated result. |
We are a leading provider of advertising and search services through our advertising business
Sensis and its respective subsidiaries. Sensis provides advertising and local search solutions
through a print, online, voice, wireless and satellite navigation network.
The 6.9% increase in sales revenue to A$1,826 million during fiscal 2006 has primarily been
driven by advertising and directories revenue as described in the Advertising and Directories
product discussion. The growth in this area has been driven by good performance in White Pages and
Yellow print and online. The inclusion of acquired entities in fiscal 2006 has also contributed to
growth in the current year.
Operating expenses increased by 6.3% due mainly to the following:
|
|
|
Labour expenses grew by A$18 million during fiscal 2006 due to organic growth of the
workforce, redundancy costs and a A$10 million write back of a deferred expense provision. |
|
|
|
|
Cost of goods sold increased by A$14 million after the inclusion of a full 12 months
of results from Universal Publishers acquired mid way through fiscal 2005; and |
|
|
|
|
Increased depreciation and amortisation expense by A$27 million after commissioning
new software, the inclusion of amortisation for Universal Publishers and Adstream and the
revision of certain software service lives as part of our transformation strategy. |
Cost management and growing yields and margins in print and online led to underlying EBITDA
growth of 10.2% in fiscal 2006.
CSL New World Mobility Group financial summary
In February 2001, we acquired a 60% ownership interest in CSL. We paid A$3,085 million,
including incidental acquisition costs, to acquire this controlling interest. In June 2002, we
acquired the remaining 40% ownership interest in CSL as part of our redemption of a convertible
note from PCCW. In March 2006, we merged the CSL entity with New World PCS to form CSLNW. This
transaction involved us exchanging a 23.6% share in CSL and receiving a controlling interest in the
merged entity of 76.4%.
CSLNW operates in the highly competitive Hong Kong mobile market and has delivered revenue
growth in fiscal 2006 despite a difficult operating environment, characterised by significant
market competition and local voice price erosion. CSL and New World PCS have retained their own
brandings as they target different market segments. CSL remains Hong Kongs premium provider of
mobile voice and data services while New World PCS targets value conscious customers with a low
cost business model. The merged entity provides a much broader customer base for growth.
88
CSL New World financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006 |
|
2005 |
|
Change |
|
|
A$m |
|
A$m |
|
% |
|
HK$m |
|
HK$m |
|
% |
Total income |
|
|
833 |
|
|
|
735 |
|
|
|
13.3 |
% |
|
|
4,831 |
|
|
|
4,308 |
|
|
|
12.1 |
% |
Total expense |
|
|
(757 |
) |
|
|
(648 |
) |
|
|
16.8 |
% |
|
|
(4,145 |
) |
|
|
(3,583 |
) |
|
|
15.7 |
% |
EBITDA |
|
|
240 |
|
|
|
217 |
|
|
|
10.6 |
% |
|
|
1,390 |
|
|
|
1,272 |
|
|
|
9.3 |
% |
EBIT |
|
|
77 |
|
|
|
87 |
|
|
|
(11.5 |
)% |
|
|
686 |
|
|
|
725 |
|
|
|
(5.4 |
)% |
CAPEX |
|
|
98 |
|
|
|
128 |
|
|
|
(23.4 |
)% |
|
|
568 |
|
|
|
755 |
|
|
|
(24.8 |
)% |
EBITDA margin |
|
|
28.8 |
% |
|
|
29.5 |
% |
|
|
(0.7 |
)% |
|
|
28.8 |
% |
|
|
29.5 |
% |
|
|
(0.7 |
)% |
|
|
|
Note: Amounts presented in HK$ have been prepared in accordance with A-IFRS. |
Amounts presented in A$ represent amounts included in our consolidated result including additional
depreciation and amortisation arising from consolidation fair value adjustments.
Amounts include three months of New World PCS in fiscal 2006.
Total income increased by 12.1% or HK$523 million in fiscal 2006. The majority of the increase
resulted from the inclusion of the New World PCS business from March 2006. This resulted in an 8.7%
increase in total income year on year. The remaining revenue growth was driven by rising data,
international voice, and prepaid revenues offset by a decline in local voice revenues after
sustained pressure on prices. Mobile handset revenue also increased after recent handset
promotions.
Total operating expenses increased by 15.7% mainly due to the following:
|
|
|
the incorporation of costs after the merger with New World PCS; |
|
|
|
|
increased subsidies as part of heightened promotional activity to drive sales; and |
|
|
|
|
higher offshore outpayments associated with higher international voice revenues. |
Depreciation and amortisation expense increased as CSLNW is now carrying higher network assets
due to the roll out of its 3G network. EBITDA increased by 9.3% or HK$118 million while EBIT
decreased by 5.4% or HK$39 million due to the impact of higher depreciation.
CSLNW continues to enhance its 3G network and promote 3G services through the deployment of
pioneering technology and innovative applications. In February 2006, we announced the launch of
Hong Kongs first 3G Mobile TV service enabling customers to enjoy a variety of news and
infotainment stations.
TelstraClear financial summary
TelstraClear, the second largest full service carrier in New Zealand, has been operating in
its current form since December 2001. In December 2001, we merged our 50% owned joint venture,
TelstraSaturn and CLEAR Communications, to form TelstraClear. As part of this transaction, we
acquired an additional 8.4% interest in the merged entity and began the consolidation of 58.4% of
TelstraClears results. In April 2003, we acquired the remaining 41.6% interest in TelstraClear and
consolidated 100% of TelstraClears results from that date.
89
TelstraClear financial summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006 |
|
2005 |
|
Change |
|
|
A$m |
|
A$m |
|
% |
|
HK$m |
|
HK$m |
|
% |
Total income |
|
|
620 |
|
|
|
625 |
|
|
|
(0.8 |
)% |
|
|
693 |
|
|
|
676 |
|
|
|
2.5 |
% |
Total expense |
|
|
(645 |
) |
|
|
(648 |
) |
|
|
(0.5 |
)% |
|
|
(713 |
) |
|
|
(695 |
) |
|
|
2.6 |
% |
EBITDA |
|
|
111 |
|
|
|
112 |
|
|
|
(0.9 |
)% |
|
|
124 |
|
|
|
122 |
|
|
|
1.6 |
% |
EBIT |
|
|
(25 |
) |
|
|
(24 |
) |
|
|
4.2 |
% |
|
|
(20 |
) |
|
|
(19 |
) |
|
|
5.3 |
% |
CAPEX |
|
|
126 |
|
|
|
115 |
|
|
|
9.6 |
% |
|
|
141 |
|
|
|
125 |
|
|
|
12.8 |
% |
EBITDA margin |
|
|
17.8 |
% |
|
|
18.0 |
% |
|
|
(0.2 |
)% |
|
|
17.9 |
% |
|
|
18.0 |
% |
|
|
(0.1 |
)% |
|
|
|
Note: Amounts presented in NZ$ represent the New Zealand business excluding intercompany
transactions and have been prepared in accordance with A-IFRS. |
Amounts presented in A$ represent amounts included in our consolidated result and include the
Australian dollar value of adjustments to consolidate TelstraClear into the Group result.
In fiscal 2006, revenue increased by 2.5% to NZ$693 million for the following reasons:
|
|
|
the full year impact of the national HomePlan offering in the consumer segment; and |
|
|
|
|
the current year included the first whole year of Sytec Resources Limited and its
controlled entities (Sytec) revenue after its acquisition in November 2004. |
These increases were offset by:
|
|
|
access and call revenue declines in the wholesale and small to medium enterprise
segments due to price erosion caused by competition in the market. This was moderated by
growth in our customer bases in those segments; and |
|
|
|
|
Internet revenues have declined, particularly in the second half, as reduced pricing
plans have impacted yield in the consumer segment. |
Total operating expense increased by 2.6% to NZ$713 million due to the following:
|
|
|
an increase in outpayments due to higher revenue; and |
|
|
|
|
a small increase in labour expenses driven by the inclusion of a full year of Sytec costs. |
TelstraClears acquisition of local ICT service provider, Sytec in November 2004 and its
controlled entities was an important step to leverage TelstraClears existing service capability
and provided growth and opportunities in this segment in fiscal 2006. New Zealand is a
strategically important market for our trans-Tasman customers and the combination of TelstraClear
and Telstra enables us to provide customers on both sides of the Tasman with seamless communication
and IT solutions.
REACH
REACH is primarily focused on meeting the increasing needs of its shareholders, Telstra and
PCCW, as well as third party voice and satellite services. We are the premier provider of
international voice and satellite services in Asia via the operation and management of the most
diverse high-speed network in the region.
In February 2001, we sold our global wholesale business, including certain offshore controlled
entities, to REACH in exchange for 50% ownership in REACH.
Since the original transaction, REACH has been operating in a difficult environment. Prices
for international voice and data carriage have fallen, but growth in usage has not been sufficient
to compensate for the loss in revenue caused by the price reductions. Consequently, we have
previously been required to write down our investment, reducing the carrying value to nil. Equity
accounting was suspended at that date and remains suspended. As a result, our share of net
profits/(losses) in relation to REACH are not booked in the Telstra Group results.
90
Fiscal 2006 operational performance of the business continued to track according to plan with
a focus on consolidation of a new operating model. Data volumes continue to grow strongly and voice
business volumes are stable. REACH has also recently signed a memorandum of understanding (MOU)
with a
consortium of entities to plan and develop a proposal to build an international undersea cable
linking South East Asia with the United States of America. In addition, in October 2005, REACH
announced the launch of the first stage of its international IP enabled Next Generation Network.
Cash flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Receipts from customers |
|
|
25,229 |
|
|
|
24,526 |
|
|
|
703 |
|
|
|
2.9 |
% |
Payments to suppliers/employees |
|
|
(14,785 |
) |
|
|
(13,848 |
) |
|
|
(937 |
) |
|
|
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash generated by operations |
|
|
10,444 |
|
|
|
10,678 |
|
|
|
(234 |
) |
|
|
(2.2 |
)% |
Income tax paid |
|
|
(1,882 |
) |
|
|
(1,718 |
) |
|
|
(164 |
) |
|
|
9.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities(1) |
|
|
8,562 |
|
|
|
8,960 |
|
|
|
(398 |
) |
|
|
(4.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
used in investing activities(1) (see table |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
below) |
|
|
(4,012 |
) |
|
|
(3,766 |
) |
|
|
(246 |
) |
|
|
6.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flow less investing cash flow(1) |
|
|
4,550 |
|
|
|
5,194 |
|
|
|
(644 |
) |
|
|
(12.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movements in borrowings/finance leases |
|
|
493 |
|
|
|
1,393 |
|
|
|
(900 |
) |
|
|
(64.6 |
)% |
Employee share loans |
|
|
24 |
|
|
|
19 |
|
|
|
5 |
|
|
|
26.3 |
% |
Dividends paid |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
|
|
(846 |
) |
|
|
20.5 |
% |
Share buy-back |
|
|
|
|
|
|
(756 |
) |
|
|
756 |
|
|
|
|
|
Finance costs paid |
|
|
(940 |
) |
|
|
(879 |
) |
|
|
(61 |
) |
|
|
6.9 |
% |
Purchase of shares for employee share plans |
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities(1) |
|
|
(5,399 |
) |
|
|
(4,347 |
) |
|
|
(1,052 |
) |
|
|
24.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash |
|
|
(849 |
) |
|
|
847 |
|
|
|
(1,696 |
) |
|
|
(200.2 |
)% |
|
|
|
(1) |
|
Due to the implementation of A-IFRS, we have revised the presentation of the cash
flow summary and our statutory reported statement of cash flows. This has resulted in some
reclassifications between our key cash flow totals (net cash provided by operating
activities, net cash used in investing activities and net cash used in financing
activities). Consequently, the 2005 comparative totals disclosed for these lines have
changed from the amounts disclosed as at 30 June 2005. The most significant change is the
reclassification of our finance costs paid from operating into financing, and the
reclassification of interest received from operating into investing. |
Net cash provided by operating activities
Our primary source of liquidity is cash generated from our operations. Net cash provided by
operating activities includes receipts from trade and other receivables, payments to suppliers and
employees, income tax paid, and GST received, paid and remitted to the Australian Taxation Office.
During fiscal 2006, net cash provided by operating activities decreased by 4.4% to A$8,562
million. Higher revenue and lower working capital items were offset by higher expense payments. The
key drivers of our increased revenue were our mobiles and broadband products. Our higher expense
payments were mainly due to increased labour costs, in particular redundancy payments, our variable
operating expenditure items that increase with revenue and our service contracts and agreements
expenditure.
In addition, our cash paid to the Australian Taxation Office was A$164 million higher in
fiscal 2006 than in fiscal 2005 due to a low tax instalment rate requiring us to make a larger
final tax payment in respect of fiscal 2005. The final payment in respect of fiscal 2005 was made
in fiscal 2006.
91
Net cash used in investing activities
Net cash used in investing activities represents amounts paid for capital assets and
investments, offset by cash receipts from the sale of capital assets and investments, and other
cash receipts from our investing activities.
Net cash used in investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Switching |
|
|
452 |
|
|
|
338 |
|
|
|
114 |
|
|
|
33.7 |
% |
Transmission |
|
|
426 |
|
|
|
358 |
|
|
|
68 |
|
|
|
19.0 |
% |
Customer access |
|
|
800 |
|
|
|
870 |
|
|
|
(70 |
) |
|
|
(8.0 |
)% |
Mobile telecommunications networks |
|
|
1,043 |
|
|
|
497 |
|
|
|
546 |
|
|
|
109.9 |
% |
International assets |
|
|
338 |
|
|
|
279 |
|
|
|
59 |
|
|
|
21.1 |
% |
Capitalised software |
|
|
556 |
|
|
|
523 |
|
|
|
33 |
|
|
|
6.3 |
% |
Specialised network functions |
|
|
237 |
|
|
|
291 |
|
|
|
(54 |
) |
|
|
(18.6 |
)% |
Other |
|
|
340 |
|
|
|
377 |
|
|
|
(37 |
) |
|
|
(9.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating capital expenditure |
|
|
4,192 |
|
|
|
3,533 |
|
|
|
659 |
|
|
|
18.7 |
% |
Other intangibles |
|
|
63 |
|
|
|
6 |
|
|
|
57 |
|
|
|
950.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure before investments |
|
|
4,255 |
|
|
|
3,539 |
|
|
|
716 |
|
|
|
20.2 |
% |
Add: investment expenditure |
|
|
48 |
|
|
|
590 |
|
|
|
(542 |
) |
|
|
(91.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure and investments |
|
|
4,303 |
|
|
|
4,129 |
|
|
|
174 |
|
|
|
4.2 |
% |
Sale of capital equipment, investments and other proceeds |
|
|
(139 |
) |
|
|
(244 |
) |
|
|
105 |
|
|
|
(43.0 |
)% |
Proceeds from other investments |
|
|
(86 |
) |
|
|
(76 |
) |
|
|
(10 |
) |
|
|
13.2 |
% |
Repayment of loans to jointly controlled and associated
entities |
|
|
|
|
|
|
37 |
|
|
|
(37 |
) |
|
|
|
|
Interest received |
|
|
(66 |
) |
|
|
(78 |
) |
|
|
12 |
|
|
|
(15.4 |
)% |
Dividend received |
|
|
|
|
|
|
(2 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
4,012 |
|
|
|
3,766 |
|
|
|
246 |
|
|
|
6.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2006, our expenditure on operating capital, intangibles and investments amounted to
A$4,303 million, an increase of 4.2% on the previous fiscal year. This growth was driven by our
next generation network transformation program, which is part of our ongoing strategy of
transforming the business.
The increases in our operating capital expenditure were across most capital expenditure
categories, with the exception of minor decreases in customer access and specialised network
functions. The drivers of our operating capital expenditure for fiscal 2006 were as follows:
|
|
|
higher domestic switching as a result of our fixed line transformation program, which
involves building a new IP core and the next generation ethernet transmission network.
Further expenditure was also incurred to cater for increasing demand for broadband ADSL
and specialised wideband services; |
|
|
|
|
higher transmission expenditure to support the new NEXT GTM wireless
network and to provide capacity to support increased broadband demand for digital
subscriber line (DSL) technology; |
|
|
|
|
lower expenditure on customer access due to the achievement of operational
efficiencies and the use of new IP ADSL technology at a lower unit cost; |
|
|
|
|
significantly higher expenditure on our mobile networks, primarily due to two items:
payments to Hutchison amounting to A$312 million for the purchase of a 50% share of its 3G
2100 network, acquired in fiscal 2005 with payments deferred until fiscal 2006 and fiscal
2007; and costs incurred in relation to the roll out of our NEXT GTM wireless
network. Most of the expenditure incurred on the NEXT GTM wireless network
relates to |
92
|
|
|
installing and updating our base stations to enable them to carry the new network. During fiscal
2006 we installed 3,500 base stations out of an intended long term program in excess of 5,000
base stations; |
|
|
|
|
higher expenditure on international assets, predominantly related to the purchase of
additional international transmission capacity to facilitate increased Internet traffic
with the United States; |
|
|
|
|
marginally higher expenditure on capitalised software as we embark on a three to five
year program of transformation projects. In this early stage of the program we have been
through a process of rationalising and streamlining our software applications; and |
|
|
|
|
lower expenditure on specialised network functions due to the postponement of a
number of projects as we undergo a review to ensure that each project is aligned to our
transformation initiatives. The expenditure we incurred during the year was mainly in
relation to improving the reliability and robustness of the network and on improving the
IP telephony network infrastructure platform. |
Our expenditure on investments and other intangibles amounted to A$111 million in fiscal 2006,
compared with A$596 million in fiscal 2005. Investment expenditure was significantly higher in
fiscal 2005 predominantly due to our acquisitions of KAZ and PSINet.
In fiscal 2006 our cash payments for investments and intangibles resulted from the following
items:
|
|
|
A$56 million for the acquisition of the TNS business assets and customer bases from
our associated entity Keycorp Limited; |
|
|
|
|
A$21 million for the acquisition of a further 25% of the issued share capital of
Adstream Australia Limited, to increase our shareholding to 58% making Adstream a
controlled entity; |
|
|
|
|
A$5 million cash contribution to our joint venture entity FOXTEL; and |
|
|
|
|
other minor investments. |
In fiscal 2005, our cash payments for investments resulted from the following items:
|
|
|
A$340 million for the acquisition of 100% of the issued share capital of KAZ; |
|
|
|
|
A$124 million for the acquisition of 100% of the issued share capital of PSINet; |
|
|
|
|
A$66 million for the acquisition of 100% of the issued share capital of ESA Holding
Pty Ltd and its controlled entity Damovo (Australia) Pty Ltd (now known as Telstra
Business Systems), and Damovo HK Limited; and |
|
|
|
|
A$46 million for the acquisition of 100% of the issued share capital of Universal
Publishers. |
Our proceeds from the sale of capital equipment, sale of investments and other proceeds
amounted to A$139 million in fiscal 2006, compared with A$244 million in fiscal 2005.
Our cash proceeds from asset sales in fiscal 2006 included the following:
|
|
|
the sale of our share of Xantic B.V. of A$89 million; and |
|
|
|
|
sale of property, plant and equipment amounting to A$50 million. |
Our cash proceeds from asset sales in fiscal 2005 included the following:
|
|
|
the sale of our 1.7% shareholding in Intelsat Limited for A$69 million; |
|
|
|
|
proceeds from sale of property, plant and equipment of A$68 million; and |
|
|
|
|
the sale of our 5.3% shareholding in Infonet Services Corporation for A$65 million. |
During fiscal 2006 and fiscal 2005 we also received cash from other investment transactions. These
included:
|
|
|
receipt of A$42 million as part of the settlement of the merger transaction with New
World PCS in fiscal 2006; |
93
|
|
|
receipt of A$18 million from a share buy-back performed by Xantic prior to our
disposal of our interest in Xantic in fiscal 2006; |
|
|
|
|
receipt of A$16 million from our associated entity Keycorp, due to a return of
capital in fiscal 2006; and |
|
|
|
|
the redemption of the converting note issued by PCCW with a cash consideration of
A$76 million in fiscal 2005. |
Our capital expenditure in fiscal 2007 is expected to be between A$5,400 million and A$5,700
million. This is significantly higher than our traditional expenditure levels which is largely due
to transformational expenditure, including further construction of our new NEXT GTM
wireless network, and upgrading our customer access network by delivering a new fixed line IP
core in the 5 major capital cities.
We also expect to incur future capital expenditure in the following areas:
|
|
|
meeting ongoing customer demand for existing products and services, while ensuring
service levels are improved; |
|
|
|
|
developing new products and services to meet the changing needs of our customers; |
|
|
|
|
asset lifecycle management; |
|
|
|
|
further development of our broadband and online infrastructure to meet future growth; |
|
|
|
|
providing telecommunications services to rural and remote areas; and |
|
|
|
|
internal business support infrastructure to ensure continued productivity
improvements, operational efficiencies and customer relationship process improvements. |
We believe our cash flow from operating activities and available borrowings will be sufficient
to meet our anticipated capital expenditure and investment requirements.
Net cash used in financing activities
Our net cash used in financing activities increased in fiscal 2006 by 24.2%.
A significant portion of our net financing cash outflows related to the payment of dividends
and, in fiscal 2005, a share buy-back. The amount paid to shareholders in fiscal 2006 was largely
consistent with the combined amount paid by way of dividends and the share buy-back in fiscal 2005.
In fiscal 2006, shareholders received the payment of two special dividends of A$0.06 each per
share, amounting to A$1,492 million, one was the final dividend for fiscal 2005 and the other was
the interim dividend for fiscal 2006.
We also receive and repay significant amounts in relation to our borrowings to fund our
working capital requirements and other business needs.
The net increase in cash used in financing activities is due to higher dividends and a share
buy-back in fiscal 2005, partially offset by a higher net level of proceeds from our debt issuances
in fiscal 2005. Our net proceeds from debt were high during fiscal 2005 due to the refinancing of
debt which matured during the year and our need to increase our level of liquidity to fund working
capital.
During the year, we received A$8,641 million in borrowed funds and repaid A$8,141 million. In
fiscal 2005, we received A$7,416 million in borrowed funds and repaid A$6,007 million. This
resulted in a net increase in cash of A$1,909 million over the two-year period, which assisted in
funding the outflows from
the payment of dividends and finance costs.
94
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June |
|
|
2006 |
|
2005 |
|
Change |
|
2006/2005 |
|
|
(In A$ millions) |
|
(% change) |
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
689 |
|
|
|
1,548 |
|
|
|
(859 |
) |
|
|
(55.5 |
)% |
Other current assets |
|
|
4,190 |
|
|
|
4,034 |
|
|
|
156 |
|
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
4,879 |
|
|
|
5,582 |
|
|
|
(703 |
) |
|
|
(12.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
23,622 |
|
|
|
22,891 |
|
|
|
731 |
|
|
|
3.2 |
% |
Intangibles goodwill |
|
|
2,073 |
|
|
|
2,037 |
|
|
|
36 |
|
|
|
1.8 |
% |
Intangibles other |
|
|
4,050 |
|
|
|
4,292 |
|
|
|
(242 |
) |
|
|
(5.6 |
)% |
Other non current assets |
|
|
1,551 |
|
|
|
409 |
|
|
|
1,142 |
|
|
|
279.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non current assets |
|
|
31,296 |
|
|
|
29,629 |
|
|
|
1,667 |
|
|
|
5.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
36,175 |
|
|
|
35,211 |
|
|
|
964 |
|
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
1,969 |
|
|
|
1,507 |
|
|
|
462 |
|
|
|
30.7 |
% |
Other current liabilities |
|
|
5,917 |
|
|
|
4,905 |
|
|
|
1,012 |
|
|
|
20.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
7,886 |
|
|
|
6,412 |
|
|
|
1,474 |
|
|
|
23.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
11,409 |
|
|
|
10,941 |
|
|
|
468 |
|
|
|
4.3 |
% |
Other non current liabilities |
|
|
4,048 |
|
|
|
4,200 |
|
|
|
(152 |
) |
|
|
(3.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
15,457 |
|
|
|
15,141 |
|
|
|
316 |
|
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
23,343 |
|
|
|
21,553 |
|
|
|
1,790 |
|
|
|
8.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
12,832 |
|
|
|
13,658 |
|
|
|
(826 |
) |
|
|
(6.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
12,586 |
|
|
|
13,656 |
|
|
|
(1,070 |
) |
|
|
(7.8 |
)% |
Minority interests |
|
|
246 |
|
|
|
2 |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
12,832 |
|
|
|
13,658 |
|
|
|
(826 |
) |
|
|
(6.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We continue to maintain a strong financial position with net assets of A$12,832 million as at
30 June 2006 and A$13,658 million as at 30 June 2005. The decrease in net assets in fiscal 2006 of
A$826 million was due to an increase in total liabilities of A$1,790 million, offset by higher
total assets of A$964 million.
The movement in total assets of A$964 million was primarily due to:
|
|
|
cash assets decreased by A$859 million partially due to the proceeds on our EUR1
billion bond issue being received just prior to 30 June 2005, which was subsequently
invested in the short term money market. The current level of cash is more reflective of
our normal cash holdings; |
|
|
|
|
our property, plant and equipment increased by A$731 million, largely due to high
capital expenditure on our network and our new fixed line IP core driven by our next
generation network transformation projects; |
|
|
|
|
other intangibles decreased by A$242 million, due mainly to the amortisation of our
software assets exceeding expenditure on new software during the year as we rationalised
and streamlined
many of our software applications as part of our business transformation; and |
95
|
|
|
other non current assets increased by A$1,142 million mainly due to an increase in
the actuarially determined value of our defined benefit pension asset. |
The movement in total liabilities of A$1,790 million was primarily due to:
|
|
|
total borrowings, current and non-current, increased by A$930 million. This increase
reflected our need to increase our level of liquidity to fund our working capital and
business requirements, along with two special dividend payments made during the fiscal
year; |
|
|
|
|
other current liabilities increased by A$1,012 million primarily due to an increase
in our trade creditors and accruals, reflecting the large amount of activity, in
particular construction activity, undertaken close to the end of the fiscal year. In
addition, current and non-current liabilities include a provision for restructuring and
redundancy expenses planned to be incurred as part of our transformation of the business
mainly over the next two years; and |
|
|
|
|
other non-current liabilities decreased by A$152 million primarily due to a change in
our cross currency swap position in line with currency movements and our hedging
requirements. |
Liquidity and capital resources
Capitalisation
|
|
|
|
|
|
|
|
|
|
|
As at 30 June 2006 |
|
|
A$ million |
|
US$ million(1) |
Cash and cash equivalents |
|
|
689 |
|
|
|
511 |
|
|
|
|
|
|
|
|
|
|
Short term debt(2)(3) |
|
|
|
|
|
|
|
|
Bank loans |
|
|
111 |
|
|
|
82 |
|
Bills of exchange and commercial paper |
|
|
1,457 |
|
|
|
1,082 |
|
Other loans |
|
|
394 |
|
|
|
293 |
|
Finance leases |
|
|
7 |
|
|
|
5 |
|
Derivative financial instruments (net)(4) |
|
|
(9 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
Short term debt |
|
|
1,960 |
|
|
|
1,455 |
|
|
|
|
|
|
|
|
|
|
Long term debt(3) |
|
|
|
|
|
|
|
|
Telstra bonds |
|
|
2,613 |
|
|
|
1,939 |
|
Other loans (unsecured) |
|
|
8,748 |
|
|
|
6,494 |
|
Finance leases |
|
|
48 |
|
|
|
36 |
|
Derivative financial instruments (net)(4) |
|
|
377 |
|
|
|
280 |
|
|
|
|
|
|
|
|
|
|
Total long term debt |
|
|
11,786 |
|
|
|
8,749 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Share capital |
|
|
5,569 |
|
|
|
4,134 |
|
Reserves |
|
|
(160 |
) |
|
|
(119 |
) |
Retained profits(5) |
|
|
7,177 |
|
|
|
5,327 |
|
Minority interests |
|
|
246 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
12,832 |
|
|
|
9,525 |
|
|
|
|
|
|
|
|
|
|
Total capitalisation(6) |
|
|
26,578 |
|
|
|
19,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Translated at the noon buying rate on 30 June 2006 of A$1.00 =
US$0.7423.
|
|
(2) |
|
Includes the current portion of long term debt. |
|
(3) |
|
No borrowings are guaranteed by third parties. All of our significant borrowings were
unsecured, except for finance leases which are secured, as the rights to the leased assets revert
to the lessor in the event of default. |
96
(4) |
|
The presentation of our short term and long term debt is consistent with note 18 to our
consolidated financial statements, except for derivative financial instruments which are separately
disclosed in note 16 and note 20 respectively. |
|
(5) |
|
On 10 August 2006, we declared a fully franked final dividend of A$1,739 million, payable on 22
September 2006. This dividend was not deducted from retained profits as at 30 June 2006 and was
disclosed as a post balance date event, refer to note 34 to our consolidated financial statements
for further detail. |
|
(6) |
|
Total capitalisation consists of short term debt, long term debt and equity, including minority
interests. |
Cash and cash equivalents as at 30 June 2006 was A$689 million compared with A$1,548 million
as at 30 June 2005. Cash and cash equivalents are predominantly held in Australian dollars. As at
30 June 2006, our total debt (including derivative financial instruments) was A$13,746 million
compared with A$13,319 million as at 30 June 2005. After deducting cash and cash equivalents, net
debt as at 30 June 2006 was A$13,057 million compared with A$11,771 million as at 30 June 2005. In
fiscal 2006, the net debt position increased largely due to higher debt holdings to fund our
working capital requirements. We believe our balance sheet continues to have strong capital
settings.
The majority of our total debt consisted of foreign currency denominated borrowings sourced
from a variety of foreign currency markets. These borrowings are generally swapped into Australian
dollars at draw down through to maturity to generate Australian dollar obligations. Our current
borrowings (including derivative financial instruments) that mature in less than 12 months amount
to A$1,960 million maturing within the fiscal 2007 year, representing approximately 14.3% of our
total debt.
As at 30 June 2006, we had access to A$625 million, HK$51 million and US$200 million of
committed standby bank lines. These comprise bilateral arrangements of approximately one year
duration with ten major banks that fall due for renewal at various times throughout the year.
We have four commercial paper programs with a total nominal borrowing capacity of A$2 billion,
US$4 billion, EUR4 billion and NZ$0.5 billion (the New Zealand dollar facility is technically
unlimited, but we estimate a practical limit of around NZ$0.5 billion based on the efficient
capacity of the New Zealand market). In each case, we issue commercial paper through dealers on a
quotation (non underwritten) basis. Our commercial paper facilities are not committed and do not
provide guaranteed access to funds. As at 30 June 2006, we had borrowed A$1,123 million under our
Australian dollar facility and NZ$406 million under our New Zealand dollar facility. We had no
borrowings under our United States dollar and Euro commercial paper facilities at year end.
Generally, our facilities are operational unless we default on any terms applicable under the
relevant agreements or we become insolvent.
A key objective with our short term facilities is to provide ready and efficient access to
substantial borrowings capacity in order to ensure that we can comfortably meet any reasonable
unforeseen demands for funding. We have established commercial paper programs as outlined above
that provide diverse and reliable sources of funding. The maturity of our total debt portfolio is
generally structured in consideration of expected cash flows from business investments and
activities.
Our current liabilities are typically in excess of our current assets, as is common with most
incumbent telecommunications companies. We had negative working capital of A$3,007 million as at 30
June 2006 compared with A$830 million as at 30 June 2005. We define our working capital as the
difference between current assets and current liabilities. We believe that our negative working
capital position does not create a liquidity risk because we can delay the timing of discretionary
capital expenditure should cash inflows from our diverse customer base diminish at any point in
time. In addition, our commercial paper programs and standby bank lines provide us with readily
available sources of liquidity at short notice when the need arises. As a result, these
contributing factors and our existing working capital enables us to meet our present and future
expenditure obligations, including the potential realisation of any contingencies, as required.
In fiscal 2006, the increase in our negative working capital position to A$3,007 million was
mainly due to a decrease in our cash and cash equivalents, together with an increase in our trade
and other payables. The decrease in cash and cash equivalents was mainly due to a higher cash
position at 30 June 2005 after the receipt of a substantial Euro borrowing late in June 2005, which
generated a one off large cash surplus. This borrowing just prior to year
97
end was not repeated in fiscal 2006. The increase in trade and other payables reflects additional
accrued expenditure associated with the roll out of the NEXT GTM wireless network.
In fiscal 2006, net cash provided by operating activities amounted to A$8,562 million compared
with A$8,960 million in fiscal 2005. Operational cash flows continue to be our primary source of
liquidity and generate funding for capital expenditure, investment acquisitions and dividend
payments to our shareholders. Our operating cash flows continue to remain strong and relatively
consistent each month. The major spikes in cash flows across our business arise from significant
receipts such as asset and investment sales, and from significant outgoings such as the acquisition
of large assets and investments, dividend payments and tax instalments. In general, we use our cash
generated and other liquid assets, as well as our short term debt, to cover our major outgoings.
Refer to Operating and Financial Review and Prospects Cash flow for further discussion.
The majority of our funding is generated by the operations of Telstra Corporation Limited, the
parent entity in the group. As a result, we are not reliant on dividends from controlled entities
for our liquidity needs. We are not aware of any restrictions on the payment of dividends apart
from those specified in the Corporations Act 2001, common law requirements or through local
jurisdictional obligations.
During fiscal 2006, we undertook several new long term private placement borrowings that
included:
|
|
|
a JPY5 billion loan that will mature in September 2013; |
|
|
|
|
JPY1 billion, JPY4 billion and JPY3 billion note that will mature in November 2012,
November 2015 and June 2016 respectively; and |
|
|
|
|
a USD$20 million and USD$150 million note that will mature in December 2011 and December 2015
respectively. |
During fiscal 2005, we undertook several new long term borrowings that included:
|
|
|
a EUR500 million ten year bond that will mature in July 2014; |
|
|
|
|
two A$500 million domestic bonds of eight and ten years duration that will mature in November
2013 and April 2015 respectively; |
|
|
|
|
two NZD$100 million bonds of seven and ten years that will mature in November 2011 and
November 2014 respectively; |
|
|
|
|
a CHF300 million eight year bond that will mature in April 2013; and |
|
|
|
|
a EUR1,000 million bond, comprising a EUR500 million tranche that will mature in June 2010
and a further EUR500 million tranche that will mature in July 2015. |
In future reporting periods, we believe capital expenditure will continue to be financed
largely from our cash flow from operations. Maturing long term debt of A$401 million in fiscal 2007
is expected to be principally refinanced by new debt. While borrowings will increase in fiscal 2007
to fund our working capital requirements, including dividend payments, we continue to be confident
of remaining within our financial parameters.
Our borrowings profile is managed centrally by our treasury department, which is part of our
Finance and Administration business unit. For additional information regarding our borrowings
profile, refer to note 18 to our consolidated financial statements.
Our activities result in exposure to a number of financial risks including market risk
(interest rate risk, foreign currency risk and other price risk), credit risk, operational risk and
liquidity risk. Our overall risk management program seeks to mitigate these risks and reduce
overall volatility on our financial performance. We enter into derivative transactions in
accordance with Board approved policies to manage our exposure to market risks and volatility of
financial outcomes that arise as part of our normal business operations. These derivative
instruments create an obligation or right that effectively transfers one or more of the risks
associated with an underlying financial instrument, asset or obligation.
We maintain a portfolio of derivative contracts to manage risks that arise from our business.
The derivatives are principally forward foreign currency contracts, interest rate swaps and cross
currency swaps. Under A-IFRS, these
98
instruments are consolidated on our balance sheet. As at 30 June 2006, our net derivative financial
instruments resulted in a net liability of A$368 million recorded in our consolidated financial
statements.
Our derivative instruments are managed centrally by our treasury department, which is part of
our Finance and Administration business unit. For additional information regarding the nature,
business purposes and importance of our derivative instruments, see Quantitative and qualitative
disclosures about market risk and note 35 to our consolidated financial statements.
Our credit ratings by the three major rating agencies are currently:
|
|
|
|
|
|
|
|
|
Long Term |
|
Short Term |
|
Outlook |
Standard and Poors
|
|
A
|
|
A1
|
|
negative |
Moodys
|
|
A2
|
|
P1
|
|
negative |
Fitch
|
|
A+
|
|
F1
|
|
negative |
During fiscal 2006, Standard and Poors, and Moodys Investors Service both adjusted their long
term ratings down by one grade to reflect the decline in PSTN revenues, the uncertain regulatory
outlook and the repositioning of target key financial parameters during the financial year
(detailed below). All three rating agencies have Telstra on a negative outlook. Ratings are not a
recommendation to purchase, hold or sell securities, and may be changed, superseded or withdrawn at
any time.
We continually review our capital structure and associated financial flexibility in light of
our environment, overall operating conditions and future outlook. Factors considered include:
|
|
|
the strength of our operating cash flows; |
|
|
|
|
requirements for capital expenditure and investments; |
|
|
|
|
access to funding from the capital markets; |
|
|
|
|
our gearing and associated credit rating; and |
|
|
|
|
the regulatory environment and its potential impact. |
The Board has approved a set of target levels for selected key financial parameters, which
indicate comfort zones that we consider consistent with the financial flexibility required in light
of our overall business and objectives. These parameters are continually reviewed and subject to
change at any point. The parameters were last changed at our strategic review announcement on 15
November 2005 and are detailed below:
|
|
|
debt servicing of 1.7 to 2.1 times, representing our net debt divided by earnings before
interest, income tax expense, depreciation and amortisation (EBITDA); |
|
|
|
|
net debt gearing of 55.0% to 75.0%, representing net debt divided by total capitalisation
(net debt plus equity); and |
|
|
|
|
interest cover of greater than 7 times, representing EBITDA divided by net finance costs. |
Under our previous capital management policy, the Board intended to return an additional
A$1,500 million to shareholders for three consecutive fiscal years ending fiscal 2007 through
special dividends and share buy-backs, subject to us maintaining our target financial parameters.
In November 2005 as part of our company wide strategic review, we decided not to proceed with the A$1,500 million capital
return in the third year of the program. We are now directing those funds to our transformation
program.
During the two-year period, we returned the following additional capital returns to our
shareholders, in addition to our ongoing ordinary dividends:
|
|
|
during fiscal 2006, we paid a special dividend of A$0.06 per share (A$746 million) in March
2006 with our interim dividend for fiscal 2006; |
|
|
|
|
during fiscal 2006, we paid a special dividend of A$0.06 per share (A$746 million) in October
2005 with our final dividend for fiscal 2005; |
99
|
|
|
during fiscal 2005, we paid a special dividend of A$0.06 per share (A$746 million) in April
2005 with our interim dividend for fiscal 2005; and |
|
|
|
|
during fiscal 2005, we completed an off-market share buy-back of 185,284,669 ordinary shares
in November 2004. The cost of the share buy-back comprised purchase consideration of A$750
million and associated transaction costs of A$6 million. |
It is the current intention of the Board to declare ordinary dividends of A$0.28 per share for
fiscal 2007. This assumes that we continue to be successful in implementing our transformation
strategy and there are no further material adverse regulatory outcomes during fiscal 2007. The
Board will make their final decision on the future amount of dividends in its normal cycle having
regard to our earnings and cash flow as well as future regulatory impacts and all other factors
that affect our operations.
Contractual obligations and commercial commitments
In the ordinary course of business we enter into agreements for the supply of products and
services to support our business needs. While the liability under these agreements only arises on
supply, we have a commitment to acquire the particular products and services under the relevant
agreements. In addition, we are obligated to meet our long term debt requirements.
Contractual obligations and commercial commitments as at 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Expiration per Period |
|
|
Total |
|
|
|
|
|
Within |
|
Within |
|
Within |
|
Within |
|
|
|
|
Amounts |
|
Within |
|
1-2 |
|
2-3 |
|
3-4 |
|
4-5 |
|
After |
|
|
Committed |
|
1 Year |
|
Years |
|
Years |
|
Years |
|
Years |
|
5 Years |
|
|
|
|
|
|
|
|
|
|
(In A$ millions) |
|
|
|
|
|
|
|
|
Expenditure commitments:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
expenditure |
|
|
776 |
|
|
|
665 |
|
|
|
62 |
|
|
|
32 |
|
|
|
9 |
|
|
|
6 |
|
|
|
2 |
|
Intangible commitments |
|
|
305 |
|
|
|
159 |
|
|
|
130 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cancellable operating leases(2) |
|
|
1,530 |
|
|
|
424 |
|
|
|
290 |
|
|
|
201 |
|
|
|
139 |
|
|
|
118 |
|
|
|
358 |
|
Finance leases |
|
|
55 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
4 |
|
|
|
2 |
|
|
|
28 |
|
FOXTEL commitments(3) |
|
|
1,677 |
|
|
|
144 |
|
|
|
113 |
|
|
|
93 |
|
|
|
95 |
|
|
|
92 |
|
|
|
1,140 |
|
Other expenditure commitments |
|
|
704 |
|
|
|
337 |
|
|
|
123 |
|
|
|
83 |
|
|
|
120 |
|
|
|
19 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations and
commercial commitments |
|
|
5,047 |
|
|
|
1,736 |
|
|
|
725 |
|
|
|
432 |
|
|
|
367 |
|
|
|
237 |
|
|
|
1,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt obligations:(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt obligations |
|
|
11,791 |
|
|
|
394 |
|
|
|
1,373 |
|
|
|
581 |
|
|
|
1,315 |
|
|
|
2,642 |
|
|
|
5,486 |
|
Unamortised discount |
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,755 |
|
|
|
394 |
|
|
|
1,373 |
|
|
|
579 |
|
|
|
1,313 |
|
|
|
2,642 |
|
|
|
5,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations and
commercial commitments (including
long term debt obligations) |
|
|
16,802 |
|
|
|
2,130 |
|
|
|
2,098 |
|
|
|
1,011 |
|
|
|
1,680 |
|
|
|
2,879 |
|
|
|
7,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The presentation of our commitments is consistent with note 26 to our consolidated financial
statements. |
|
(2) |
|
In addition to our non-cancellable leases, we have commitments under cancellable operating
leases amounting to A$356 million. |
|
(3) |
|
On 31 July 2006, FOXTEL entered into a new A$600 million syndicated secured term loan facility
to fund the refinancing of previous loan facilities. Refer to Operating and Financial Review and
Prospects Related party transactions FOXTEL for further details. As a result, we no longer
have a share of FOXTELs |
100
|
|
|
|
|
commitments relating to digital set top box units, which reduced our share of the commitments by
A$141 million. |
|
(4) |
|
Our long term debt obligations include the current portion of long term debt, however it
excludes our derivative financial instruments and our finance leases. Our finance lease commitments
are included separately in the above table. Additional details regarding the split of our long term
debt obligations is provided in note 18 to our consolidated financial statements. Refer to
Liquidity and capital resources for further discussion regarding our debt obligations. |
Our property, plant and equipment expenditure commitments mainly relate to committed
expenditure to build and improve our networks, enhance our network software and meet our future
hardware requirements. Our commitments for intangibles mainly relate to committed expenditure for
future business software requirements and license obligations. Our commitments include expenditure
relating to our transformation program.
Our operating lease commitments primarily relate to lease agreements we have entered into for
the following:
|
|
|
rental of land and buildings, over an average term of seven years; |
|
|
|
|
rental of motor vehicles, caravan huts, trailers and mechanical aids over an average term of
between two and twelve years, depending on the type of vehicle; and |
|
|
|
|
rental of personal computers and related equipment over an average term of three years. |
Our finance lease commitments mainly relate to capitalised property leases and leases for IT
equipment to support our client requirements for managed service solutions. In addition to our
finance lease commitments, we have previously entered into US finance leases with several entities
incorporated in the Cayman Islands relating to communications exchange equipment. We have provided
guarantees over the performance of these entities under defeasance arrangements, whereby lease
payments are made on our behalf by the entities over the remaining term of the finance leases.
Refer to note 26 and note 27 to our consolidated financial statements for further details.
The FOXTEL commitments primarily relate to our 50% share of the FOXTEL partnerships
commitment to acquire subscription television programming that is subject to minimum subscriber
guarantee levels. The minimum subscriber payments fluctuate in accordance with price
escalation/reduction formulae contained in the agreements, as well as foreign currency movements.
In addition, FOXTEL has other commitments for satellite transponder costs and digital set top box
units. Due to the joint and several nature of the FOXTEL partnership agreements, we are also
contingently liable to the extent of our FOXTEL partners share of certain commitments should
FOXTEL and/or the other FOXTEL partners default on their payment obligations under these
agreements.
Our other expenditure commitments of A$704 million relate to various commitments for
engineering and operational support services, information technology services and building
maintenance. In particular, these commitments include the following items:
|
|
|
commitments relating to service contracts for general maintenance and support of our hardware
and software; |
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commitments relating to the purchase of wavelengths to enhance our international operational
capabilities, amounting to A$70 million; |
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commitments to provide our call centre partners with a minimum number of calls during the
duration of our contracts with these partners, amounting to A$133 million; and |
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commitments for future sponsorship and advertising expenditure in our marketing area,
amounting to A$44 million. |
Off balance sheet arrangements
As at 30 June 2006, we had provided indemnities, performance guarantees, financial support and
other arrangements to various entities. Our off balance sheet arrangements include:
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arrangements with our joint venture entities such as REACH, FOXTEL and the 3GIS Partnership;
and |
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guarantees over the performance of third parties incorporated in the Cayman Islands under
defeasance arrangements, whereby finance lease payments for communications exchange equipment
are made on our behalf by the third parties. |
The features and counterparties involved in our indemnities, performance guarantees, financial
support and other arrangements are detailed in note 27 to our consolidated financial statements. We
do not have any other significant off balance sheet arrangements, other than those disclosed in
note 27 to our consolidated financial statements.
Related party transactions
The following discussion summarises our significant transactions with related parties, other
than our controlled entities and key management personnel. For discussion on our related party
transactions with controlled entities and key management personnel, refer to note 33 to our
consolidated financial statements.
REACH
In fiscal 2001, we formed REACH, a 50/50 joint venture with PCCW Limited (PCCW), which merged
our respective international infrastructure assets. REACH is a major carrier of international voice
traffic. It provides outsourcing services in support of Telstras and PCCWs international voice
and data services. In addition, it also provides third party voice and satellite services to
customers other than PCCW and us. Upon the formation of REACH, we agreed with PCCW to enter into
contractual arrangements with the jointly controlled entity for the provision of voice, data and
Internet connectivity services. We use these services primarily in connection with our retail
international telecommunications business.
Our purchases from REACH were A$198 million in fiscal 2006 compared with A$226 million in
fiscal 2005. These amounts were mainly for both the purchase of, and entitlement to, capacity and
connectivity services. The purchases were made in line with market prices. We also made sales to
REACH for international inbound call termination services, construction and consultancy of A$61
million in fiscal 2006 and A$71 million in fiscal 2005. These transactions are in the ordinary
course of business and are on normal commercial terms and conditions.
During fiscal 2005, REACH made several improvements to its operating model including the
decision that its data capacity would be consumed entirely by its shareholders. PCCW and Telstra
continue to experience significant traffic growth in recent years, which will see both companies
utilising virtually all of REACHs capacity. REACH continues to provide its third party voice and
satellite services to consumers other than PCCW and us.
As part of these improvements, REACH allocated its international cable capacity between PCCW
and us, via an indefeasible right of use (IRU) agreement. As consideration for the IRU, we
discharged our rights under a previous capacity prepayment arrangement and the accrued interest on
the prepayment. As a result, the total consideration amounted to A$205 million (US$157 million).
For the Telstra Group, the IRU is deemed to be an extension of our investment in REACH resulting in
the IRU having a carrying value of A$nil in the consolidated financial statements reflecting the recognition of equity accounted
losses in REACH. Over the period of the IRU, we pay REACH an outsourcing fee for managing our cable
usage on a cost plus mark up basis.
As part of the acquisition of the IRU, we agreed to fund half of the committed capital
expenditure that REACH is contractually obliged to pay to its capacity providers until fiscal 2022.
We have recognised a provision in our balance sheet of A$52 million in fiscal 2006 and A$90 million
in fiscal 2005. In fiscal 2006, the decrease in the provision was due to amounts drawn down by
REACH for expenditure and the unwinding of the discount rate arising from the passage of time. PCCW
has committed to fund the other half of REACHs capital expenditure. In the event that PCCW fails
to make the payments under their commitment, we have no obligation to fund PCCWs share of the
commitment.
Together with PCCW, we previously bought out a loan facility owed to a banking syndicate by
REACH and its controlled entity, Reach Finance Ltd. Our share of the acquisition cost was US$155.5
million, which was recognised as a receivable at the date of the transaction. We provide for the
non recoverability of this receivable as we do not consider that REACH is in a position to repay
the loan in the medium term. Due to the restructuring of our arrangements with REACH in fiscal
2005, the terms of the maturity were altered such that the facility is now an
102
interest free loan and repayable on or after 31 December 2010 upon the giving of 6 months notice by
both PCCW and us.
In addition, we previously agreed with PCCW to provide a US$50 million revolving working
capital facility to REACH to assist it in meeting their ongoing operational requirements. Our share
of this facility is US$25 million. Draw downs under this facility must be repaid at the end of each
interest period and fully repaid by 31 December 2007. As at 30 June 2006, REACH had not made any
draw down under this facility. We have no joint or several liability relating to PCCWs US$25
million share of the working capital facility.
The revised loan facilities and working capital arrangements in fiscal 2005 provided REACH
with greater flexibility and a more viable capital structure. It also certified our ongoing
ownership of this core infrastructure, ensuring that we have the continued capacity to meet our
international carriage service requirements.
FOXTEL
Our 50% owned pay television joint venture FOXTEL uses capacity on our HFC cable network. As
part of the arrangements with our joint venture partners, News Corporation Limited, and Publishing
and Broadcasting Limited, we are the exclusive long term supplier of cable distribution services
for FOXTELs subscription television services in our cabled areas. We also receive a share of
FOXTELs cable subscription television revenues. Further details about our arrangements with FOXTEL
are included in the Information on the Company Subscription television.
We have entered into arrangements with FOXTEL, whereby we are able to bundle and resell FOXTEL
services to our customers, including pay television content, as part of our ongoing product
bundling initiatives. Our purchases from FOXTEL of pay television services were A$250 million in
fiscal 2006 compared with A$218 million in fiscal 2005. The increase in fiscal 2006 was primarily
driven by growth in bundled FOXTEL subscribers. The purchases enabled us to resell FOXTEL services
to our customers and facilitate product bundling initiatives. In fiscal 2006, we generated HFC
cable related revenue from FOXTEL of A$84 million compared with A$65 million in fiscal 2005, which
includes revenue for carriage services, cable installations and service calls. The increase in
fiscal 2006 was mainly due to additional promotional activity which increased services in operation
and a scheduled FOXTEL contract rate increase. These transactions are in the ordinary course of
business and are on normal commercial terms and conditions.
FOXTEL has other commitments amounting to A$3,354 million as at 30 June 2006 of which we have
a 50% share amounting to A$1,677 million. The majority of these commitments relate to minimum
subscriber guarantees for pay television programming agreements, as well as the partnership
commitments for satellite transponder costs and digital set top box units. Due to the joint and
several nature of the FOXTEL partnership agreements, we are also contingently liable to the extent
of our FOXTEL partners share of the commitments for minimum subscriber guarantees and satellite
transponder costs should FOXTEL and/or the other FOXTEL partners default on their payment
obligations under these agreements. Our contingent liability as at 30 June 2006 amounted to A$1,531
million. During the two-year period, FOXTEL has continued to meet its obligations under these
arrangements and as a result, we have not paid any significant amounts to meet the minimum
subscriber guarantees and other FOXTEL commitments. Refer to Operating and Financial Review and
Prospects Contractual obligations and Operating and Financial Review and Prospects commercial
commitments and note 26 and note 27 to our consolidated financial statements for further
information.
Previously, FOXTEL entered into a A$550 million bank facility arrangement to fund its full
digital conversion and launch of new digital services. As part of this arrangement, we and FOXTELs
other ultimate shareholders entered into an Equity Contribution Deed (ECD) whereby FOXTEL is
required to call on a maximum of A$200 million in equity contributions in certain specified
circumstances, as necessary, to avoid default of a financial covenant. These equity contributions
are based on ownership interests and as a result, our maximum contingent liability is A$100
million. We have no joint and several liability relating to our partners obligations under the
ECD.
103
On 31 July 2006, FOXTEL entered into a new A$600 million syndicated secured term loan facility
to fund the refinancing of previous loan facilities (including the A$550 million syndicated
facility previously detailed), and to enable it to meet future cash flow and expenditure
requirements.
The ECD entered into by us and FOXTELs other ultimate shareholders has been terminated. Under
this new arrangement, recourse to our controlled entity Telstra Media Pty Ltd, as a FOXTEL partner,
is limited to the assets of the FOXTEL Partnerships.
3GIS Partnership
During fiscal 2005, we established a joint venture partnership with Hutchison 3G Australia Pty
Ltd (H3GA), a subsidiary of Hutchison Telecommunications (Australia) Limited, to jointly own and
operate H3GAs existing 3G radio access network (RAN) and fund network development. The H3GA RAN is
the core asset of the joint venture, known as the 3GIS partnership. In return for 50% ownership of
the asset, we paid H3GA A$450 million in instalments over two years ending 3 July 2006. We paid
A$312 million in fiscal 2006 and A$22 million in fiscal 2005 for the acquisition of these assets.
The balance outstanding as at 30 June 2006 was settled on 3 July 2006 and is reflected in our trade
and other payables at 30 June 2006.
During the two-year period, we provided interest free funding to 3GIS for operational
expenditure purposes. As a result, we have recognised our share of the loan outstanding by the 3GIS
partnership amounting to A$14 million as at 30 June 2006 and A$32 million as at 30 June 2005. The
loan is classified as a non current receivable in our consolidated financial statements.
Research and development
Our research and development activities cover diverse areas of our business and focus on
developing:
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new competitive products for our customers; |
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product innovation and differentiation; |
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service quality improvements; and |
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long term strategic positioning. |
Our research and development expenditure includes amounts expensed in the income statement and
amounts capitalised in software developed for internal use and property, plant and equipment. Items
include:
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research and development carried out directly by us in our research laboratories; |
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research and development expenditure contracted out by us, for which the resultant
intellectual property is owned by the contractor; |
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research and development expenditure incurred in the development of certain software; and |
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support and other research and development expenditures. |
For the purposes of this Institutional Offering Memorandum, we estimate the amount of research
and development expenditure incurred over the past year. The amount of the actual expenditure is
not determined until we complete our research and development assessment process in the following
April of each fiscal year. For fiscal 2005, we estimated expenditure of A$148 million, which later
was determined to be A$157 million. For fiscal 2006, we estimate that we have spent A$146 million.
We have included A$23 million in fiscal 2006 and A$29 million in fiscal 2005 of this total amount
spent in the income statement as research and development expenses.
In future years, we expect our research and development to include expenditure on the following
key activities:
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broadband access provision (both fixed and mobile); |
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convergence of mobile and online services; |
104
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IP networks; and |
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network and service management |
Segment information
Business segments
Our business is organised and managed by business unit, as described under Information on the
Company Organisational structure. This internal structure provides the initial basis for
determining our business segments. Our business segments are predominantly distinguishable by the
different type of customers we deliver our key products and services to.
The main adjustments from our internal management reporting structure to our reported business
segments are in relation to certain offshore operations. For internal management reporting
purposes, our TelstraClear group (TelstraClear) is included with Telstra Enterprise and Government,
CSLNW is a business unit in its own right, and the International Head Office group is included with
Strategic Marketing. For segment reporting purposes, these offshore operations are reported as part
of a segment that we have called Telstra International.
Our reportable business segments as at 30 June 2006 were:
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Telstra Consumer Marketing and Channels; |
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Telstra Business; |
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Telstra Enterprise and Government; |
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Telstra Wholesale; |
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Sensis; |
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Telstra International; and |
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Telstra Operations. |
In addition, various business units that do not qualify as business segments in their own
right have been aggregated into an Other category for segment reporting purposes. The Other
category consists of Telstra Country Wide®, Telstra BigPond®, Telstra Media and the Strategic
Marketing business units, as well as our corporate areas. Please refer to note 5 to our
consolidated financial statements for details of the major products and services provided by each
of our business segments.
During fiscal 2006, we have restructured our business segments as follows:
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we created a new business segment named Telstra Business. The Telstra Business group was
drawn from the Telstra Consumer Marketing and Channels (formerly known as Telstra Consumer and
Marketing), Telstra Country
Wide® and the Telstra Enterprise and Government (formerly known as
Telstra Business and Government) business segment; |
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we created a new business segment named Telstra Operations. This group combined Telstra
Services (formerly known as Infrastructure Services), Telstra Technology, Innovation and
Products, and Operations Support which moved from being reported within our corporate areas;
and |
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we created a new business unit named Strategic Marketing. This group was drawn from various
business units across Telstra comprising mainly Telstra Consumer Marketing and Channels. This
business unit forms part of the Other category. |
In addition, we restructured our existing business unit, Telstra Country Wide® during fiscal
2006. In prior years, our segment policy was to recognise the results of our consumer, small
business, enterprise and some government customers residing outside the mainland state capital
cities, in outer metropolitan areas, and in Tasmania and Northern Territory in the Telstra Country
Wide® business segment. In fiscal 2006, the results of Telstra Country Wide® were allocated to the
Telstra Consumer Marketing and Channels, Telstra Business and Telstra Enterprise and Government
business units depending on the type of customer served.
105
Analysis of segment results
We have discussed the segment results of each reportable segment separately over the two-year
period. A detailed discussion and analysis of the changes in revenue for each of our major product
groups and principal operating expense categories is provided in Operating revenue and
Operating expenses respectively.
The following table provides a summary of our revenue and EBIT for each of our business
segments. For additional detailed financial information on our business segment results, including
intersegment revenues, see note 5 to our consolidated financial statements.
During fiscal 2006, we changed our segment accounting policy on interconnection revenue. In
previous financial years, our segment accounting policy was to recognise revenue relating to
interconnection entirely in our Telstra Wholesale business segment. In fiscal 2006, some parts of
the revenue earned from interconnection were allocated to the Telstra Consumer Marketing and
Channels, Telstra Business and Telstra Enterprise and Government business segments to match the
revenue recognised with the associated expense. As a result, revenue in Telstra Wholesale decreased
by A$633 million and revenue increased in Telstra Consumer Marketing and Channels by A$500 million,
Telstra Business by A$52 million and Telstra Enterprise and Government by A$81 million in fiscal
2005 to reflect this change in policy.
We have restated all our comparative information to reflect the current reporting position as
if all our new business segments and segment accounting policies existed in the prior year.
For segment reporting purposes, we have reallocated certain items between the respective
business segments pursuant to the definitions of segment revenues and segment expenses contained in
the applicable accounting standard, where a reasonable allocation basis exists. Where no reasonable
allocation basis exists, we have not reallocated individual items to alternative segments as
outlined below. For segment reporting purposes, these items are reported within the same business
segment as for internal management reporting.
Currently, sales revenue associated with mobile handsets for Telstra Consumer Marketing and
Channels, Telstra Business and Telstra Enterprise and Government are allocated totally to the
Telstra Consumer Marketing and Channels segment, with the exception of some products sold in
relation to small to medium enterprises which are allocated to Telstra Business. Ongoing prepaid
and postpaid mobile revenues derived from our mobile usage is recorded in Telstra Consumer
Marketing and Channels, Telstra Business and Telstra Enterprise and Government depending on the
type of customer serviced. In addition, the majority of goods and services purchased associated
with our mobile revenues are allocated to the Telstra Consumer Marketing and Channels segment.
These allocations reflect managements accountability framework and internal reporting system and accordingly no reasonable basis for reallocation
to the respective business segments exist.
In addition, revenue derived from our BigPond® Internet products is recorded in the customer
facing business units of Telstra Consumer Marketing and Channels, Telstra Enterprise and Government
and Telstra Business. Certain distribution costs in relation to these products are also recognised
in these business segments. Telstra Operations recognises expenses in relation to the installation
and running of the HFC cable network. In accordance with our application of the definition of
business segment per the applicable accounting standard, we have not reallocated these items to the
Telstra BigPond® business segment.
106
Segment summary results
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Year Ended 30 June |
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2006 |
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2005 |
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2006/2005 |
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(In A$ millions) |
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(% change) |
Revenue from external customers |
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Telstra Consumer Marketing and Channels |
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8,897 |
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8,931 |
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(0.4 |
) |
Telstra Business |
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3,053 |
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3,099 |
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(1.5 |
) |
Telstra Enterprise and Government |
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4,607 |
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4,570 |
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0.8 |
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Telstra Wholesale |
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2,607 |
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2,267 |
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15.0 |
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Sensis |
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1,826 |
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1,708 |
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6.9 |
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Telstra International |
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1,450 |
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1,360 |
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6.6 |
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Telstra Operations |
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226 |
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161 |
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40.4 |
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Other(1) |
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106 |
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85 |
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24.7 |
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Total revenue |
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22,772 |
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22,181 |
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2.7 |
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Earnings/(loss) before interest and income tax expense (EBIT)(2)(3) |
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Telstra Consumer Marketing and Channels |
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5,721 |
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6,248 |
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(8.4 |
) |
Telstra Business |
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2,412 |
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2,488 |
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(3.1 |
) |
Telstra Enterprise and Government |
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2,706 |
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2,812 |
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(3.8 |
) |
Telstra Wholesale |
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2,693 |
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2,283 |
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18.0 |
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Sensis |
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864 |
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812 |
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6.4 |
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Telstra International |
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156 |
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11 |
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1,318.2 |
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Telstra Operations |
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(4,175 |
) |
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(3,371 |
) |
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(23.9 |
) |
Other(1) |
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(4,909 |
) |
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(4,351 |
) |
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(12.8 |
) |
Eliminations |
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29 |
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3 |
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866.7 |
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Total EBIT |
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5,497 |
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6,935 |
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(20.7 |
) |
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(1) |
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Revenue for our Other segment primarily relates to revenue earned by Telstra Media for our
share of FOXTEL cable subscriber revenue and for services provided to FOXTEL. The Asset Accounting
Group is the main contributor to the segment result for this segment, which is primarily
depreciation and amortisation charges. The Asset Accounting Group centrally manages all of the
Telstra Entitys fixed assets, including network assets. EBIT loss grew for the Other segment
mainly due to increased deprecation and amortisation reflecting the strategic review of the service
lives of our assets as part of the transformation strategy. |
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(2) |
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Most internal charges between business segments are charged on a direct cost recovery basis.
For segment reporting purposes, transfer pricing is not used within Telstra. EBIT reflects our
intercompany and external charges. |
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(3) |
|
During fiscal 2006, we recognised a one off restructuring and redundancy provision of A$427
million to be incurred as part of the business transformation, as we have provided in this year for
future restructuring. This provision was mainly recorded in Telstra Consumer Marketing and Channels of
A$171 million and Telstra Operations of A$236 million. |
Telstra Consumer Marketing and Channels
Telstra Consumer Marketing and Channels revenue decreased by 0.4% to A$8,897 million in fiscal
2006. This segment experienced revenue increases in mobile services, primarily international
roaming, mobile data usage and handset sales. In addition, strong growth in BigPond® broadband and
pay television services were experienced due to increased marketing activities and improved
retention of existing customers through bundling initiatives. Offsetting this growth in revenue was
a decline in PSTN revenue as a result of competition, product substitution and decreased consumer
usage.
107
Telstra Consumer Marketing and Channels EBIT decreased by 8.4% to A$5,721 million in fiscal
2006 driven by increased use of BigPond® broadband and a reduced use of high margin PSTN services.
The change in customer mix and use of products and a continued shift to higher use of mobiles
resulted in expense growth in mobile handsets, dealer costs, network payments and labour in line
with revenue and customer growth in emerging products and services. In addition, EBIT was impacted
by meeting competition and adjusting to customer needs in line with customer preferences, and one
off costs associated with renegotiating dealer contracts and redundancy and restructuring costs
resulting from our transformation initiatives.
Telstra Business
Telstra Business revenue declined by 1.5% to A$3,053 million in fiscal 2006 primarily due to a
decline in PSTN revenue. This segment experienced growth in mobile products including voice, data,
MessageBank® and international roaming, which partially offset the decrease in PSTN revenues. In
addition, Internet and IP products revenue grew in fiscal 2006 reflecting the increase in broadband
subscribers.
Telstra Business EBIT decreased by 3.1% to A$2,412 million in fiscal 2006 predominantly due to
a decline in revenues and an increase in expenses. Expenses grew mainly due to a rise in network
payments, cost of goods sold and other directly variables costs associated with product offerings.
This segment continues to be adversely impacted by a change in product mix from higher margin
products such as PSTN to lower margin products such as broadband.
Telstra Enterprise and Government
Telstra Enterprise and Government revenue increased by 0.8% to A$4,607 million in fiscal 2006
due to strong growth in domestic information and communication technology (ICT) services, Internet
and IP products, and offshore revenues. This increase has been partially offset by reductions in
sales revenue from the underlying core carriage business, consisting mainly of a decline in
traditional PSTN and ISDN revenues. This segment continues to experience change in usage patterns
with traditional product usage migrating to alternative access offerings such as wireless,
broadband and other IP product offerings.
Telstra Enterprise and Government EBIT decreased by 3.8% to A$2,706 million in fiscal 2006
reflecting a changing product mix, which resulted in reductions in sales volumes of higher margin
core access technologies, and growth in lower margin ICT services and offshore revenues.
Telstra Wholesale
Telstra Wholesale revenue increased by 15.0% to A$2,607 million in fiscal 2006 driven by
continuing demand for broadband and data services and an increase in wholesale basic access
revenues. Telstra Wholesale experienced significant revenue growth in several products such as
facilities access as a variety of carriers extend their DSL capabilities in preparation for
building their own infrastructure via unconditioned local loop and spectrum sharing. Data and
Internet service revenues also showed solid growth, which was mainly driven by wholesale broadband
offerings and associated ISP related data carriage and transmission services. Growth in revenue was
partly offset by a decrease in local call revenues due to ongoing product substitution to mobiles
and broadband.
Telstra Wholesale EBIT increased by 18.0% to A$2,693 million in fiscal 2006 driven by revenue
growth and a decrease in expenses. The expense decline consisted of a decrease in Telstra
Wholesales allocated share of domestic outpayments, reflecting lower rates and a decrease in
international voice traffic expenses, which was assisted by an appreciating Australian dollar.
Lower labour costs were due to the decrease in staff numbers as part of our transformation project
and the movement of staff to other areas in Telstra as part of overall business restructure. In
addition, service contract costs were lower due to the discontinuation of a number of contracted
activities. The expense decline was partly offset by increased IT professional services costs
driven by growth in system support and automation costs to deliver ongoing operational productivity
and revenue growth.
Sensis
Sensis revenue increased by 6.9% to A$1,826 million in fiscal 2006 driven by growth in White
Pages® and Yellow® print and online services. Growth in Sensis emerging businesses included strong
results from Whereis®
108
and Mediasmart, and a full year of results for Universal Publishers. Overall, online sites
continued their improved growth driven by rising usage and customer numbers, leading to increased
yields. This growth was partially offset by a decline in revenue from classifieds driven by
competition and economic weakness in the Sydney and Melbourne markets.
Sensis EBIT increased by 6.4% to A$864 million in fiscal 2006 as the improved revenue was
partly offset by growth in expenses. EBIT growth was supported by higher revenue, strategic
re-alignment and a renewed focus on costs. An increase in labour expenses was attributable to
growth in staff numbers, higher redundancy costs and a reversal of a deferred expense provision. In
fiscal 2006, amortisation expense was also higher as a result of the revision of certain software
service lives reflecting the transformation initiatives. For further information, refer to
Operating and Financial Review and Prospects Sensis financial summary.
Telstra International
Telstra International revenue increased by 6.6% to A$1,450 million mainly due to the CSLNW
merger partially offset by a small decline in revenues from TelstraClear. CSLNW revenues grew due
to the inclusion of the New World PCS business from March 2006, and rising data, international
voice, mobile handset and prepaid mobile revenues partially offset by decreased local voice
revenues reflecting sustained competitive pressure on prices. TelstraClears revenue primarily
decreased as a result of adverse foreign exchange movements. TelstraClear recorded increases in
revenue reflecting the full year impact of their national HomePlan offering in the consumer
segment, and their controlled entity, Sytec after its acquisition in November 2004. The increase
was partially offset by access and call revenue declines in the wholesale and small to medium
enterprise segments due to price erosion caused by competition, which was moderated by growth in
our customer bases in those segments, and a decline in Internet revenues as reduced pricing plans
have impacted business yield in the consumer segment.
Telstra International EBIT improved by A$145 million to A$156 million due to increased EBIT in
our International Head Office Group partially offset by a decline in the CSLNW and TelstraClear.
The growth in the International Head Office Group was due to the sale of our shareholding in Xantic
B.V. in fiscal 2006 and the recognition of a provision for Reachs committed capital expenditure in
fiscal 2005. Expenses increased in the CSLNW following the incorporation of costs after the merger
with New World PCS, increased subsidies as part of heightened promotional activity to drive sales,
and larger offshore outpayments associated with higher international voice revenues. In addition,
depreciation and amortisation expense was higher due to the rollout of their 3G network. Expenses
increased in TelstraClear due to larger outpayments due to higher revenue, and growth in labour
expenses driven by the inclusion of a full year of Sytec costs. For further information regarding
our significant offshore controlled entities, refer to Operating and Financial Review and
Prospects CSL New World Group financial summary and Operating and Financial Review and
Prospects TelstraClear financial summary.
Telstra Operations
Telstra Operations revenue increased by 40.4% to A$226 million in fiscal 2006 driven by
additional revenue received for maintenance activities, revenue for digital migration of FOXTEL
subscribers from analogue to digital services and higher fees for overdue accounts. Operations
revenue is essentially limited to cost recovery as afforded by regulatory and commercial
arrangements. Product revenue is earned by the customer facing segments.
Telstra Operations EBIT is a net cost as this segment does not recover all the costs it incurs
on behalf other segments. This reflects our one factory approach to delivering the
infrastructure, services and systems which support the customer experience. EBIT loss grew by 23.9%
to A$4,175 million in fiscal 2006 due to significant redundancy and restructuring costs being
recognised in the current year associated with our concerted effort to reduce staff numbers and
planning for the transformation of our future business. Also, there were other one off
transformation costs in the current year associated with the closure of old platforms and project
write offs due to the cancellation of certain capital program initiatives. Additionally, expenses
grew due to the increased sales activity of our growth products such as broadband, as well as
increased costs associated with the FOXTEL digital expansion. The expense increase was partly
offset by managements continued focus on lower discretionary spending and cost reduction
initiatives.
109
Quantitative and Qualitative Disclosures about Market Risk
The potential for change in the market value of our financial assets and liabilities is
referred to as financial market risk. We sometimes enter into financial instruments to manage our
exposure to financial market risk such as interest rates and foreign currency rates that arise as
part of our normal business operations.
Derivatives are financial instruments such as interest rate swaps, futures, foreign exchange
forwards, options, and
cross-currency swaps that derive their value from specified assets, indices,
reference rates or a combination of these factors. We use derivative financial instruments, in
accordance with Board-approved policies, to hedge the market risks and volatility of financial
outcomes arising from the underlying physical business or balance sheet exposure.
We are exposed to interest rate risk due to our borrowings
Our borrowings are generally for maturities of up to ten years and we manage our debt in
accordance with targeted, currency, interest rate, liquidity and debt portfolio maturity profiles.
Our target currency is principally A$ matching our principal currency of operation. Our
borrowings are derived both from A$ and foreign currency sources with foreign currency borrowings
in most cases swapped into A$ at commencement through to maturity. A relatively small proportion of
our foreign currency borrowings are not swapped into A$, principally where they are used as natural
hedges against our translation foreign exchange risk to offshore business investments.
Where the actual interest rate profile on the physical debt differs substantially from our
desired target, we use derivatives, principally interest rate swaps, to adjust the net interest
rate position towards the target. Our net debt portfolio includes both physical borrowings (such as
bonds and commercial paper) and associated derivative instruments (such as cross-currency and
interest rate swaps).
Our interest rate risk is assessed as the interest rate exposure on our total net debt
portfolio, after offsetting any holdings of financial assets whose value is sensitive to interest
rates and after applying related derivatives.
The interest rates on a proportion (approximately A$3.1 billion equivalent face value) of our
borrowings is subject to the possibility of a limited increase through coupon step-up clauses
that would be triggered by credit ratings downgrades from Standard & Poors and/or Moodys Investor
Service. The interest rates on this debt will increase by 0.25% up to a maximum of 0.50% per annum
if our minimum credit rating falls to A- or below (S&P) and A3 or below (Moodys) depending on the
particular trigger points of each borrowing and the extent of the rating change. The interest rate
increase will step-down again for some borrowings if the minimum credit rating was to subsequently
increase above the previously mentioned trigger points. Our current ratings are A Negative Outlook
(S&P) and A2 Negative Outlook (Moodys).
We have exposure to foreign currency risk due to our normal business operations and borrowings
Foreign currency exchange risk arises from:
|
|
|
firm or anticipated transactions for receipts and payments for international
telecommunications services settled in or dependent on foreign currencies; |
|
|
|
|
purchase commitments for material and supplies with prices dependent on foreign currencies;
investments (both business and financial) denominated in foreign currencies; and |
|
|
|
|
borrowings that are denominated in foreign currencies. |
We manage the foreign exchange risk on the major part of our foreign currency-denominated
borrowings by effectively converting them to A$ borrowings at drawdown by applying cross-currency
swaps to maturity. Where foreign currency borrowings are used to hedge a specific underlying
foreign exchange exposure, they are not swapped to A$ (e.g. to hedge financial investments in
foreign currency-denominated securities and borrowings raised for offshore ventures).
110
Foreign exchange risks that arise from the purchase of goods and services are managed
principally through the use of forward foreign currency derivatives.
We manage our translation foreign exchange risk to offshore business investments with a
combination of foreign currency denominated borrowings (either physical or synthetic) in the
currency of the entity concerned and forward foreign currency derivatives. Our economic foreign
exchange risk is assessed for each individual currency, calculated by aggregating the net exposure
for that currency.
Our economic exposure to movements in market risks is assessed and measured on a market value basis
Two methods used to assess and present our overall estimated market risk
are:
|
|
|
sensitivity analysis; and |
|
|
|
|
value-at-risk or VaR. |
These are undertaken to assess the potential impacts of adverse movements in the market value
of the relevant portfolio at the reporting date as shown below. Since market rates move in both
directions, these can be advantageous as well as adverse. Hedging to protect against a downside
risk can, in its establishment, remove or diminish the potential for upside benefits.
Sensitivity analysis
We undertake a sensitivity analysis on our net debt and foreign exchange exposure portfolios
after application of all hedging transactions. This is based on an instantaneous adverse
proportional movement of 10% in interest rates and exchange rates.
The probability of this occurring is not factored into this sensitivity analysis. Also, the
diverse nature of the portfolios is not taken into account and concurrent adverse movements in all
exchange rates and interest rates are assumed.
For these reasons, the analysis may be conservative and may not represent likely market
volatility since based on historical movements it is unlikely that there would in the future be a
concurrent adverse movement across all factors.
The numbers in the following tables represent market value movement in the areas concerned
after all underlying exposures and related hedges are taken into account. Market value movements
can contain profit and loss statement or balance sheet movements or a combination of both.
Adverse proportional movement of 10% across risk categories
|
|
|
|
|
|
|
|
|
|
|
As at 30 June |
Market Value Risk |
|
2006 |
|
2005 |
|
|
(A$m |
|
|
approximate) |
Risk Categories |
|
|
|
|
|
|
|
|
Interest rates |
|
|
238 |
|
|
|
286 |
|
Foreign currency rates |
|
|
264 |
|
|
|
118 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
502 |
|
|
|
404 |
|
|
|
|
|
|
|
|
|
|
The foreign currency rate numbers include the translation exposure movements generated from
our overseas investments which include CSL New World Mobility Group (CSL New World) and
TelstraClear. A proportion of both these exposures is hedged using a combination of foreign
currency borrowings and foreign currency derivatives. This sensitivity analysis assumes that the
HKD and USD are free to move in opposite directions against the AUD (i.e., that the peg, where
the HKD is held to approximately 7.8 to the USD, no longer is in place). If it is assumed that the
HKD and USD peg continues and the USD and HKD both move in the same direction against the AUD, then
the foreign currency sensitivity quoted in the table above drops from A$264m to A$152m.
111
VaR
VaR is used to assess the potential adverse economic outcome due to market movements over a
defined time horizon and with a specified confidence level based on historical volatilities. This
potential component is calculated using the current statistical volatility relevant to the
particular instrument derived from representative market wide data.
For the VaR numbers reported below, a one month time horizon and a 99% confidence level were
used. This one-month time horizon differs from many financial institutions who hedge for trading
purposes and where a shorter one day period may be more appropriate. We consider a one-month
holding period appropriate since our hedging activities are of a non-trading nature.
The monthly figures quoted can be approximately converted to daily assessments by multiplying
by 0.22 or to 12 monthly estimates by multiplying by 3.5, these conversion factors assume that the
portfolio continues with the same basic profiles such as maturity and debt mix. For example, the
VaR monthly result for foreign exchange of $61 million converts to an annual equivalent of
approximately $214 million. We derive the potential market value impact by applying historical
volatility measures to the identified current market risk.
Unlike the sensitivity analysis, our overall VaR analysis takes into account the diversified
nature of our net debt and net foreign exchange exposure portfolios and incorporates historical
correlation between the markets. This projection based on historical volatility is, however, only
an estimation of future volatility. The actual future volatility may be substantially different.
We arrived at the VaR numbers by using a Monte Carlo simulation model developed by our
consulting actuaries, Mercer Finance & Risk Consulting which is part of Mercer Human Resources
Consulting Pty Ltd, which uses recognised market wide based data sets and volatility calculation
methodology. The data sets comprise:
|
|
|
interest rate and foreign exchange rate volatilities; and |
|
|
|
|
correlations between and within interest rates and foreign exchange rates. |
The simulation model determines the distribution of the market value of our debt portfolio and
foreign exchange portfolio plus related hedges at future rates. This is undertaken by simulating
interest and foreign exchange movements against our actual transaction portfolio. In deriving the
VaR numbers, 50,000 simulations have been undertaken to ensure the production of stable, robust
results.
The VaR is the difference between the median expected value of the portfolio and the value at
the 99% confidence level assuming an adverse movement (i.e., there is a 1% chance that the result
arising from an adverse movement will be more adverse than the VaR).
VaR
|
|
|
|
|
|
|
|
|
|
|
As at 30 June |
Market Value Risk (One-month holding period) |
|
2006 |
|
2005 |
|
|
(A$m) |
Risk categories |
|
|
|
|
|
|
|
|
Interest rates |
|
|
130 |
|
|
|
175 |
|
Foreign currency rates |
|
|
61 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
191 |
|
|
|
207 |
|
Diversification effect (1) |
|
|
(31 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
Total |
|
|
160 |
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Equals the difference between the total composite monthly VaR and the sum of the monthly
VaRs for the two risk categories assessed independently. |
VaR calculations were undertaken for portfolio balances (which dynamically change throughout
the year) at the end of each quarter during fiscal 2006. The following table shows the high, low
and average amounts of the
112
combined total portfolio of interest rates and foreign currency rates at these quarterly points
through the year. Note that the compositions of the individual portfolios change throughout the
year and that the high or low for each of the two component portfolios (i.e., interest rate or
foreign exchange rate) may not arise at the same time that the overall combined portfolio is at a
high or low value.
VaR analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June 2006 |
Market Value Risk (One-month holding period) |
|
High |
|
Low |
|
Average(2) |
|
|
(A$m) |
Risk categories |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rates |
|
|
172 |
|
|
|
130 |
|
|
|
148 |
|
Foreign currency rates |
|
|
63 |
|
|
|
61 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
235 |
|
|
|
191 |
|
|
|
215 |
|
Diversification effect (1) |
|
|
(35 |
) |
|
|
(31 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
200 |
|
|
|
160 |
|
|
|
178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Equals the difference between the total composite monthly VaR and the sum of the monthly
VaRs for the two risk categories assessed independently. |
|
(2) |
|
The high and low quarterly portfolio is defined at the total portfolio level and therefore
there may be instances where the average for individual risk categories is either higher than the
high or lower than the low for that category. |
Additional information regarding our market risks is provided in note 35 to our consolidated
financial statements.
113
Information on the Company
History and development of the Company
Our origins date back to 1901, when the Postmaster-Generals Department was established by the
Commonwealth to manage all domestic telephone, telegraph and postal services, and to 1946, when the
Overseas Telecommunications Commission was established by the Commonwealth to manage international
telecommunications services. Since then, we have undergone many changes and been renamed several
times as follows:
|
|
|
the Australian Telecommunications Commission, trading as Telecom Australia, in July 1975; |
|
|
|
|
the Australian Telecommunications Corporation, trading as Telecom Australia, in January
1989; |
|
|
|
|
the Australian and Overseas Telecommunications Corporation Limited in February 1992; |
|
|
|
|
Telstra Corporation Limited in April 1993, trading internationally as
Telstra; and |
|
|
|
|
trading domestically as Telstra in 1995. |
We were incorporated as an Australian public limited liability company in November 1991.
Following the opening of Australias telecommunications markets to full competition in July 1997,
we underwent a partial privatisation in November 1997 under which the Commonwealth sold
approximately 33.3% of our issued shares to the public. Following the initial privatisation, those
of our shares that are not held by the Commonwealth are quoted on the ASX and NZSX. A further
global offering by the Commonwealth of up to 16.6% of our issued shares was launched in September
1999.
Organisational structure
Our organisational structure has evolved over recent years to meet our business needs and the
needs of our customers. The organisational structure currently consists of strategic business units
and corporate centre business units as outlined below.
Strategic business units
|
|
|
Telstra Consumer Marketing and Channels is responsible for serving our consumer
customers with our full range of products and services including fixed lines, mobiles,
Internet access and pay TV services. It also has responsibility for mass marketing
channels including Telstras call centres, Telstra shops and the dealer network. |
|
|
|
|
Telstra Business is responsible for serving the needs of Australias small to medium
enterprises with fixed line, mobile, broadband, as well as data and Internet solutions
tailored for business. |
|
|
|
|
Telstra Enterprise and Government is responsible for providing innovative ICT
solutions to large corporate and government customers in Australia and New Zealand. It is
also responsible for KAZ and TelstraClear. KAZ and Telstra service our Enterprise and
Government customers IT needs. TelstraClear is New Zealands second largest full service
telecommunications company, providing innovative market leading products and services to
the business, government, wholesale and residential sectors. Telstra Enterprise and
Government is also responsible for our Global Business operations, recently renamed
Telstra International. |
|
|
|
|
Telstra Country Wide® provides telecommunications and information technology
services to customers in outer metropolitan, regional, rural and remote parts of
Australia. |
|
|
|
|
Telstra BigPond® is responsible for the management and control of our retail
Internet products, BigPond® brand and marketing, services and content, contact
centres, customer relations and associated functions, for broadband and dial-up delivery. |
|
|
|
|
Sensis is our advertising, search and information services business. Sensis manages
three important Telstra brands YellowTM (formerly Yellow Pages®), White
Pages® and Trading Post®, along with the CitySearch® online city guide, the
Whereis® online, mobile and satellite navigation services, the GoStayTM
print guide and |
114
|
|
|
complementary website, the sensis.com.au search engine, the Sensis® 1234 voice service,
and the 51% (on a fully diluted basis) owned SouFun investment, a real estate and home
furnishings website in China. |
|
|
|
Strategic Marketing is responsible for Corporate Strategy, Mergers & Acquisitions,
and our overall marketing, pricing, brand, sponsorship, promotions and advertising
direction. Strategic Marketing is also responsible for Telstra Asia, which manages our
international interests in the region and directs our offshore strategy, with a current
focus on enhancing the value of our existing investments, profitably rationalising
non-core-assets and positioning us to capture high growth opportunities, particularly in
China and South East Asia. |
|
|
|
|
Telstra Media is responsible for our FOXTEL investment. |
|
|
|
|
Telstra Operations has responsibility for the core or shared elements of our
infrastructure and related support units. Using a one factory approach to improve our
customer service delivery and customer satisfaction, the group includes Telstra Services,
Network and Technology, Wireless, IT Services, Product Management, Procurement, Strategic
Supplier Relations, Credit Management, Billing and the corporate Program Office. The
Program Office identifies and prioritises opportunities for streamlining, implementing and
coordinating all aspects of our transformation strategy. |
|
|
|
|
Telstra Wholesale provides a wide range of wholesale products and services to the
Australian domestic market, including fixed, wireless, data and Internet, transmission and
IP, interconnection, access to our network facilities, and retail/rebill products. It also
serves global wholesale markets to satisfy growing Internet and high bandwidth needs. |
Corporate centre business units
|
|
|
Finance & Administration is responsible for corporate policy and support functions
including finance, risk management and assurance, shared services for processing
functions, treasury, company secretary, investor relations and other administration
services. It is also responsible for the financial management of the majority of our fixed
assets, including network assets. |
|
|
|
|
Legal Services provides operational and strategic legal support and advice across
Telstra, with lawyers from Legal Services serving clients in all strategic and corporate
centre business units. |
|
|
|
|
Public Policy & Communications manages corporate communications and public affairs
across Telstra including media relations, employee communications, corporate social
responsibility (including the Telstra Foundation), corporate content on the Telstra
website (www.telstra.com), Telstras website (www.now-wearetalking.com.au) and external
relations. Its external relations responsibility includes government relations and
regulatory positioning and negotiation, including assessment of regulatory risks, advice
and counsel to business units, preparation of submissions to industry regulators, and the
facilitation of regulatory compliance through advisory services and the management of a
regulatory compliance assurance program. |
|
|
|
|
Human Resources is responsible for developing and implementing our people, culture
and capability strategy and providing strategic and operational support and advice to
business managers about all human capital matters. This includes organisational design,
culture change, employee engagement, leadership development, talent management,
performance management, policy, employment, recruitment and health, safety and
environment. |
A list of our controlled entities is provided in note 29 to our consolidated financial
statements. Our jointly controlled and associated entities are listed in note 30 to our
consolidated financial statements.
Marketing and customer service
We use customer analytics to formulate marketing strategies based on customer needs. This
provides a better understanding of customer behaviour and improved customer relationships. Overall,
we believe needs-based marketing will provide us with a competitive advantage in the market.
115
Market-based management puts customers at the core of our business focus. We have conducted
extensive research that informs us about customers needs, priorities and expectations. As a result
of this knowledge, we have grouped our residential and small-medium business customers into
segments which reflect their specific characteristics. This knowledge forms the basis of a
relationship with our customers around which we organise our processes and procedures. Market-based
management is used to formulate our marketing strategies for our various strategic business units,
and to offer and deliver products and services tailored to customers needs across these business
units.
Residential customers and small-medium businesses
We have organised the management structures of Telstra Consumer Marketing and Channels and
Telstra Business by those segments.
We segment our residential customers based upon their usage and lifestyle patterns. We segment
our small-medium enterprise customers according to the type of business they operate and the way
they interact with their customers. This information on customers by segment is used to tailor our
marketing campaigns.
This information on customers by segment is then used to tailor segment specific value
propositions by product sets and applications, by channels and by service experience which results
in microsegments around each of our product and service areas.
We are also implementing customer relationship management (CRM) technologies to deliver
these segment differentiated value propositions. The combination of detailed understanding of
customer needs with CRM capabilities enables a customer to experience a personalised and meaningful
experience at every touch point, from initial investigation of service through ongoing care.
We enable customers to interact with us online, through door-to-door sales representatives,
telephone sales channels and face to face via our account managed sales team, Telstra shops and
Telstra licensed stores as well as indirectly through approximately 4,000 retail outlets nationwide
in conjunction with our retail partners.
We anticipate that changing from a product to a customer segment focus will enable us to
uncover previously unseen growth potential as we drive segment-related benefits across product
lines that were previously operated in silos.
Enterprise and government customers
The Enterprise and Government customer base comprises some of our largest customers. All of
Telstra Enterprise and Government customers are sophisticated users of ICT. We segment these
customers into Integrated (Large ICT outsourcing customers), Multinational and Industry and
Government customers with a predominant Trans Tasman or Australian domestic focus. Further customer
segmentation in Industry and Government is on the basis of geography and industry verticals. The
verticals include Retail, Finance & Insurance, Manufacturing, Media, Business Services & IT,
Resource & Utilities, Health, Public Safety & Justice and Local Government. We provide account
management and customised solution development along with enhanced service delivery. Our sales team
takes a consultative approach with our customers, focusing on delivering enhanced business results
through ICT solutions, leveraging the capabilities of KAZ, our ICT services arm.
We have 20 offices around the world including Asia Pacific, Europe and the USA supporting the
global telecommunications requirements of our multi-national customers and global service
providers. We provide our customers with managed network solutions including Global WAN, Internet,
Back-up and Storage, Security, Mobility, Enhanced voice solutions and more. Other value added
solutions include managed CPE, network reporting, consulting, planning, project management and
customer support seven days a week.
Regional, rural and remote customers
Telstra Country Wide® was established to improve service levels, business performance and
to strengthen relations with customers and communities in regional, rural and remote areas of
Australia. In 2003, this area was expanded to include outer metropolitan areas. In addition, the
local management model was further extended in
116
January 2006 to incorporate the metropolitan cities of Adelaide, Brisbane and Perth. Area General
Managers are located throughout Australia to address the sales, marketing and service needs of our
customers.
Wholesale customers
Our wholesale customers include licensed carriers, CSPs and ISPs. Telstra Wholesale provides
products and services to more than 500 customers, including more than 400 ISPs (about 80 of which
offer broadband digital subscriber line (DSL) services).
Wholesale customers typically buy products and services from Telstra Wholesale, add their own
inputs and then sell to the retail market under their own brand.
Advertising customers
Sensis provides advertising solutions to more than 400,000 Australian businesses (small and
medium enterprises (SMEs) and large corporates) and Government through a network of print,
online, voice and wireless services. Sensis also serves the advertising needs of personal sellers
through its print and online classifieds business.
Products and services
We offer a broad range of telecommunications and information products and services to a
diverse customer base. The following table shows our total income by major product and service
category and as a percentage of total income for the last two fiscal years. See also Operating and
Financial Review and Prospects for a discussion of the performance of our products and services
during the last two fiscal years.
Income by product and service category, including the percentage of total income contributed by
each product and service category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
|
A$m |
|
% of Total |
|
A$m |
|
% of Total |
PSTN products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
3,318 |
|
|
|
14.4 |
|
|
|
3,362 |
|
|
|
15.0 |
|
Local calls |
|
|
1,023 |
|
|
|
4.4 |
|
|
|
1,284 |
|
|
|
5.7 |
|
PSTN value added services |
|
|
246 |
|
|
|
1.1 |
|
|
|
250 |
|
|
|
1.1 |
|
National long distance calls |
|
|
913 |
|
|
|
4.0 |
|
|
|
1,013 |
|
|
|
4.5 |
|
Fixed to mobile |
|
|
1,491 |
|
|
|
6.5 |
|
|
|
1,566 |
|
|
|
7.0 |
|
International direct |
|
|
201 |
|
|
|
0.9 |
|
|
|
234 |
|
|
|
1.0 |
|
Fixed interconnection |
|
|
286 |
|
|
|
1.1 |
|
|
|
309 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,478 |
|
|
|
32.4 |
|
|
|
8,018 |
|
|
|
35.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services |
|
|
4,505 |
|
|
|
19.5 |
|
|
|
4,307 |
|
|
|
19.2 |
|
Mobile handsets |
|
|
467 |
|
|
|
2.0 |
|
|
|
381 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,972 |
|
|
|
21.5 |
|
|
|
4,688 |
|
|
|
20.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data and Internet services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet and IP Solutions |
|
|
1,907 |
|
|
|
8.3 |
|
|
|
1,377 |
|
|
|
6.1 |
|
ISDN products |
|
|
807 |
|
|
|
3.5 |
|
|
|
890 |
|
|
|
4.0 |
|
Specialised data |
|
|
884 |
|
|
|
3.8 |
|
|
|
966 |
|
|
|
4.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,598 |
|
|
|
15.6 |
|
|
|
3,233 |
|
|
|
14.4 |
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 30 June |
|
|
2006 |
|
2005 |
|
|
A$m |
|
% of Total |
|
A$m |
|
% of Total |
Other products and services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and directories |
|
|
1,711 |
|
|
|
7.4 |
|
|
|
1,585 |
|
|
|
7. 1 |
|
Customer premises equipment |
|
|
274 |
|
|
|
1.2 |
|
|
|
231 |
|
|
|
1.0 |
|
Pay phones |
|
|
104 |
|
|
|
0.5 |
|
|
|
121 |
|
|
|
0.5 |
|
Intercarrier services |
|
|
351 |
|
|
|
1.5 |
|
|
|
290 |
|
|
|
1.3 |
|
Inbound calling products |
|
|
449 |
|
|
|
1.9 |
|
|
|
449 |
|
|
|
2.0 |
|
Solutions management |
|
|
989 |
|
|
|
4.3 |
|
|
|
931 |
|
|
|
4.1 |
|
Offshore controlled entities |
|
|
1,745 |
|
|
|
7.6 |
|
|
|
1,611 |
|
|
|
7.2 |
|
Pay TV bundling |
|
|
320 |
|
|
|
1.4 |
|
|
|
263 |
|
|
|
1.2 |
|
Other sales and services |
|
|
759 |
|
|
|
3.2 |
|
|
|
741 |
|
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,702 |
|
|
|
29.0 |
|
|
|
6,222 |
|
|
|
27.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales revenue |
|
|
22,750 |
|
|
|
98.5 |
|
|
|
22,161 |
|
|
|
98.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
revenue (1) (excluding finance income) |
|
|
22 |
|
|
|
0.1 |
|
|
|
20 |
|
|
|
0.1 |
|
Other income |
|
|
328 |
|
|
|
1.4 |
|
|
|
261 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (excluding finance income) |
|
|
23,100 |
|
|
|
100.0 |
|
|
|
22,442 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other revenue excludes finance income, which is included in net finance costs. |
Sales revenues are derived from domestic and international sales as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
30 June |
|
|
2006 |
|
2005 |
|
|
% |
|
% |
Australia |
|
|
92.3 |
|
|
|
92.7 |
|
Hong Kong |
|
|
3.7 |
|
|
|
3.3 |
|
New Zealand |
|
|
2.7 |
|
|
|
2.8 |
|
Other International |
|
|
1.3 |
|
|
|
1.2 |
|
PSTN products
PSTN includes basic fixed-line access, local calls, value added services, national long
distance, fixed-to-mobile and international direct.
Basic Access
Our Basic Access service includes installing and maintaining connections between customers
premises and our Public Switched Telephone Network (PSTN) and providing basic voice, facsimile
and Internet services. Basic Access does not include enhanced products like Integrated Services
Digital Network (ISDN) access and Asymmetric Digital Subscriber Line (ADSL) services.
Along with basic access services, we provide handsets for sale and rental to help customers
use our services more effectively. The latest rental phones have single button access to features
such as 3-way chat, Messagebank®, call forward and SMS. We also develop products to assist our
customers with disabilities. This ranges from the very popular big button phone to Teletypwriter
(TTY) and TeleBraille products.
118
Local calls (including PSTN value-added services)
We provide local call services to more residential and business customers than any other
service provider in Australia, generally charging for calls on an untimed fee basis. The
geographical reach of our untimed local call zones, combined with our packages, access and pricing
offers, extend the value of our local call service. In addition, we provide value-added services
such as voicemail, call waiting, call forwarding, call conferencing and call return.
National long distance calls
We are the leading provider of national long distance services for residential and business
customers in Australia. This comprises national long distance calls made from our PSTN network to a
fixed network. Calls are generally charged on a timed basis after a call connection fee. Call
details such as duration, destination, time of day and day of the week generally determine charges
which are also offered on a fixed or capped price basis. We also offer options that let customers
choose between a range of offers to suit individual needs, including the recent addition of
subscription plans with included features and calls.
Fixed to mobile
Fixed to mobile are calls made from our PSTN/ISDN to a mobile network and are charged on a
timed basis after a call connection fee. Charges usually depend on the duration of the call and
whether the call is to a Telstra mobile service. Calls made within a capped calling option are
charged according to duration, time of day, day of week and terminating carrier. Capped calling
offers predominantly apply to calls to Telstra mobiles.
International direct
We are the leading provider of international telephone services in Australia, offering
international telephone services to more than 230 countries and territories. Calls are typically
charged on a per-second basis after a call connection fee, depending on the duration and
destination of the call. REACH provides the connections we use to supply international services to
both our retail and wholesale customers. For more information regarding our arrangements with
REACH, refer to Operating and Financial Review and Prospects International business ventures.
Mobile telecommunications services
We offer a wide range of mobile services to our customers, including voice calling and
messaging, text and multimedia messaging and a range of information, entertainment and connectivity
services.
NEXT GTM Wireless Network
In 2005, we announced that we would build a 3GSM 850 Mhz wireless network with our strategic
partner Ericsson. We launched this network, called NEXT GTM, on 6 October 2006, and it
provides 3G coverage to 98% of the Australian population. It is the largest 3G network in
Australia.
Using multi-band handsets, customers will be able to access both our NEXT GTM
wireless network as well as our existing 3GSM 2100 MHz network.
3GSM 2100
Our existing 3GSM 2100 MHz network allows additional functionality such as video calling and
higher speed data access within its coverage boundary while offering access to the GSM network and
services outside of the 3G area. Our 3GSM 2100 MHz network sharing arrangement with Hutchinson
covers over 50% of the Australian population in a number of mainland capital cities including
Canberra.
GSM digital service
Our digital GSM network covers around 96% of the Australian population and we continue to
improve existing areas of coverage and expand this network, where commercially justified. We have
also improved depth of coverage
119
in major cities, particularly in-building and underground coverage, as well as offering
international roaming in more than 140 countries and 300 networks.
CDMA digital service
Our existing CDMA network currently provides Australias largest cellular mobile phone
coverage, spanning more than 1.6 million square kilometres and covering around 98% of the
Australian population. The CDMA network will remain in place until our new NEXT GTM
wireless service has the same or better coverage as CDMA and until at least January 2008. Our
CDMA 1X technology service (1XRTT) which was Australias first commercial mobile network based on
CDMA 1X technology was launched in December 2002. By the end of 2005, CDMA 1X, was made available
across the entire CDMA network footprint of over 1.6 million square km covering around 98% of the
population.
We
will continue to operate our CDMA network until our NEXT G wireless network provides the
same or better coverage than the CDMA network, and in any event at least until January 2008, and
the software upgrades are complete and any necessary Government approvals have been obtained.
Telstra Mobile Satellite
In 2002, we launched Telstra Mobile Satellite, a hand-held mobile satellite voice and data
service for people living, working or travelling in rural and remote Australia. The service
operates off the Iridium Low Earth Orbit satellite system which provides global mobile satellite
phone coverage wherever there is a clear view of the sky. We have a service partner agreement to
sell the Iridium service.
BigPond®
We offer a range of Internet products and packages under our BigPond® brand. Telstra
BigPond® Dial-Up offers dial-up modem and ISDN Internet services to residential and small and
medium business customers across Australia. Telstra BigPond® Broadband provides broadband
Internet services to consumer and small and medium business customers via hybrid fibre coaxial
cable, satellite, ADSL and wireless technologies.
BigPond® Mobile Services
With BigPond® Mobile Services customers can browse and purchase a broad range of
up-to-date information and entertainment. With a 3G video mobile, customers can access 3D games,
receive news bulletins, stock quotes or sport scores, download ringtones, find directions, watch
music videos and send and receive emails.
Wireless Broadband Expansion
In August 2005, we introduced the BigPond® Wireless Broadband product and have expanded
our CDMA 1xEVDO network to provide greater coverage for our Wireless Broadband customers. The
BigPond® focus on the consumer market provides an addition to the existing business-oriented
Telstra Mobile Broadband solution. These two products provide solutions for wireless broadband
access. As we move towards closing our CDMA network, we plan to migrate customers from this service
to the wireless broadband services provided over our new NEXT GTM wireless network.
Content services
Telstra BigPond® provides online and mobile content services (including BigBlogTM
and BigPond® Movies, BigPond® Sport, BigPond® Games, BigPond® Kids, News
and BigPond® TV). These services include music, movies, games, sports entertainment, video on
demand and DVD rental offerings. All of these services are available from BigPond.com.
120
Internet and IP Services
In addition to our BigPond® services, we provide new generation data and Internet services
including:
|
|
|
business grade Internet solutions; |
|
|
|
|
IP Solutions; |
|
|
|
|
Business DSL, that offers a broadband data service with symmetric data rates and
business grade service levels; |
|
|
|
|
Connect IP solution range which is a standardised, end-to-end, IP-based WAN offering
that integrates network management and data connectivity with Customer Premises Equipment
(CPE), allowing for seamless data transfer between customer sites; and |
|
|
|
|
IP Telephony, an open standard IP communications suite, which delivers hosted IP
telephony and IP applications to our corporate customers. |
Data Services
We also provide data and specialised services, including ISDN, digital data services, voice
grade dedicated lines, transaction/EFTPOS services and video and audio network services, as well as
domestic and international frame relay and ATM products.
Telstra Internet Direct also provides business customers with dedicated Internet access within
Australia at access transmission rates up to one gigabyte per second (Gbps).
We also provide wholesale Internet access products for use by licensed carriers, ISPs and CSPs.
Other services
We offer other data services, in some cases with business partners, including:
|
|
|
collaboration services that provide audio, video and web-based conferencing
(including the Conferlink® product range); |
|
|
|
|
e-commerce solutions including e-trading, e-payments, EFTPOS/ATM network services and
straight-through processing services; |
|
|
|
|
Online Customer Management Facility (OCMF) providing a self-service capability for
customers to manage user access to their IP networks; |
|
|
|
|
Digital Video Network (DVN) initiative allowing our media customers to share
content such as news or sporting arena access; |
|
|
|
|
Managed Wide Area Networks services (WANs) including design, CPE sales and
installation, network establishment and maintenance. |
Advertising and directories
We are a leading provider of advertising and search services through our advertising business
and wholly owned subsidiary, Sensis. Sensis popular information services include
YellowTM, White Pages®, Trading Post®, CitySearch® and Whereis®.
The YellowTM print directory is Australias leading business directory, while White
Pages® print directory maintains its position as a leading information source. The
YellowTM and White Pages® print directories also feature comprehensive Information
Pages, providing valuable information about emergency and community services, activities and
resources within the area of coverage. The YellowTM OnLine site and the White
Pages® OnLine site extend the print directorys capabilities.
121
Whereis® maps and directions complement and combine with other Sensis products-including
YellowTM
OnLine and White Pages® OnLine directories, and the CitySearch®
site-to deliver location orientated services across Internet and WAP channels.
The CitySearch® site provides a range of editorial content, business listings and
entertainment and event information in major cities around Australia.
The Trading Post® is published throughout Australia, providing a classifieds service to
most of the Australian population. In addition to print editions, the Trading Post® also has
an online site located at tradingpost.com.au.
During fiscal 2006, Sensis has continued to focus on developing and providing solutions to
meet the needs of both consumers and advertisers. In April 2006, Sensis entered the travel and
accommodation market with the launch of GoStayTM. With more than 5,500 ads and a
national distribution to 3 million households, the
GoStayTM print guide has the largest
distribution of any printed Australian travel guide. Complementing
the GoStayTM Accommodation Guide is a comprehensive website gostay.com.au where consumers can search,
select and book and pay for accommodation at thousands of properties across Australia.
In February 2006, Sensis became a majority shareholder of Adstream Australia. This has opened
up new advertising options for Sensis small and medium enterprise (SME) customers, helping
Adstream Australias customers reach a wider audience through the joint Sensis and Telstra online
network, and extending Sensis advertising agency relationships to a much deeper level.
On 31 August 2006, we purchased a 51 per cent shareholding in SouFun, a leading real estate
and home furnishings web-site in China.
Wholesale services (including inter-carrier services)
In addition to providing products for resale, we provide a range of other products
specifically tailored for wholesale customers. These include:
|
|
|
interconnection services, including originating and terminating access to our fixed
and mobile networks, preselection services and access to our network facilities such as
ducts, towers and exchange space; |
|
|
|
|
domestic and international transmission services; |
|
|
|
|
broadband, IP backbone and traditional data services; and |
|
|
|
|
both GSM and CDMA mobile products and services. Telstra Wholesale has advised
customers of the closure of the CDMA network, with the earliest possible closure date
being 28 January 2008. |
We also manage and deliver a range of customer processes for wholesale customers. These
include product and service provisioning, ordering and activation, billing, fault reporting and
end-user and product transfer. In addition, we provide a range of web-based business-to-business
services to our customers.
Inbound calling products
We offer inbound call services including:
|
|
|
Telstra Freecall® 1800, a reverse-charge call service used widely by small and
large businesses to extend market reach and attract sales; |
|
|
|
|
Priority® One3, a shared-cost service offering a six-digit national number used
by larger businesses as a front-door to contact centres and franchise operations for
service calls; |
|
|
|
|
Priority® 1300 services, a shared-cost service offering a 10-digit number,
similar to the Priority® One3 service, where a short-number format is not required; |
|
|
|
|
Contact centre enablement services, including network-based speech recognition and
interactive voice response solutions, computer telephony integration, call routing
services and speech recognition;
|
122
|
|
|
InfoCall® 190, a telephone premium-rate service where we bill the calling
customer for both content and carriage on our bill and receive a fee from the content
provider for these payment and carriage services; and |
|
|
|
|
Phone Words, an inbound number derived from the alphabetic translation of a number,
provided by 1300 Australia Pty Ltd. |
ICT Solutions, Services and Outsourcing
KAZ, a wholly owned subsidiary, partners with us in the market to service our medium and large
Enterprise and Government customers in Australian and Asia Pacific markets. The combination of
KAZs IT capabilities and our telecommunications strengths gives us capabilities in the provision
of end-to-end ICT services and solutions from within our own group of companies.
The repositioning of KAZ over the past two years as our ICT Services arm has enabled the
business to achieve revenue growth from services such as:
|
|
|
Applications development, management and maintenance; |
|
|
|
|
Systems Integration: particularly focusing on the integration of our ICT solutions
and partner applications in the client environment; |
|
|
|
|
ICTand Business Process Outsourcing: covering servers, desktops, peripherals and
other portable devices for some of Australias largest companies as well as non core
business processes such as credit card processing and cheque processing; |
|
|
|
|
ICT Consulting: designed to support our core business and focusing on ICT Strategy,
Network Consulting & Integration, Mobility & Wireless and Security & Business Continuity
as well as Information Intelligence and Business Process; |
|
|
|
|
The provision of ICT services supporting our managed voice, data and mobility
solutions including IP-based networks and IP Telephony; and |
|
|
|
|
Managed IT Services: covering a range of solutions such as security, hosting, data
centre management and managed storage. |
On 31 August 2006, we sold AAS, the superannuation administration business of our KAZ Group
subsidiary to Link Market Services Limited for A$215 million. In addition, we took out A$35.5
million in cash from AAS prior to settlement. The transaction was completed after a competitive
public sale process had been undertaken. A decision was made to sell AAS after it was determined
that it was no longer strategic and not a core part of our business. KAZ continues to be a crucial
part of our Information and Communication Technology strategy and service delivery.
Payphones
We are the leading provider of payphones in Australia. As at 30 June 2006, we operated
approximately 30,000 public payphones. Our Universal Service Obligation requires us to make
payphone services reasonably accessible throughout Australia including in non-metropolitan and
rural areas.
Customer premises equipment
As part of our customer voice, data, mobile and service solutions, we provide customer
premises equipment for rental or sale to our residential, consumer, business and Government
customers. In relation to Telstra rental phones, modern new standard and calling number display
rental phones are available, making phones and phone features easier to use.
We acquired the Converged Networks Group (CN) in March 2006. CN services the Western
Australian market as Telstra Business Sales exclusive franchise in Western Australia. CNs
principal product sets are Ericsson Enterprise (its core business) and more recently, IBM and
Nortel. The acquisition effectively allows us to operate in our own right in Western Australia
rather than as a reseller to CN.
123
Other sales and services
The principal components of operating revenue that we record in other sales and services
relate to information and connection services, external construction and various other minor
products and services.
Subscription television
We own 50% of FOXTEL, with Publishing & Broadcasting Ltd (PBL) and The News Corporation
Limited (News Corporation) each owning 25%. The FOXTEL partners have committed, with very limited
exceptions, to confine their involvement in the provision of subscription television services in
Australia to participation in FOXTEL. PBL and News Corporation have also made programming
commitments to FOXTEL. Each of these commitments expires in November 2008.
FOXTEL is Australias leading provider of subscription television services, with over one and
a quarter million subscribers (including our resale subscribers and those receiving FOXTEL
programming through Optus Television and others). FOXTEL markets its services to more than 5
million homes, split approximately equally between those homes passed by our hybrid fibre co-axial
cable (HFC) and those covered by a satellite distribution.
FOXTEL DigitalTM offers customers access to around 130 digital channels, superior
picture and sound quality, a comprehensive and easy to use electronic program guide (EPG),
interactive sports and news applications and FOXTEL Box Office® (near video on demand). FOXTEL
continues to enhance FOXTEL DigitalTM, launching new channels and interactive features,
including additional news, sports and weather applications, as well as launching the FOXTEL
iQTM in February 2005. The FOXTEL iQTM is a personal digital recorder (PDR)
designed to change the way viewers watch television by enabling subscribers to record two programs
simultaneously, even while watching a previously recorded program.
Under arrangements with the FOXTEL partners, FOXTEL may provide, in addition to subscription
television services, a range of information and other services. FOXTEL currently only provides
subscription television services.
We are the exclusive long-term supplier of cable distribution services for FOXTELs cable
subscription television services in our cabled areas and we receive a share of FOXTELs cable
subscription television revenues. We can independently, or through partnerships and alliances,
provide a broad range of communications, data and information services to other parties using our
broadband network.
FOXTEL has entered into various program supply arrangements, including some with minimum
subscriber fee commitments. Refer to Operating and Financial Review and Prospects Contractual
obligations and commercial commitments for further details regarding our exposure to these
commitments.
We also resell Austar United Communications Limited (AUSTAR) subscription television
services, which are eligible for inclusion in the Telstra Rewards Options plan. The bundling and
reselling of both the FOXTEL and AUSTAR services broadens the range of telecommunication and
entertainment services we offer to our customers. These arrangements allow us to provide a
residential subscription television package to most areas in Australia regardless of geography.
A discussion of competition in the subscription television services market is contained in
Competition Subscription television.
International investments
Our major international investments include:
|
|
|
CSL New World Mobility Group, Hong Kongs leading mobile operator of which we own
76.4%. It has around 2.6 million customers, equating to approximately 32% of Hong Kongs
mobile market. CSL New World Mobility has retained all CSL and New World brands thereby
addressing all mobile market segments; |
|
|
|
|
TelstraClear, our wholly-owned subsidiary, is the second largest full-service carrier
in New Zealand. TelstraClear provides voice, data, Internet, mobile resale, managed
services and cable television products |
124
|
|
|
and services to the New Zealand market. New Zealand is a an important market for our
trans-Tasman customers, and this investment enables these customers to receive end-to-end
services; |
|
|
|
|
REACH, a 50/50 joint venture with PCCW, which provides outsourcing services in
support of Telstras and PCCWs international voice and data services. REACH is also one
of the worlds top carriers of international voice traffic. REACH operates and maintains
or uses voice and data switching platforms, satellite earth stations and a network of over
a network of over forty submarine cable and international satellite systems, together with
associated landing rights, backhaul, operating licences and bilateral agreements in most
international markets; |
|
|
|
|
Last year Telstra and PCCW reported a number of improvements to the REACH operating model,
whereby REACH would provide voice and data services to the two shareholders in return for an
outsourcing fee on a cost plus mark-up basis. This year has focused on a consolidation of the
new operating model. Data volumes continue to grow strongly and voice business volumes are
stable. |
|
|
|
|
Telstra and REACH will continue to focus on a range of initiatives aimed at securing
comprehensive international voice and data services at low unit cost; and |
|
|
|
|
SouFun, a leading real estate and home furnishing website in China, which we
purchased a 51 per cent shareholding in on 31 August 2006 as part of our growth strategy
for Sensis. |
We also have a 46.9% equity interest in Australia-Japan Cable Holdings Limited, a network
cable provider, which owns and operates a fibre optic cable between Australia and Japan.
Our 35% equity interest in the satellite communications operator, Xantic B.V. (formerly
Station 12 B.V.) was divested in fiscal 2006.
Capital Expenditures and Divestitures
For a discussion of the significant capital expenditures and divestitures we made in the
preceding two-year period, refer to Operating and Financial Review and Prospects Cash flow.
Research and development
We continue to make significant investment in research and development. In fiscal 2006, the
estimated spend was A$146 million. We review our project expenditure annually to determine its
actual spend on research and development. The expenditure was determined to be A$157 million in
fiscal 2005. For a detailed discussion of our research and development, refer to Operating and
Financial Review and Prospects Research and development.
Networks and systems
Transformation Simplifying our infrastructure
Next-generation network (NGN)
In November 2005, we outlined our plans to build a next-generation network and rationalise the
more than 300 different network platforms provided by an array of vendors. On 7 August 2006 we
announced that we had reached an impasse with the ACCC and as a result the FTTN component of the
NGN remains on hold.
Our current plan is to reduce our network platforms by 60% in three years and 65% in five
years. As at 30 June 2006, we had capped or exited 48 of our network platforms exceeding our
December 2006 target.
Over the next five years the NGN initiative aims to remove network duplication and the high
level of complexity by transforming our network infrastructure in Australias five major cities of
Melbourne, Sydney, Adelaide, Brisbane and Perth. The transformation will include:
|
|
|
an Internet Protocol (IP) core network which will replace todays dual cores and
add new capacity, greater capability, improved reliability and lower cost per unit;
|
125
|
|
|
an Ethernet network which will aggregate all traffic onto the new IP core supporting
what we anticipate to be high throughput demands of next-generation applications and
services; |
|
|
|
|
a multi service edge, providing common services for customers regardless of access
network and connectivity for business services including Frame Relay, ATM and Ethernet; |
|
|
|
|
high capacity soft switch platforms which will support voice services and features
over the common IP core, provide high capacity and high flexibility platforms. |
We believe the NGN will provide customers a simpler experience, fewer outages, faster services
and a consistent experience across multiple devices and networks. This new network will also enable
customer access to new and innovative services such as broadband Internet access many times faster
than current speeds, multi-channel TV delivered over the Internet and video conferencing.
This next-generation network will continue to be monitored and supported through a largely
centralised global operations centre, which has a recovery plan that enables network management to
be transferred to an alternate location in the event of an unforeseen disaster.
Mobile telecommunications networks
We currently own and operate two mobile network platforms, GSM and CDMA. Together, these cover
around 98% of the Australian population and serve more than 8 million SIOs. Through CSL New World
Mobility Group we also operate mobile services in Hong Kong.
In November 2005, we committed to simplify our Australian mobile infrastructure and announced
the plan to build a national 3GSM 850 MHz wireless network and, therefore, remove duplicate cost of
maintaining and upgrading two networks. We launched our 3GSM 850 MHz or NEXT GTM
wireless network on 6 October 2006.
The NEXT GTM wireless network operates on our GSM platform and uses the 850 MHz
radio frequency spectrum. The GSM platform will provide access to higher data speeds, better
applications and provide economies of scale. The CDMA network will remain in place until the
national NEXT GTM wireless network has the same or better coverage than the CDMA network
coverage and until at least January 2008. The new network provides coverage to 98% of the
Australian population.
Our GSM digital network operates in the 900MHz and 1800MHz spectrum bands. As at 30 June 2006,
our GSM network had approximately 4,750 base stations nationally. We are continuing to expand the
capacity and coverage of the GSM network, with just under 500 new base stations established in
fiscal 2006.
Our existing 3GSM service operates in the 2100 MHz spectrum band and with multi-band handsets
it is compatible with our NEXT GTM wireless network.
Other current networks & infrastructure
Transmission infrastructure
Our national transmission infrastructure consists of both terrestrial and non-terrestrial
transmission systems. Our domestic terrestrial systems are almost exclusively digital and use
approximately 4 million kilometres of optical fibre. Our major transmission routes incorporate
Synchronous Digital Hierarchy (SDH) technology.
Our international switching and transmission requirements are provided by REACH, which owns
international gateway switches in Sydney and an expanding network of switches across Asia, North
America and Europe to augment its state-of-the-art global data/IP system. REACH uses satellite
communication systems to supplement international traffic capacity where undersea cables are not
feasible and to provide route diversity and circuit redundancy, as well as specialist
satellite-based applications. REACH utilises satellite earth stations in Australia and Hong Kong,
including the largest satellite teleport in Asia.
126
Public Switched Telephone Network (PSTN)
Our PSTN or fixed network supports voice, facsimile and dial-up data products and we continue
to deploy new infrastructure as residential and business areas expand.
Australias geographic characteristics provide unique challenges for the provision of
nationwide digital PSTN coverage, overcome by our innovative application of a range of modern
technologies. Some 286 digital switching nodes connect customers with each other through a
combination of copper, fibre optic, radio and satellite technologies.
Our network supports a range of switch features which include features such as Call Waiting,
Call Return, Abbreviated Dialling and Virtual Private Networks (VPN). New types of telephones and
customer premises equipment which make these features more accessible and easy to use are
continually entering the market.
The PSTN supports many operator assisted service products such as directory assistance and
CallConnect. We are planning to enhance these services with higher levels of automation including
the latest in advanced voice recognition technology. The PSTN is also Australias lifeline to
Emergency 000 services.
Our PSTN infrastructure in the five major capital cities is expected to evolve over the next
five years, from the current technologies to increasingly utilising an IP core network and IP
access switching to replace our traditional exchanges.
We utilise CDMA-based wireless local loop technology in regional Australia as part of our
contract with the Commonwealth to improve communications in extended zones. With the deployment of
3G mobile network technology we will have a similar capability after the CDMA network is phased out
in early 2008 to ensure continuation of this type of service. In more remote areas satellite will
continue to be used for providing calling and internet services.
Integrated Services Digital Network (ISDN)
ISDN is a flexible, switched digital network. The integrated nature of this network means that
ISDN can support many applications at the same time while using a single access point to the
network, including traditional telephony as well as various data applications such as
videoconferencing, Internet access and EFTPOS.
The ISDN network is available to approximately 96% of the Australian population. ISDN provides
an end-to-end digital connection that allows us to deliver minimum 64Kbps connections to customers.
Intelligent Network (IN) platforms
We operate a number of IN platforms that support a range of services across fixed, mobile and
messaging services including:
|
|
|
inbound services such as Telstra Freecall® 1800, Priority® One3, Priority®
1300 and InfoCall® 190; |
|
|
|
|
Telstra prepaid mobile, Pre-paid Plus; |
|
|
|
|
calling cards (Telecard®); |
|
|
|
|
prepaid cards (Phoneaway®,
Say Gday®); |
|
|
|
|
information services numbers; |
|
|
|
|
number portability; |
|
|
|
|
mobile VPN, mobile voicemail; |
|
|
|
|
advanced network routing; and |
|
|
|
|
screening functions. |
127
Our inbound services are important to our major business customers because they support their
call centre and customer service operations. Our Contact centre enablement services, include
network-based speech recognition, interactive voice response solutions, computer telephony
integration and advanced call routing services.
Data networks
We operate a number of data networks including a:
|
|
|
Switched Data Network (SDN); |
|
|
|
|
National Transaction Switching Network; and |
|
|
|
|
Digital Data Network (DDN). |
Our SDN comprises approximately 857 switches linked to access multiplexers at more than 130
sites around Australia. It is the backbone for numerous IP WAN services, supporting a range of
access types from the fixed ATM and frame services for domestic and global use to Dynamic Dial,
ADSL, wireless services and value-added features including firewalls, hosting, Messenger, IP Voice
and IP Video.
Our retail customers use ATM and frame relay data services on the SDN to build wide-area
corporate data networks. Our wholesale customers use the SDN as an element of their own retail
offerings.
Our National Transaction Switching Network is suitable for electronic funds transfer and
inventory applications. This network provides dedicated and dial-up access in a secure environment,
suitable for transmitting transactions.
Our DDN, with its fully integrated management system, provides dedicated secure site-to-site
transmission at speeds ranging from 1200bps up to 2Mbps. This network has extensive coverage, with
more than 2,500 points of presence nationally across Australia for both Telstra retail DDS and
Telstra Wholesale Data Access Radial (DAR) products.
In addition, the DDN is the underlying access infrastructure for our Accelerated Frame Relay
product using our large network reach over multiple access technologies such as G.Shdsl, HDSL and
optic fibre to enable customer access into the SDN core network.
The DDN and SDN will be replaced and customers migrated to new products as part of our
transformation strategy.
Internet Protocol / Multiprotocol Label Switching (IP/MPLS) networks
We operate a national Internet full IP routed network, which provides the backbone for all of
our Telstra Internet Direct services and all Telstra BigPond® Internet offerings, as well as
Telstra Wholesales Internet products. Our Internet backbone network connects to the rest of the
Internet via the international links provided by REACH and connects domestically via peering links
with peer ISPs.
We also operate an MPLS (Multiprotocol Label Switching) based Routed Data Network (RDN)
which supports both our internal IP network as well as our suite of IP Products under the name of
IP Solutions. The RDN is also used to deliver IP Metropolitan Area Network (IPMAN) and Ethernet
MAN services along with our interstate IP Wide Area Network (IPWAN). We offer a Government IP
solution providing a direct fibre-based IP Network for use by Government agencies in Metropolitan
and regional locations.
The RDN supports the delivery of retail and wholesale Ethernet based products nationally.
As part of the transformation, our Internet backbone network and the RDN will be replaced by a
single IP/ MPLS core.
IP Voice Solutions
We have provided a hosted open-standards IP Telephony solution for our corporate customers
since 2003.
128
The IP Voice Solutions are delivered using a common Internet Protocol network utilising a
Next-generation Network architecture.
Broadband network
We deliver broadband capability through HFC, ADSL, Wireless and satellite services. Our HFC
broadband network passes approximately 2.8 million homes and businesses. The optic fibre component
of this broadband network consists of two forward and one return path fibre. The HFC network is
designed to provide two-way transmission for interactive services and high-speed data downloads,
currently up to 17Mbps via BigPond® Cable Extreme service.
ADSL is a broadband technology using the existing copper line technology that also delivers
PSTN services. ADSL deployment commenced in August 2000 and we achieved our target coverage for
fiscal 2006 with over 2,300 ADSL enabled exchanges sites.
We also offer satellite broadband services via both a two-way satellite service and a
satellite download/dial-up backchannel in areas of Australia for customers who are unable to access
broadband via cable, ADSL or Wireless.
Digital Video Network
Our Digital Video Network is an optical fibre network used by video broadcasters and
aggregators for the transmission and distribution of their content. The capabilities of the network
allow for seamless sharing of content between approved broadcasters as well as transmission of the
content by means of high grade encoding techniques.
Electromagnetic energy (EME)
Certain reports have suggested that EME emissions from mobile phone base stations and radio
communications facilities (including handsets) may have adverse health consequences for users and
the community. We rely on the expert advice of national and international health authorities such
as the Australian Radiation Protection and Nuclear Safety Agency (ARPANSA) and the World Health
Organisation (WHO) for overall assessments of health and safety impacts of EME. The current
consensus is that there is no substantiated scientific evidence of health effects from the EME
generated by radio frequency technology, including mobile phones and base stations, when used in
accordance with applicable standards.
We are committed to being open and transparent on all issues relating to EME emissions. We
comply with all relevant radio frequency standards and have comprehensive policies and procedures
to protect the health and safety of the community and our employees.
Together with other Australian mobile carriers, through the Mobile Carriers Forum (MCF), we
have implemented a process to help ensure compliance with the Australian Communications Media
Authority (ACMA) electromagnetic radiation framework and the Australian Communications Industry
Forum (ACIF) code of practice for radio communications infrastructure deployment. We developed
tools to assist compliance, such as the National Site Archive and National Antenna database, which
have been adopted by the MCF.
We have developed base station EME software that calculates environmental emission levels in a
matter of seconds. Our RF-MAPTM software enables operators, local authorities and
community groups to assess the environmental impacts of mobile phone base stations and confirm
compliance with safety standards. We have given copies of our RF-MAPTM software to
national and international health authorities as well as community and Government organisations,
reflecting our commitment to sharing expertise and providing the community with easy to use
solutions.
We are also active participants on national and international EME standards bodies and
research institutions.
129
Property, plant and equipment
Overview
A large part of our network is constructed on land occupied under our statutory powers and
immunities. We also own and occupy land that includes strategic sites, such as the properties on
which our telephone exchanges are located. As at 30 June 2006, we owned 5,233 freehold sites and
occupied 8,870 sites on a leasehold or other basis. Most of our sites are related directly to our
telecommunications operations and are used for housing network equipment of various types, such as
telephone exchanges, transmission stations, microwave radio equipment and mobile radio repeater
equipment. Some of our operational sites are on leased land or land that we have access to by
statutory right or other formal or informal arrangement. In addition to our operational sites, we
own or lease a range of properties used for office accommodation, storage and other miscellaneous
purposes which are discussed in Operating and Financial Review and Prospects-Contractual
obligations and commercial commitments.
Land access powers and immunities
The land access powers and immunities conferred on carriers by the Telecommunications Act 1997
(Cwth) (Telecommunications Act) are limited specific activities involving inspection and survey of
land, maintenance of facilities and installation of low impact facilities as prescribed by the
Telecommunications Low Impact Facilities Determination 1997. For activities not covered by the land
access powers and immunities regime, we must obtain all necessary consents, including the consent
of the relevant town planning authority as well as from the owner of the land, before network
construction activities may commence. Where the network-related activities are to occur in areas of
indigenous cultural heritage or on land where native title exists the relevant stakeholders are
consulted. In areas of environmental significance, the Department of Environment and Heritage are
also consulted and notified. The consultation period must be considered when determining activity
timeframes. We have comprehensive land access procedures and systems to enable staff and
contractors to comply with relevant legislation when undertaking network related activities.
Environmental issues
Environmental aspects covering the handling and storage of dangerous goods, noise from fixed
plant, visual amenity and disposal of waste (including obsolete and decommissioned equipment) are
required to be managed as part of operating and maintaining plant and equipment on occupied sites.
We manage the potential risks associated with these environmental aspects through various control
procedures. Incident processes are in place to minimise the potential impacts of environmental
incidents. New equipment undergoes an environment assessment before being implemented into the
network. Sites to be divested undergo environmental assessment and, if appropriate, remediation,
prior to sale.
We are aware of no current significant environmental issues that impede the utilisation or
integrity of our network operation.
130
Legal Proceedings
C7 litigation
In November 2002, Seven Network Limited and C7 Pty Limited (Seven) commenced litigation
against us and various other parties (the respondents) in relation to the contracts and
arrangements between us and some of those other parties relating to the right to broadcast the
Australian Football League and National Rugby League, the contract between FOXTEL and us for the
provision of broadband HFC cable services (the Broadband Cooperation Agreement) and other
matters.
Seven seeks damages and other relief, including that some of these contracts and arrangements
are void. Seven also seeks orders which would, in effect, require a significant restructure of the
subscription television/sports rights markets in Australia. Expert reports filed by Seven were at
one time used to suggest that Seven sought total damages of around A$1.1 billion. However, some
significant components of this expert evidence have since been ruled inadmissible by the trial
judge and many of the facts on which Sevens loss claim is based are contested. In addition to
denying liability at all, the respondents have filed expert reports to the effect that, even if
liability were found to exist, damages should be assessed at a very significantly lesser amount. If
Seven obtained any order for damages or legal costs affecting us, the liability arising from that
order may subsequently be apportioned between the relevant respondents, with us bearing only a
portion of the total liability. Final oral submissions were completed in early October and we are
awaiting judgement. In light of the progress of this case to date, we consider that it is unlikely
to have any material effect on our overall business or financial position.
Shareholder class action
In January 2006, a shareholder commenced a representative proceeding in the Federal Court
against us. The statement of claim alleges that we breached the Corporations Act and the ASX
Listing Rules between 11 August and 7 September 2005 by failing to disclose to the ASX or in our
fiscal 2005 full year accounts (1) that our CEO, Mr Trujillo had formed an opinion that there had
been past deficiencies in operating expenditure and capital expenditure on telecommunications
infrastructure, (2) that our CEO had forecast a significant and accelerating decline in our PSTN
business, and (3) that we had communicated these matters to the Commonwealth. The claim seeks
orders for compensation for the class of shareholders who bought shares between 11 August and 7
September 2005. The proceeding is at an early stage, and is considered unlikely to have any
material effect on our overall business or financial position. We are vigorously defending the
claim.
Competition notice regarding line access
Refer Regulation Conduct regulation.
Other
We are also involved in routine litigation. Governmental authorities and other parties
threaten and issue legal proceedings against us from time to time.
We do not consider that there are any current proceedings that could materially adversely
affect our overall business or financial position.
131
Employees
We are one of Australias largest employers. As at 30 June 2006, the Telstra Group employed
40,996 full-time employees. We also engage employees under flexible work arrangements including
casual, supplementary and part-time employees. As at 30 June 2006, the Telstra Group had engaged
the equivalent of 3,456 full-time employees under these flexible arrangements. In total, as at 30
June 2006, the Telstra Groups full-time equivalent (FTE) employee total was 44,452 which is 1,775
less than at the same time in 2005, where the equivalent FTE employee number totalled 46,227.
We also use contractors and agency arrangements to round out our total workforce. Including IT
contractors, non-IT contractors, staff on agency arrangements, full-time employees and employed
equivalents, we had a total workforce of 49,443 as at 30 June 2006 and a total workforce of 52,705
as at 30 June 2005.
More than 90% of our employees work in Australia. However, we also have international
interests, with employees in New Zealand, Asia and other locations as follows:
|
|
|
|
|
|
|
|
|
|
|
As at 30 June |
|
|
2006 |
|
2005 |
New Zealand |
|
|
1,395 |
|
|
|
1,508 |
|
Asia |
|
|
1,884 |
|
|
|
1,060 |
|
Other |
|
|
233 |
|
|
|
298 |
|
The following table summarises full-time employees and equivalents in Australia and overseas
for the past five financial years:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June |
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
Full-time Australian based employees of the
Telstra Group |
|
|
37,599 |
|
|
|
39,680 |
|
|
|
35,774 |
|
|
|
36,781 |
|
|
|
40,084 |
|
Full-time equivalent total for the Telstra Group |
|
|
44,452 |
|
|
|
46,227 |
|
|
|
41,488 |
|
|
|
41,620 |
|
|
|
44,595 |
|
Superannuation
Our employees receive superannuation contributions that are either more generous than or
comply with our legal obligations. The majority of our Australian employees are members of the
Telstra Superannuation Scheme, our default fund, or in the case of some employees who were employed
prior to 1990, the Commonwealth Superannuation Scheme. Refer Relationship with the Commonwealth
The Commonwealth as shareholder.
During fiscal 2006, we implemented Choice of Superannuation Fund in accordance with the
legislation, which came into effect in July 2005. While the legislation allows for certain
categories of our employees to be exempted, we extended this flexibility to as many employees as
possible, subject to other legislative restrictions.
Employee Relations
In September 2005, a new Enterprise Agreement (EA) was certified by the Australian
Industrial Relations Commission. This EA covers approximately 50% of our employees, has a nominal
expiry date of September 2008 and provides pay increases of 2.5% each year over a three-year
period.
Amendments to the Workplace Relations Act 2006 (Work Choices) were enacted on 27 March 2006.
We have adjusted relevant terms and conditions of employment in accordance with the new Work
Choices requirements.
Occupational Health and Safety
We believe that the successful prevention of work-related injury and illness is achieved
through a balance of robust management systems, engaged employees and committed managers. Telstra
Care, our health and safety management system, focuses on leadership in safety, together with
measurable accountabilities, through all levels of management. Each year we undertake an extensive
schedule of occupational health and safety audits with the aim of continually improving safety at
work. For the last nine years, the results have shown year-on-year improvement, which has a high
correlation to our decrease in Lost Time Injuries.
132
Under our Telstra Care health and safety management system, in fiscal 2006 we have:
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|
completed more than 57 external occupational health and safety audits across office and field
based areas throughout Australia, taking the total to over 723 since the audit program
commenced in December 1997; |
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|
included in this are 8 audits of our contractor management systems |
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|
further enhanced and simplified our successful office health, safety and environment planning
to assist managers in achieving safe workplaces; |
As a result of the continuous improvement through the Telstra Groups activities, during fiscal
2006:
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|
|
Lost-Time Injuries (LTIs) reduced by 21% to 157; |
|
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|
|
The 12 month moving average of Lost-Time Injury Frequency Rate (measured by the
number of LTIs per million hours worked) reduced from 3.2 to 2.7; and |
|
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|
The number of open claims has been reduced to 1796. This is a significant milestone
as it is the first time since 1988, when we became a self-insurer that the number of open
claims has fallen below 2000. |
In line with Commonwealth OHS Reporting, the following work-related incidents were reported in
fiscal 2006:
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|
|
42 employees were absent from work as a result of an incident for more than a month; |
|
|
|
|
68 employees required emergency medical treatment or treatment in a hospital; and |
|
|
|
|
201 dangerous occurrences were reported. These are work-related incidents that could
have caused death, serious injury or incapacity to a person, but did not. Notably, we have
a policy of reporting incidents quickly and often investigation reveals that the potential
severity of an incident was less than initially estimated. |
Our focus is to rigorously identify the risks to our people and to manage those risks
appropriately.
Annual general meeting
Telstras annual general meeting was held on 14 November 2006. The following items of business
were considered at that meeting:
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Chairman and CEO presentations; |
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Remuneration Report; |
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|
|
discussion of financial statements and reports; |
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|
|
election and re-election of directors; and |
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proposed new constitution |
At the time of the annual general meeting, the Commonwealth held approximately 51.8% of
Telstras shares.
The results of the annual general meeting were as follows:
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|
|
adoption of the Remuneration Report; |
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election of Mr Geoffrey Cousins and re-election of the following persons
as directors: |
|
1. |
|
Mr Charles Macek |
|
|
2. |
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Dr John Stocker |
|
|
3. |
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Mr Peter Willcox |
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|
4. |
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Mr John Zeglis |
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|
|
adoption of the proposed new constitution. |
133
Competition
Overview
Telstra operates in a number of highly competitive markets. There is no restriction on the
number of carriers or carriage service providers (CSPs) in the Australian market, or on the types
of products and services they may supply. Many of our competitors are subsidiaries of large,
foreign-owned multinationals. Their presence in the Australian market, along with a myriad of
smaller players (notably hundreds of ISPs), contributes to rigorous competition. There is not only
competition within specific product offerings, but between them, as customers are substituting one
method of communication for another, such as mobile for basic access at home. While the overall
communication market has grown in size, our market share has declined due to competition. Further,
the traditionally high-margin PSTN market is shrinking.
In summary, as at 30 June 2006, we estimate our retail market shares in the products and
services we provide to be as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Retail Market Share |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Basic access services |
|
|
71 |
% |
|
|
73 |
% |
|
|
75 |
% |
Local calls |
|
|
71 |
% |
|
|
73 |
% |
|
|
74 |
% |
Domestic long distance minutes |
|
|
63 |
% |
|
|
62 |
% |
|
|
65 |
% |
International long distance minutes |
|
|
50 |
% |
|
|
51 |
% |
|
|
52 |
% |
Mobile services(1) |
|
|
43 |
% |
|
|
45 |
% |
|
|
46 |
% |
Internet services (retail broadband)(2) |
|
|
44 |
% |
|
|
41 |
% |
|
|
41 |
% |
Data revenue(3) |
|
|
62 |
% |
|
|
62 |
% |
|
|
64 |
% |
Subscription television services(4) |
|
|
60 |
% |
|
|
60 |
% |
|
|
58 |
% |
Sensis advertising(5) |
|
|
N/A |
|
|
|
13 |
% |
|
|
13 |
% |
|
|
|
(1) |
|
Based on Telstra, Optus, Vodafone and Hutchinson data. |
|
(2) |
|
Retail broadband includes
BigPond® Broadband and retail business broadband services
like Telstra Mobile Broadband, Internet Direct and Hyperconnect. |
|
(3) |
|
Excludes ISDN but includes some wholesale revenues. |
|
(4) |
|
FOXTEL excludes services provided on a wholesale basis to other providers such as
Optus TV. |
|
(5) |
|
2006 data not available as of the date of this Institutional Offering Memorandum.
Figures are for 31 December. |
Basic access and local calls
Historically, we faced limited competition in basic access and local calls services. Today we
compete for business and residential customers primarily in large cities, because our competitors
have built networks or have access to networks in those areas. Local number portability has
contributed to facilities and network-based competition. We also face increasing competition from
fixed Voice over Internet Protocol (VoIP) call operators.
National long distance and international services
Our market share for national long distance and international telephone services has been
eroded by fierce competition as competitors build switching and build or lease transmission
capacity. In most cases, the PSTN originating and terminating access is purchased from us on a
wholesale basis. We also compete in this market with a number of operators who sell international calling cards direct to the
public via retail outlets.
Mobile telecommunications services
The mobile telecommunications market is highly competitive. Optus, Vodafone and Hutchison own
networks, and several CSPs specialise in the resale of mobile services. We estimate that market
penetration as of 30 June 2006 was 96%. The rate of growth in voice services in operation is
slowing considerably. Mobile service providers are
134
looking to future growth in revenue from high speed data usage by existing subscribers. We expect
that our new high speed NEXT GTM wireless network will provide differentiation in the
mobile market, through greater coverage, faster speeds and new value-added services.
Spectrum is required for mobile services and is auctioned by ACMA from time to time. Limits
may be imposed upon the amounts of spectrum we or other bidders may purchase.
Data access services
The Australian data access market is competitive. Customer demand for new growth data services
based on DSL, Ethernet or IP-based solutions is increasing. Competition is intense in these growth
areas, particularly across niche product solutions and specific geographic areas. Several DSL
network providers are offering DSL based VPN services as an alternative to frame relay or leased
line data connections. Others are offering Voice over DSL (VoDSL) and in the future will likely
offer integrated voice and data bundles. Nine of our competitors have outlined for consideration a
model to build a jointly owned FTTN network to deliver broadband services to a large number of
customers. The Commonwealth has announced a A$878 million scheme to subsidise Internet service
providers to supply broadband services in regional, remote and rural Australia. This scheme is
likely to increase facilities and network-based competition.
Internet access services
The ISP market in Australia is diverse and highly competitive with over 700 ISPs, ranging in
size from very small to substantial. For Internet access services, differentiation includes quality
of service, price, speed, voice bundles, value added services, content and availability of local
call access and associated information or transaction services.
We provide both dial-up and broadband Internet access services using a range of ADSL, cable,
wireless and satellite technologies.
Online services
We compete with domestic and international companies for online, content and web hosting
services. We seek to differentiate ourselves through factors including brand recognition and the
entertainment, educational and commercial value of our content. In response to increasing
competition in the market for content, we have formed alliances with providers of content such as
sport and music to deliver additional value to our customers.
Wholesale services
The wholesale market is becoming more competitive with 30 carriers including Optus and
PowerTel having invested in infrastructure which enables them to offer wholesale products and
services. Telstra Wholesale has more than 500 customers, including approximately 400 ISPs. Telstra
Wholesale is focused on the delivery of communication services to intermediaries operating in
Australia and offers approximately 40 wholesale-only products. Competition is strong in the
wholesale provision of transmission services. Wholesale prices are generally falling as new
competitors enter the wholesale services market.
Subscription television
FOXTEL (of which we own 50%) and Optus are the main providers of subscription television
services over cable in largely overlapping areas.
AUSTAR distributes subscription television through digital satellite systems in regional
areas. FOXTEL and AUSTAR compete only in limited areas.
FOXTEL is the leading subscription television provider in Australia. It has more than 1.25
million subscribers using both cable and satellite (aggregating FOXTELs retail and wholesale
customers). In fiscal 2006, FOXTEL increased its subscribers by more than 10%. Digital services
provide more choice to subscribers and greater revenue to FOXTEL. All FOXTEL services will be
digital by March 2007.
135
Subscription television providers compete with free-to-air television operators. Free-to-air
television operators are given priority in the telecasting of most major sports programs. From
2007, they will be allowed to broadcast an additional channel each.
Advertising, Directories and Information Services
Sensis, our directories and search business, operates within the highly competitive Australian
advertising market. We face competition in automotive, travel and general merchandise markets from
a number of print and online businesses. We also face competition from a variety of print and
online directories and search businesses. The brands and intellectual property of Sensis are very
important to its business and Sensis will consider all avenues open to it to defend those rights.
Competing directory providers have access to CSP subscriber contact details from the
Integrated Public Number Database (IPND) which we maintain as a requirement of our carrier
licence.
Payphones
Our payphones business faces increasing competition from new entrants, the increasing use of
calling cards that erode payphones revenues, and increased mobile usage.
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Regulation
Overview
Current regulations were largely set in 1997 when the structure of the Australian
telecommunications market was substantially different than it is today. In our view, those
regulations significantly diminish shareholder value by increasing our costs and reducing the
opportunity for us to earn revenue and grow, and undermine the development of a sustainably
competitive and financially healthy industry. We face substantial regulatory risks in our business
which have had, and we expect will continue to have, a significant adverse effect on our operations
and financial performance. This is an issue with which management is seriously concerned and
committed to seek reform on behalf of our shareholders.
There are three key areas of regulatory impact:
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Access regulation: the ACCC can require compulsory competitor access to our networks
at prices arbitrated by the ACCC if the parties fail to agree. We believe that those
prices have been significantly less than our calculations of the efficient costs of supply
and effectively provide our competitors with heavily subsidised access to our investments.
There is no right to a merits review of ACCC decisions to require access or arbitrate
prices. The ACCC may hold a public inquiry at any time into whether compulsory competitor
access to our NEXT GTM wireless network should be required. In addition, the
uncertainty associated with the access regime meant that we decided we were not able to
build our proposed A$3 billion fibre to the node (FTTN) network despite the substantial
operational savings and incremental revenues for us and the significant benefits for
Australia in the widespread availability of high speed broadband services; |
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Conduct regulation: Telstra and the ACCC differ in critical instances in their views
as to what amounts to anti-competitive conduct in breach of the TPA. For example, the ACCC
has stated that it has reason to believe that, by raising our basic access prices to
competitors without a similar increase in retail prices, we have engaged in
anti-competitive conduct. In our view, an increase in access prices to allow a greater
recovery of our costs is not anti-competitive conduct. We believe that should the ACCC
allege that we have engaged in anti-competitive conduct, it will rely on the potential of
very large fines in an endeavour to have us modify what we consider to be normal
commercial behaviour. |
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The ACCC may in the future regard other of our conduct as a breach of the TPA. In addition,
the Communications Minister has a broad power to vary our operational separation plan subject
only to the aims and objects of the legislation which are very broad. Any such variation
could allow the Minister to determine the way we conduct our business; and |
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Social regulation: as the former national telecommunications carrier, some
regulations are specific to us and do not apply to our competitors. For example, we are
subject to retail price controls and are obliged to make certain uneconomic services
available in rural and remote areas without in our view receiving a fair contribution to
costs from our competitors. |
We are regulated as a carrier and as a carriage service provider (CSP). A description of
principal industry regulators is set out at the end of this Regulation section.
Access regulation
Part XIC of the TPA is an access regime specific to the telecommunications industry.
Declaration of services
The ACCC may declare that a particular telecommunications service of a carrier or CSP is a
declared service and so must be supplied to access seekers upon request. A carrier or CSP is not
able to seek a merits review of such declarations.
The main services declared by the ACCC are:
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PSTN originating and terminating access (PSTN OTA); |
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mobile terminating access service (MTAS); |
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transmission capacity (except links between mainland capital cities and some routes between
capital cities and regional centres) on various bandwidths; |
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certain digital data access service; |
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an unconditioned local loop service (ULLS) allowing access seekers exclusive use of copper
wires which connect customer premises; |
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a spectrum sharing service (SSS) allowing an access seeker to supply broadband services to
customers while the access provider supplies voice services to the customer; |
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local carriage services (LCS) (except in central business districts); |
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wholesale line rental (WLR) (except in central business districts); and |
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an analogue subscription television broadcast service. |
FTTN
On 15 November 2005, we announced our next-generation network including an extensive FTTN
network to provide high speed broadband services in Australias five largest cities. The rollout of
the FTTN network was, however, subject to obtaining what we viewed a reasonable regulatory outcome
including acceptable guarantees about what services would have to be provided to competitors under
the access regime and how much they would be required to pay. No such outcome was achieved, and
accordingly, on 7 August 2006, we announced that the discussions with the ACCC to allow this
investment to proceed had failed. We have made clear that we would not invest in an FTTN network unless we were
satisfied that our costs would be recognised (especially those we incur in providing services to
rural, regional and remote Australia) and could be recovered.
3G
The ACCC may hold a public inquiry at any time into whether mandated competitor roaming on or
other access to our NEXT GTM wireless network should be required, despite the market for
mobile services being highly competitive. If roaming or other access were mandated, we would lose
the competitive advantage of the wider coverage of our NEXT GTM wireless network,
despite having made a substantial investment in that network. A loss of this ability would have a
substantial impact on our mobile revenues. In fiscal 2006, we grew mobile revenues by A$284
million. We believe future growth in mobile revenues would be severely compromised by mandated
roaming as would our ability to grow or even hold mobile market shares. Further, depending on the
extent to which competitors acquire mandated roaming rather than invest in their own 3G network,
this could result in significant additional mobile and transmission network capital expenditure
requirements on us.
LCS
In July 2006, the ACCC extended the declaration of LCS by three years and declared WLR for the
first time for the same period despite the growing level of facilities and network-based
competition and the fact that line rental had for many years been available from us on a commercial
basis.
Future declarations
If the ACCC believes that it would promote the long-term interests of end users, it may
declare other services, such as a high-speed broadband service using ADSL2+ or HFC cable network.
We believe that such declarations would be unwarranted.
Terms and conditions of access
Part XIC of the TPA also empowers the ACCC to determine the terms of access to the declared
services, taking into account such criteria as the long term interests of end users. For example,
the ACCC has issued Model Terms and Conditions (price and non-price) for core declared services,
such as the ULLS, PSTN OTA and LCS. It has also
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published pricing principles for various declared services informing the industry of how prices for
these services are likely to be determined by the ACCC in an arbitration.
In most cases, the ACCC proposes that the prices of declared services should be cost based to
reflect the total service long run incremental cost (TSLRIC) of providing the service. In
applying the TSLRIC methodology, we have often disagreed with the ACCCs calculation of our TSLRIC
costs of providing declared services. For some services, such as the LCS and WLR, the ACCC has
adopted a Retail Minus Retail Costs (RMRC) approach, which has for some services the potential to
deliver a price that is below our calculation of the TSLRIC of the service.
The legislation also allows the Minister to make a pricing determination setting out
compulsory principles for establishing access prices that must be followed by the ACCC. To date, no
Ministerial pricing determination has ever been issued.
In relation to bilateral negotiations, Part XIC gives primacy to commercial negotiations;
however, if negotiations are unsuccessful, the ACCC has the power to arbitrate the terms and
conditions of access which are in dispute. The ACCC can issue interim and final determinations in
an arbitration. Final determinations may be backdated to the date negotiations between the parties
commenced. In addition, while arbitration proceedings are confidential between the parties, the
ACCC has the ability to publish any determination it makes.
An adverse outcome in an arbitration would harm us in terms of lower wholesale revenues and a
greater ability for our wholesale customers to be competitive in retail markets. It would also
weaken our position in negotiating access prices with other wholesale customers.
An access provider of a declared service may also lodge an undertaking with the ACCC, setting
out the terms and conditions upon which it proposes to provide a declared service. If that
undertaking is accepted by the ACCC, then any determination made by the ACCC in an arbitration must
be consistent with the terms of the accepted undertaking. While it is not possible to apply to the
Australian Competition Tribunal (ACT) for a merits review of an arbitral decision of the ACCC, we
have the right to a merits review by the ACT of a rejection by the ACCC of an access undertaking.
Unconditioned Local Loop Service (ULLS)
ULLS allows our competitors to install their equipment in our exchanges and provide voice and
broadband services to retail customers, bypassing much of our network and allowing them to compete
aggressively in the retail market place. As at 30 June 2006, our competitors had installed
equipment in over 80% of exchanges in band 2, giving them coverage of around 92% of PSTN lines in
band 2 exchanges. We estimate that this coverage in band 2 will increase to around 95% by 30 June
2007. In total, competitors have installed equipment in around 555 exchanges across Australia, and
we estimate that by 30 June 2007, this number will increase to over 1,000 exchanges across
Australia.
The ACCC has over time reduced the prices it believes we should charge for ULLS, although many
of our costs of providing ULLS (such as fuel, copper and labour) have increased significantly over
that time. In addition, the ACCC has indicated that we should charge different prices in different
areas for ULLS, despite the fact that we are effectively required to charge the same residential
and business retail prices for a basic line rental service throughout Australia. This will enable
our competitors to target customers in higher density areas where access prices are low, leaving us
to provide services to many customers in high cost, low density areas at the same retail price as
in metropolitan areas without what Telstra believes to be adequate compensation from the
universal service obligation regime (see below).
In December 2005, we submitted a ULLS access undertaking with a single (or averaged) price of
A$30 per month for all areas. On 28 August 2006, the ACCC issued a final decision, rejecting the
undertaking on the basis that it was not satisfied that our costs and the averaging of those costs
were reasonable. The ACCC did not give an indication of what prices it would regard as reasonable.
We have appealed that rejection to the ACT.
In addition, Primus, Optus, Chime, PowerTel, XYZed, Request and Macquarie are each in
arbitration with us claiming that our charges for ULLS are too high. In August 2006, the ACCC made
binding interim decisions in
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several of these arbitrations that prices remain deaveraged and that the price in band 2 (the
metropolitan area where the greatest number of ULLS services will be provided) be reduced from
A$22 per month to A$17.70 per month. There is a risk of the final decisions setting a lower price.
We will consider all avenues open to us to challenge any such outcome.
Following these decisions, we revised our earnings outlook for fiscal 2007, with EBIT growth
revised to between 2% and 4% from between 4% and 6% (subject to various assumptions), illustrating
that adverse regulatory decisions by the ACCC can have an immediate and significant adverse effect
on Telstras business. Refer Operating and Financial Review and Prospects Outlook.
As an illustration of the longer term impact of such an adverse regulatory decision,
management estimates that ULLS implemented in band 2 in accordance with the ACCCs interim pricing
would lead to an estimated A$2.5 billion reduction in Telstras enterprise value. This estimate
assumes that 20% of PSTN customers are served by ULLS by 2015 and a band 2 access price of A$17.70
per month as compared with the earlier price of A$22 per month. The calculation considers the first
order impacts of the price reduction for wholesale services and assumes a full flow through of the
reduced access price to retail PSTN and broadband prices by us and our competitors.
The impact of such ACCC pricing in subsequent years would be greater due to increased uptake
of ULLS by access seekers.
Spectrum Sharing Service (SSS)
The ACCC has applied TSLRIC pricing principles to the SSS. In December 2005, the ACCC rejected
our SSS monthly charges undertaking of A$9, which was consistent with the range of indicative
prices previously published by the ACCC for the service. We unsuccessfully appealed this rejection
to the ACT.
Primus, Chime and Request are each in arbitration with us claiming that our charges for SSS
are too high. The issues covered by these arbitrations relate to the appropriate price payable for
the monthly charge for SSS, the connection price for SSS, as well as some non-price terms. On 6
October 2006, the ACCC issued two draft interim decisions reducing the monthly charge to A$3.20. If
this significant reduction is confirmed, we believe there will be accelerated growth in SSS
enabling our competitors to provide broadband and VoIP services, placing retail pricing pressure on
us, while we are restricted to supplying basic access services.
PSTN Originating & Terminating Access (PSTN OTA)
The ACCC has published pricing principles for PSTN OTA, stating TSLRIC as the appropriate
methodology for determining the price of the service. We had an access undertaking accepted by the
ACCC for the price of PSTN OTA, which expired on 30 June 2006.
In March 2006, we filed a new undertaking with the ACCC, seeking new prices and a new pricing
structure for the service. The undertaking sets out new prices which would operate for two years
from 1 July 2006. The prices propose an increase from the previous prices that applied, reflecting
our efficient costs of providing the service, and recognizing the falling volume of traffic on the
network. In July 2006, the ACCC indicated in its draft indicative prices that the headline rate
should be A$0.01 per minute compared to a headline rate in our proposed undertaking of A$0.0218 per
minute. In September 2006, the ACCC gave a draft decision rejecting the undertaking.
Optus has notified an access dispute to the ACCC in relation to the price payable to us for
PSTN OTA.
Local Carriage Service (LCS) and Wholesale Line Rental (WLR)
In June 2005, our accepted undertaking for the price of the LCS expired. We filed a new
undertaking with the ACCC in conjunction with its PSTN OTA price, setting out a lower price for the
LCS, which would apply from 1 July 2006. The LCS price reflects our view of the RMRC approach the
ACCC might adopt in determining the LCS price for the period of the undertaking.
In July 2006, the ACCC indicated its draft view that the price of LCS should be A$0.1769 per
call, calculated on an RMRC basis, pending the implementation of a cost based pricing approach.
While this compares well with the price in our proposed undertaking of A$0.0928 per call, the LCS
is usually provided in conjunction with WLR and the ACCC has indicated its draft view that the
price of WLR should be A$23.57 per month residential and
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A$26.30 per month business, calculated on an RMRC basis (pending the implementation of a cost based
pricing approach) compared with our price charged of A$27.60 residential and A$31.77 business per
month. Rebalancing in this way by reducing fixed charges and increasing usage charges would be
detrimental to us. In September 2006, the ACCC gave a draft decision rejecting the LCS undertaking.
Optus has notified access disputes to the ACCC in relation to the terms and conditions of
access for the supply by Telstra of LCS and WLR.
Mobile terminating access service (MTAS)
The ACCC has published pricing principles for MTAS of A$0.15 per minute for calendar 2006 and
A$0.12 per minute for the first six months of 2007. MTAS is an input into the fixed-to-mobile and
mobile-to-mobile services provided by us to our customers. The ACCC has rejected undertakings by
Optus, Vodafone and Hutchison, each of which seek to claim prices in excess of the indicative
prices published by the ACCC (for example, Optus has sought A$0.17 per minute for calendar 2007).
Optus and Vodafone have appealed the ACCCs rejection of their undertakings to the ACT. We have
intervened in these proceedings, and the hearings commenced in August 2006.
We are also engaged in arbitrations against Optus, Vodafone and Hutchison, claiming that the
MTAS prices they are seeking to charge for calendar 2006 are too high. Recently, the ACCC issued
draft final decisions broadly consistent with the ACCCs pricing principles.
Transmission capacity
Chime has filed an arbitration against us, claiming our transmission capacity charges are too
high.
Conduct regulation
Competition rule
In addition to the general requirements of trade practices law, a carrier must not engage in
anti-competitive conduct in breach of the competition rule. A carrier may be in breach of the
competition rule if it:
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contravenes general trade practices rules relating to anti-competitive conduct in respect of
a telecommunications market (including the use of market power for an anti-competitive
purpose); or |
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has a substantial degree of market power and takes advantage of that power with the effect or
likely effect of substantially lessening competition in any telecommunications market, taking
into account other conduct with such an effect. |
The ACCC can issue a Part A competition notice if it has reason to believe that a carrier has
contravened the competition rule.
The ACCC can also issue a Part B competition notice which will be more detailed than a Part A
notice; and it is the presumptive evidence of the information in it that can be used in court
proceedings against the carrier.
Any person (including competitors) may apply at any time to the Federal Court for an
injunction to restrain a contravention of the competition rule, whether or not a competition notice
has been issued.
A carrier may be liable to pay penalties imposed by the Federal Court of up to A$10 million
plus A$1 million per day of contravention or, if the contravention lasts for more than 21 days, up
to A$31 million plus A$3 million per day (up to a maximum period of one year), and may also be
liable for compensatory damages to affected competitors, if:
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it continues to engage in conduct that is the subject of a competition notice after the
notice comes into effect; and |
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the Federal Court finds that the conduct is in breach of the competition rule. |
In Telstras view, the amount of any penalty imposed by the Federal Court is likely to be
significantly less than the maximums set.
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In December 2005, we increased our prices for line access provided to our competitors without
a similar increase in our retail prices, in order to price closer to our average costs of providing
that access. The ACCC appears to allege that these increases left insufficient margin for our
competitors in the retail market even though there is still a profit margin for our competitors in
reselling line rental as a part of a bundled package along with local, long distance and
fixed-to-mobile calls. The ACCC has argued that our conduct is taking advantage of substantial
market power which has or is likely to have the effect of substantially lessening competition in
the retail market, and that therefore we are in breach of the competition rule. On 12 April 2006,
the ACCC issued a competition notice against us to this effect. The ACCC may take us to the Federal
Court for this alleged breach. The maximum potential penalties that the Federal Court could impose
exceed A$470 million as at 30 September 2006 and are increasing at A$3 million per day. Optus
Networks Pty Ltd (ACN 008 570 330) has issued proceedings in the Federal Court which, in part, rely
on the competition notice and seek damages, a refund and an injunction preventing us from charging
the increased prices and recovering our costs. We will vigorously defend these proceedings and any
enforcement proceedings which may be brought by the ACCC, on the basis that we have not breached
the competition rule simply by moving our prices closer to our average cost of providing access.
We have also claimed that the competition notice should be set aside for uncertainty and that
the ACCC did not accord us procedural fairness by failing to properly consult with us prior to the
issue of the notice. The ACCC argues that it has complied with all of its duties of procedural
fairness and natural justice. If this challenge is successful, the ACCC will still be able to issue
a fresh competition notice but only after proper consultation.
Record-keeping rules
We are required by the ACCC to keep detailed financial statements in respect of several
wholesale and retail services. We must report periodically to the ACCC on imputation testing to
establish the adequacy of the margin, between our wholesale and retail prices as part of the
accounting separation provisions. If there is an inadequate margin the ACCC can investigate to see
if we have breached the competition rule. We are also required to keep detailed records and report
to the ACCC comparing our performance in providing and maintaining basic access and ADSL services
to retail and wholesale customers. Our imputation tests and performance reports are published by
the ACCC.
We estimate that compliance with the ACCC record-keeping rules costs us A$2.3 million per
annum. Most of this expense is associated with accounting separation. To date, there has been no
indication whether this requirement will be removed in light of the introduction of operational
separation.
Operational separation
While the Commonwealth has firmly rejected calls for the Telstra wholesale and resale
businesses to be placed in separate ownership, in September 2005, legislation was passed mandating
the operation of separate retail, wholesale and network business units (operational separation). We
prepared an operational separation plan which was adopted by the Communications Minister in June
2006. In general, the plan covers:
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the requirement to keep various business units separate; |
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measures we have adopted to ensure that the standard of delivery of services and information
to wholesale customers is equivalent to that for retail customers; |
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a price equivalence framework directed towards providing assurance that we are behaving
legitimately in the pricing of particular services; and |
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provisions to ensure that we provide equivalent operational quality, fault detection and
rectification and service activation and provisioning for retail and wholesale customers of
those services. |
We are also required to establish and publish notional contracts between our network services,
wholesale and retail business units as a means of achieving equivalence in operational quality,
fault detection and rectification and service activation and provisioning.
The operational separation provisions place an additional burden on us with numerous
restrictions imposed on the way we run our business. An important risk with operational separation
lies in the power of the Communications
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Minister to make such variations to our operational separation plan as could allow the
Communications Minister to determine the way we conduct our business, subject only to the aims and
objects of the legislation which are very broad.
Social Policy Regulations
Retail price restrictions
The Communications Minister has set retail price controls on some of our services that apply
until 30 June 2009. These price controls do not apply to our competitors.
A basket of our line rentals, local, national, international and fixed-to-mobile calls is
subject to an overall price freeze. Up to 30 June 2007, some services are subject to a price cap of
1.5 X CPI, and, between 1 July 2007 and 30 June 2009 our basic line rental products and connection
services may be increased only by the rate of inflation. These caps may limit our ability to increase line
rental charges to recover their full cost and to rebalance our charging between line rentals and
call charges. We are required to offer a basic line rental service to residential and business
customers at the same price throughout Australia. In addition, we must offer a standard line rental
to residential customers, charity customers and schools.
In addition, we are subject to the following regulations:
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The ACCC has powers to monitor and report on our compliance with price controls and
has broad discretion to determine methodologies that specify how the price controls to
which we are subject are to operate. |
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We are not permitted to charge more than A$0.50 (including GST) for a local call from
a public payphone or (in most cases) more than A$0.22 (including GST) for an untimed local
call from any other service. |
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Our price for local calls provided in non- metropolitan areas must not exceed the
price charged by us in metropolitan areas. |
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We cannot charge more than A$0.22 (including GST) for certain calls made to an
Internet service provider using an 0198 access number. |
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We cannot impose or alter a charge for a directory assistance service without
notifying the Communications Minister who may disallow such changes. |
All CSPs must offer untimed calls to residential and charity customers for all local calls and
to business customers for local voice calls.
The extent to which we face facilities or network-based competition varies significantly
across the country. In many areas there is substantial alternative network investment reflecting
higher population densities. We are effectively required to charge the same price for a basic line
rental service for all retail customers across Australia, without what we believe to be adequate
compensation from the universal service obligation regime (see below).
Carrier licences
All carriers must as a condition of their carrier licence comply with the Telecommunications
Act, the Telecommunications (Consumer Protection and Service Standards) Act and their access
obligations under the TPA. The Communications Minister has broad powers to impose further
conditions on any carrier licence. Any breach of a licence condition is subject to a penalty of up
to A$10 million imposed by the Federal Court.
Local presence licence condition
In 2005, the Communications Minister issued a licence condition requiring us to maintain a
local presence in regional, rural and remote Australia, to the extent that this is broadly
compatible with our overall commercial interests and does not impose undue financial or
administrative burdens on us. The licence condition requires us to prepare a plan setting out how
we will fulfil the condition for approval by the Communications Minister. We are required to take
all reasonable steps to comply with our approved plan.
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Universal service and digital data service obligations
We have an obligation to fulfil the universal service obligation (USO) and the Digital Data
Service Obligation (DDSO) throughout the whole of Australia. We must ensure that standard voice
services, payphones and a digital data service with a speed broadly equivalent to 64kbps are
reasonably accessible to all people in Australia on an equitable basis, wherever they reside or
carry on business. We must also take into account the needs of customers with disabilities. We are
required to submit plans to ACMA and the Communications Minister for their approval which set out
how we will fulfil the USO and DDSO throughout Australia.
Our net losses that result from supplying services under the USO and DDSO are required to be
shared among all carriers according to their size by revenue. The other participating carriers
typically pay around 30% of the net USO cost. The universal service subsidies are determined by the
Communications Minister and historically have been significantly less than our actual costs in
meeting the USO and DDSO and the costs last modelled by ACMA. The last time ACMA undertook a
detailed costing of the USO, it estimated the total USO cost to be A$548 million per annum,
although we estimate the cost to be significantly higher. The capped costs for fiscal 2006 to
fiscal 2008 are A$171.4 million, A$157.7 million and A$145.1 million respectively.
Customer service guarantee (CSG)
ACMA has made mandatory standards for CSPs in relation to the connection and repair of
standard voice telephone services and the keeping of customer appointments. From 31 October 2006,
the damages payable for CSG breach include: up to A$24.20 for a missed appointment and up to
A$24.20 for each working day of delay up to five working days and up to A$48.40 per working day of
delay after that for delayed connection or repair. Damages cannot exceed A$25,000 per customer for
each contravention.
We alone must also comply with a network reliability framework set by the Communications
Minister which imposes obligations for the monitoring, prevention and remedying of CSG faults.
Principal industry regulators
The Communications Minister is primarily responsible for telecommunications industry policy
and legislation and has very broad discretionary powers to make rules and licence conditions and to
give directions, a breach of which is subject to a penalty imposed by the Federal Court of up to
A$10 million.
The ACCC administers the TPA which regulates competition generally and includes specific
provisions governing conduct in the telecommunications industry and mandated access to certain
telecommunications services. The ACCC also administers retail price control arrangements that apply
only to us.
ACMAwas formed on 1 July 2005, assuming the functions previously held by the Australian
Communications Authority and the Australian Broadcasting Authority. ACMA is responsible for
regulating the technical aspects of the telecommunications industry. Importantly, ACMA also
administers spectrum use policy and the issuing of spectrum licences, which are of critical
importance to mobile telecommunications.
ACMA may give written directions to carriers and CSPs requiring them to comply with various
provisions of the Telecommunications Act, the Telecommunications (Consumer Protection and Service
Standards) Act and their licence conditions. Breach of such a direction is subject to a penalty
imposed by the Federal Court of up to A$10 million.
The ACCC and ACMA are independent statutory agencies and the ACCC is in general not subject to
ministerial oversight or direction. The Telecommunications Industry Ombudsman is an industry-funded
body established to investigate and resolve retail customer complaints about telecommunications
services and carrier land access disputes. Participation is mandatory for all carriers and most
CSPs.
The industry also self-regulates through codes and standards. An industry body, the Australian
Communications Industry Forum (ACIF), has developed many codes regulating detailed technical and
operational aspects
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of the telecommunications industry in areas such as billing accuracy, churn, credit management and
customer transfer. On 1 September 2006, ACIF merged with the Service Providers Association
Incorporated (SPAN) and formed the Communications Alliance.
ACMA registers ACIF codes under the Telecommunications Act and has the power to direct
carriers or CSPs in breach of a code to comply. Breach of a direction is subject to a penalty of up
to A$250,000 imposed by the Federal Court.
Offshore subsidiaries
Our international operations are subject to regulation and licensing requirements in Hong
Kong, Japan, Singapore, New Zealand and the United Kingdom. We are also subject to regulation and
licensing requirements by the US Federal Communications Commission and state regulators in the
states of New York, Texas and California.
Some of these licenses may require notification or approvals from the relevant regulators and
related governmental departments in respect of any change in control resulting from the completion
of the Global Offering and the Commonwealths transfer of its shares in Telstra to the Future Fund.
Some of the consents required in relation to our United States and Singapore regulatory licenses
and related agreements may not be obtained when required, in which case fines and other penalties
may be imposed. There is a risk that these licenses and related arrangements may also be cancelled.
While we do not believe that the relevant businesses make a significant contribution to our
financial results, if one or more of REACHs licenses were cancelled, this could have a significant
effect on the carriage of our international voice and data traffic.
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Directors and Management
Directors
As of the date of this Institutional Offering Memorandum, our directors were as follows:
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Year of Initial |
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Year Last |
Name |
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Age |
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Position |
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Appointment |
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Re-elected(1) |
Donald G McGauchie |
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56 |
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Chairman |
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1998 |
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2005 |
Sol Trujillo(2) |
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54 |
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Chief Executive Officer |
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2005 |
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2005 |
Geoffrey Cousins |
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62 |
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Director |
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2006 |
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Belinda J Hutchinson |
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53 |
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Director |
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2001 |
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2004 |
Catherine B Livingstone |
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51 |
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Director |
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2000 |
|
2005 |
Charles Macek |
|
59 |
|
Director |
|
2001 |
|
2006 |
John W Stocker |
|
61 |
|
Director |
|
1996 |
|
2006 |
Peter J Willcox |
|
61 |
|
Director |
|
2006 |
|
|
John D Zeglis |
|
59 |
|
Director |
|
2006 |
|
|
|
|
|
(1) |
|
Other than the CEO, one-third of directors are subject to re-election by rotation
each year. |
|
(2) |
|
Sol Trujillo was appointed Chief Executive Officer 1 July 2005. |
A brief biography for each of the directors and the company secretary as of the date of this
Institutional Offering Memorandum, is presented below:
Donald G McGauchie AO
Mr McGauchie joined Telstra as a non-executive director in September 1998 and was appointed as
chairman in July 2004. He is Chairman of the Nomination Committee and is a member of the
Remuneration Committee.
|
|
|
Experience: Mr McGauchie has wide commercial experience within the food processing,
commodity trading, finance and telecommunication sectors. He also has extensive public
policy experience, having previously held several high-level advisory positions to the
government including the Prime Ministers Supermarket to Asia Council, the Foreign Affairs Council and
the Trade Policy Advisory Council. |
|
|
|
|
Directorships of other listed companies current: Director, James Hardie Industries
NV (since 2003) and Nufarm Limited (since 2003). |
|
|
|
|
Directorships of listed companies past three years: Deputy chairman, Ridley
Corporation Limited (1998-2004); director, National Foods Limited (2000-2005) and
Graincorp Limited (1999-2003). |
|
|
|
|
Other: Current: director, Reserve Bank of Australia; Partner, C&E McGauchie
Terrick West Estate. Former: President of the National Farmers Federation (1994-1998);
Chairman, Rural Finance Corporation (2003-2004). Awarded the Centenary Medal for service
to Australian society through agriculture and business in 2003. Appointed an officer in
the general division of the Order of Australia in 2004. |
Solomon D Trujillo BSc, BBus, MBA, Hon Doctor of Law Degrees (University of Wyoming,
University of Colorado).
Mr Trujillo joined Telstra as CEO on 1 July 2005.
|
|
|
Experience: Mr Trujillo has spent his career in the communications sector where he
managed fixed-line, wireless, broadband and directory businesses and served as a leader in
the shift to market-based management. He most recently served as CEO of Orange SA, one of
Europes leading wireless companies. Mr Trujillo was Chairman and CEO of US West until he
retired in July 2000 after the companys merger with Qwest Communications. |
|
|
|
|
Directorships of other listed companies current: Target Corporation (since 1994). |
|
|
|
|
Directorships of listed companies past three years: Director, Electronic Data
Systems Corporation (EDS) (2005-2005), PepsiCo Inc. (2000-2005), Orange SA (2001-2005) and
Gannett Co Inc (2002-2006). |
146
|
|
|
Other: Current: Member, World Economic Forum (since 2005) and UCLAs School of Public
Affairs (since 2000); Trustee, Boston College; Director, Tomas Rivera Policy Institute
(since 1991). Recipient, the Ronald H. Brown Corporate Bridge Builder Award in 1999 from President Clinton
for his lifetime commitment as an advocate of workplace diversity.
|
Geoffrey Cousins
Mr Cousins was elected as a non-executive director of Telstra at the companys annual general
meeting held on 14 November 2006.
|
|
|
Experience: Mr Cousins has more than 26 years experience as a company director. Mr
Cousins was previously the Chairman of George Patterson Australia and is a former Director
of Publishing and Broadcasting Limited, the Seven Network, Hoyts Cinemas group and NM
Rothschild & Sons Limited. He was the first Chief Executive of Optus Vision and before
that held a number of executive positions at George Patterson, including Chief Executive
of George Patterson Australia. |
|
|
|
|
Directorships of other listed companies current: Insurance Australia Group Limited
(since 2000). |
|
|
|
|
Directorships of listed companies past three years: Globe International Limited
(2001-2003). |
|
|
|
|
Other: Mr Cousins was previously a consultant to the Prime Minster and is a director
of the Cure Cancer Australia Foundation. |
Belinda J Hutchinson BEc, FCA
Ms Hutchinson joined Telstra as a non-executive director in November 2001. She has been a
member of the Audit Committee since February 2005.
|
|
|
Experience: Ms Hutchinson has had a long association with the banking industry and
has been associated with Macquarie Bank since 1993 where she was an executive director.
She was previously a Vice President of Citibank Ltd. |
|
|
|
|
Directorships of other listed companies current: Director, QBE Insurance Group
Limited (since 1997) and Coles-Myer Ltd (since 2005). |
|
|
|
|
Directorships of listed companies past three years: Director, TAB Limited
(1997-2004) and Crane Group Limited (1997-2004). |
|
|
|
|
Other: Current: Director, St Vincents and Mater Health Sydney Limited (since 2001);
President, Library Council of New South Wales (since 2005) (member since 1997); and
Consultant, Macquarie Bank Limited (since 1997). Former: Director of Energy Australia
Limited (1997-2005). |
Catherine B Livingstone BA (Hons), FCA, FTSE
Ms Livingstone joined Telstra as non-executive director in November 2000. She is a member of
the Audit Committee and the Technology Committee.
|
|
|
Experience: Ms Livingstone has a degree in accounting and has held several finance
and general management roles predominantly in the medical devices sector. Ms Livingstone
was the Chief Executive of Cochlear Limited (1994-2000). |
|
|
|
|
Directorships of other listed companies current: Director, Macquarie Bank Limited
(since 2003). |
|
|
|
|
Directorships of listed companies past three years: Director, Goodman Fielder Ltd
(2000-2003) and Rural Press Limited (2000-2003). |
|
|
|
|
Other: Current: chairman, CSIRO (2001- ); Member, Business/Industry/Higher Education
Collaboration Committee (BIHECC). |
Former: Chairman and Director Australian Business Foundation (2000-2005);
Director, Sydney Institute (1998-2005); former Member, Department of Accounting and Finance
Advisory Board Macquarie University.
147
Charles Macek BEc, MAdmin, FAICD, FCPA, FAIM, SF Fin, FCA
Mr Macek joined Telstra as a non-executive director in November 2001. He is a member of the
Audit Committee and Nomination Committee and is Chairman of the Remuneration Committee.
|
|
|
Experience: Mr Macek has a strong background in economics and has had a long
association with the finance and investment industry. His former roles include 16 years as
founding Managing Director and Chief Investment Officer and subsequently Chairman of
County Investment Management Ltd. |
|
|
|
|
Directorships of other listed companies current: Director, Wesfarmers Ltd (since
2001) and Living Cell Technologies Limited (since 2006). |
|
|
|
|
Directorships of listed companies past three years: Chairman and director, IOOF
Holdings Ltd (2002-2003). |
|
|
|
|
Other: Current: Chairman, Sustainable Investment Research Institute Pty Ltd (since
2002) and Financial Reporting Council (FRC) (since 2003); Director, Williamson Community
Leadership Program Limited (since 2004); Victorian councillor, Australian Institute of
Company Directors; Member, New Zealand Accounting Standards Review Board and Investment
Committee of Unisuper Ltd. |
Former: Chairman, Centre for Eye Research Australia Ltd (1996-2003); director of Famoice
Technology Pty Ltd
(2001-2004) and Vertex Capital Pty Ltd (2004-2006).
John W Stocker AO, MB, BSc, BMedSc, PhD, FRACP, FTSE
Dr Stocker joined Telstra as a non-executive director in October 1996. He is Chairman of the
Audit Committee and Technology Committee.
|
|
|
Experience: Dr Stocker has had a distinguished career in pharmaceutical research and
extensive experience in management of research and development, and its commercialisation
including in his roles as Chief Executive of CSIRO (1990-1995) and subsequently as chief
scientist for the Commonwealth of Australia (1996-1999). |
|
|
|
|
Directorships of other listed companies current: Chairman, Sigma Pharmaceuticals
Ltd (since 2005); director, Circadian Technologies Ltd (since 1996) and Nufarm Limited
(since 1998). |
|
|
|
|
Directorships of listed companies past three years: Chairman, Sigma Company Ltd
(1998-2005); director, Cambridge Antibody Technology Group plc (1995-2006). |
|
|
|
|
Other: Current: Principal, Foursight Associates Pty Ltd. |
Former: Chairman, Grape and Wine Research and Development Corporation (1997-2004).
Peter J Willcox MA, FAICD
Mr Willcox joined Telstra as a non-executive director on 17 May 2006.
|
|
|
Experience: Mr Willcox holds a masters degree in physics from Cambridge University
and following a 28 year career in the international petroleum industry was appointed as
CEO of BHP Petroleum Limited, from 1986 to 1994. He has wide and diverse experience as a
director and Chairman of Australian and American listed companies. He sits on the advisory
board of CVC Asia Pacific (Australia) Limited. |
|
|
|
|
Directorships of other listed companies current: Chairman, Mayne Pharma (since
2005). |
|
|
|
|
Directorships of listed companies past three years: Director, AMP Limited (2002-2005) and Mayne Group Ltd (2002-2005). |
|
|
|
|
Other: Current: Director, CSIRO (2006- ). |
Former: Director, Energy Developments Ltd (1994-2002), Lend Lease Corporation (1994-2000);
F.H. Faulding & Co Ltd (1996-2001), James Hardie Industries Ltd (1992-2001), North Ltd
(1994-2000), Schroders (Australia) Ltd (1994-1999), BHP Ltd (1988-1994) and Woodside
Petroleum (1986-1993).
148
John D Zeglis BSc Finance, JD Law
Mr Zeglis joined Telstra as a non-executive director on 17 May 2006.
|
|
|
Experience: Mr Zeglis has a legal background, and became partner with the law firm
Sidley & Austin in 1978. His qualifications include a BSc in finance from the University
of Illinois, and a JD in law from Harvard. Mr Zeglis has had a long and distinguished
career in the US telecommunications sector. He joined AT&T in 1984, and was elected as
President of AT&T in 1998 and Chairman and CEO of the AT&T Wireless Group in 1999. He
continued as CEO of AT&T Wireless until retiring in November 2004 following the companys
sale to Cingular Wireless. |
|
|
|
|
Directorships of other listed companies current: Director, Helmerich & Payne
Corporation (since 1989). |
|
|
|
|
Directorships of listed companies past three years: Director, Georgia Pacific
Corporation (2001-2005). |
|
|
|
|
Other: Current: director, AMX Corporation; (since 2005) and State Farm Automobile
Insurance (since 2004). |
Former: director, Sara Lee Corporation (1998-2000) and Illinois Power Company (1992-1996).
The following directors resigned or retired during fiscal 2006:
|
|
|
John E Fletcher resigned as a director on 30 June 2006; |
|
|
|
|
John T Ralph retired as a director on 11 August 2005; |
|
|
|
|
Anthony J Clark retired as a director on 11 August 2005; and |
|
|
|
|
Zygmunt E Switkowski resigned as a director on 1 July 2005. |
Qualifications and experience of our company secretary
Douglas C Gration FCIS, BSc, LLB (Hons), GDip AppFin
Mr Gration was appointed as our company secretary in August 2001. Before joining us, Mr
Gration was a partner in a leading national law firm. He specialised in corporate finance and
securities law, mergers and acquisitions and joint ventures and other commercial contracts, and
played a key role in the T1 and T2 privatisations. Mr Gration also advised on telecommunication
regulatory matters. Other roles previously held in Telstra include deputy group general counsel and
Infrastructure Services and Wholesale General Counsel.
149
Senior executives
As of the date of this Institutional Offering Memorandum, the senior executives who are not
directors are:
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Year |
|
|
|
|
Appointed to a |
|
Appointed to |
Name |
|
Position |
|
GMD Position |
|
Telstra |
Bruce Akhurst |
|
Group Managing Director Telstra
Media Services & CEO, Sensis |
|
1999 |
|
1996 |
Geoff Booth |
|
Group Managing Director, Telstra
Country Wide® |
|
2006 |
|
1973 |
Phil Burgess |
|
Group Managing Director, Public
Policy & Communications |
|
2005 |
|
2005 |
Andrea Grant |
|
Group Managing Director, Human Resources |
|
2005 |
|
2005 |
Holly Kramer |
|
Group Managing Director, Telstra
Product Management |
|
2005 |
|
2000 |
Kate McKenzie |
|
Group Managing Director, Telstra Wholesale |
|
2006 |
|
2004 |
Justin Milne |
|
Group Managing Director, Telstra BigPond® |
|
2005 |
|
2002 |
David Moffatt |
|
Group Managing Director, Telstra
Consumer Marketing & Channels |
|
2001 |
|
2001 |
Michael Rocca |
|
Group Managing Director, Telstra Services |
|
2002 |
|
1968 |
Deena Shiff |
|
Group Managing Director, Telstra Business |
|
2004 |
|
1998 |
John Stanhope |
|
Group Managing Director, Finance
& Administration and Chief Financial Officer |
|
2003 |
|
1967 |
|
|
|
|
|
|
|
William Stewart |
|
Group Managing Director, Strategic Marketing |
|
2005 |
|
2005 |
David Thodey |
|
Group Managing Director, Telstra
Enterprise and Government |
|
2001 |
|
2001 |
Greg Winn |
|
Chief Operations Officer |
|
2005 |
|
2005 |
A brief biography of each of the fourteen Group Managing Directors, including the seven key
management personnel who are not directors, as of the date of this Institutional Offering
Memorandum, is as follows:
Bruce J Akhurst LLB, BEc (Hons)
Bruce Akhurst is the Group Managing Director of Telstra Media Services and Chief Executive
Officer of Sensis. Bruce also has management responsibility for our digital media strategy, which
includes our 50% interest investment in FOXTEL. In March 2005, Bruce was appointed Chairman of the
FOXTEL board. Prior to his appointment as CEO of Sensis, Bruce was Group Managing Director, Telstra
Wholesale,
BigPond® and Media Services and he also headed our Legal and Company Secretariat group
and was Telstras Group General Counsel. Bruce joined Telstra as General Counsel in 1996 and became
Group Managing Director in 1999. Before joining Telstra, he was the Managing Partner at a national
law firm. He has an Economics degree with Honours, as well as his legal qualification.
Geoff Booth
Geoff Booth was appointed Group Managing Director of Telstra Country Wide on 1 January 2006
after a 33-year career with Telstra. He served as a Regional Managing Director of Telstra Country
Wide since its formation in June 2000, with responsibility for whole-of-business performance in
Western Australia, South Australia (for all areas outside Perth and Adelaide) and the Northern
Territory. Before moving to Telstra Country Wide, Geoff was National General Manager Business and
Government Energy and Resources, responsible for the sales force that account-managed Telstras
largest customers in this sector. Prior to this, Geoff was the State Sales Manger, Business and
Government in Western Australia.
150
Phil Burgess PhD
Phil Burgess was appointed Group Managing Director, Public Policy & Communications on 15
August 2005. Phil has a long record of leadership in public policy and communications with broad
experience as an academic, business executive, media commentator and writer on economic, political
and cultural trends in the US and around the world. Prior to his appointment with Telstra, Phil has
served most recently as President & Chief Executive of the National Academy of Public
Administration in Washington, D.C. Phil also served as President of the Annapolis Institute, a US
think tank established in 1993 to help leaders manage change at every level in both the public
and private sectors. Phil also serves as a Visiting Professor of Policy Studies at UCLAs public
policy school, where he teaches in the graduate program on communications and culture.
Andrea Grant B.Ed, DipTch
Andrea Grant was appointed Group Managing Director, Human Resources on 31 October 2005. Andrea
joined Telstra from GM Holden where she was Executive Director, Human Resources, a position she
held since 2001. Before joining GM Holden, Andrea was Human Resources Director of Merck, Sharp &
Dohme (New Zealand) Limited. Andrea began her career in human resources in 1984 and has over twenty
years experience in the field, working in both Australian and global businesses. Andrea holds a
Bachelor of Education Degree and a Post Graduate Diploma in Teaching. In addition she is a graduate
of the London Business Schools Advanced Development Programme.
Holly Kramer BA (Hons), MBA Mktg (Hons)
Holly Kramer is the Group Managing Director, Telstra Product Management. Most recently, Holly
held the role of Managing Director of Products, Wireless & Mobility, where she was accountable for
the development and lifecycle management of Telstras wireless and mobility products and networks.
In her previous position as Chief of Marketing for Telstra Retail, Holly was accountable for the
strategic direction and implementation of marketing plans for the consumer and business markets.
Before joining Telstra, Holly was General Manager of Marketing and Communications at eCorp. Prior
to that, she spent three years as General Manager of Marketing with Ford Australia and five years
in various marketing management positions with Ford Motor Company, USA. Holly has a BA (Hons) from
Yale University and an MBA Mktg (Hons) from Georgetown University. She is Chair of the Australian
Mobile Telecommunications Association (AMTA) and sits on the Boards of mNet Corporation and
TelstraClear Limited.
Kate McKenzie BA, LLB
Kate McKenzie was appointed Group Managing Director, Telstra Wholesale on 16 January 2006.
Kate joined Telstra in August 2004 as head of Telstra Regulatory. Within a year she was promoted to
the role of Deputy Group Managing Director, Public Policy & Communication. Prior to joining
Telstra, Kate was Director General of the NSW Department of Commerce. She previously held positions
as the Director General of the NSW Department of Industrial Relations, General Manager of the WorkCover
Authority of NSW, and Deputy Director General of the NSW Cabinet Office. During her career, Kate
has been involved in the development and implementation of competition policy, energy reform,
corporatisation and privatisation and Commonwealth/State negotiations on a range of complex policy
issues. Kate holds a Bachelor of Arts/Bachelor of Laws from the University of Sydney.
Justin Milne BA
Justin Milne was appointed Group Managing Director of BigPond® in December 2005, following
three years as BigPond® Managing Director. He is responsible for driving the growth of
BigPonds®brand and Telstras Internet content. Under his direction, BigPond® has led the market in
developing online content and applications. These efforts have been recognised with several
national awards including the 2005 best ISP award at the Australian Telecom Awards. Prior to his
career at Telstra, Justin was CEO of OzEmail, formerly Telstras biggest ISP competitor, and
Managing Director of the Microsoft Network in Australia. Justin is a former board member and past
president of the Internet Industry Association. He holds a Bachelor of Arts from Flinders
University.
151
David Moffatt BBus (Mgt), FCPA
David Moffatt was appointed Group Managing Director of the Consumer & Channels on 1 October
2003. The groups activities encompass the provision of the full range of telecommunication
products, services and communication solutions to consumer customers in Australia. The group also
manages the mass market channels including inbound and outbound call centres, Telstra shops and
Telstra dealers. David joined Telstra in February 2001 as Chief Financial Officer and Group
Managing Director, Finance and Administration. Prior to joining Telstra, David was Chief Executive
Officer General Electric, Australia and New Zealand and CEO of GE Capital in Australia and New
Zealand. He joined General Electric in 1991. David is a graduate of Queensland University of
Technology, with a Bachelor of Business (Management).
Michael Rocca MBA, DipEng, FAICD
Michael Rocca is the Group Managing Director for the Telstra Services business unit. Michael
was appointed Group Managing Director in August 2002 an appointment that builds on three decades
of experience in telecommunications over a variety of senior executive roles. Telstra Services
comprises of approximately 17,000 Telstra staff as well as an extensive contract workforce, and is
responsible for the end to end delivery of service to Telstras approximately 11 million customers
over all of Telstras networks, including fixed line, mobile and satellite. Michael holds a Master
of Business Administration, a Diploma of Engineering, as well as a range of qualifications in
management. He is also a fellow of the Australian Institute of Company Directors.
Deena Shiff B.Sc (Econ) Hons; B.A. (Law) Hons
Deena was appointed to the role of Group Managing Director, Telstra Business in January 2006.
Prior to that, Deena held the role of Group Managing Director, Telstra Wholesale. Deena started her
career in telecommunications with the former OTC Ltd in 1989. Deena held a number of positions in
Telstra, including General Manager Corporate Affairs in the International Business Unit. Between
1995 and 1998, Deena was a partner in the Corporate Advisory Section of the law firm Mallesons
Stephen Jaques. Deena rejoined Telstra in 1998 as Director of Regulatory. Deena has held a number
of non-executive directorships in both the telecommunications industry and other sectors. Deena has
a degree from the London School of Economics and a law degree from Cambridge University. She was
admitted to the Bar in London in 1981.
John Stanhope B Com (Economics and Accounting), FCPA, FCA, FAICD, FAIM
John Stanhope was appointed to the role of Chief Financial Officer and Group Managing
Director, Finance & Administration from 1 October 2003. He is responsible for finance, treasury,
risk management and assurance, corporate planning, reporting and analysis, business services,
investor relations and the Office of the Company Secretary. John previously served as Director,
Finance. In this role, which he assumed in 1995, he contributed to T1 and T2, cost reduction
programs, growth strategies, debt raising, capital management and organisational restructures.
Since joining Telstra in 1967, John has held a range of senior financial management positions
including General Manager, Strategy and Finance Special Business Products; General Manager,
Finance and Business Planning Network Products; and Executive General Manager Business Support
Services. In 2003, John was
elected as National President to the Group of 100 for a two year period. He was also appointed
as a member of the CPA Australias Professional Education Board for a three year term and is
chairman of the Business Coalition for Tax Reform. John is a director of Telstra Super,
TelstraClear, Sensis Pty Limited and the Telstra Foundation, and is Chairman of CSL New World
Mobility Ltd, 3GIS, and REACH. John was appointed as a member of the Financial Reporting Council in
2006.
William J Stewart B.Sc (Mathematics & Physics)
Bill Stewart was appointed Group Managing Director of Strategic Marketing in July 2005. Prior
to his appointment at Telstra, Bill was Executive Vice President of Strategic Marketing at Orange
SA, based in London. Bill has over twenty-five years experience in the communications industry,
including positions at Harris Corporation, GTE Corporation and US West. Bill has an excellent
record of achievement in driving customer-focused strategies and world class marketing in the US
and Europe.
152
David Thodey BA, FAICD
David Thodey joined Telstra in April 2001 as Group Managing Director of Telstra Mobile. He was
appointed to the position of Group Managing Director, Telstra Enterprise and Government in December
2002 and is now responsible for our corporate, government and large business customers. Before
joining Telstra, David was Chief Executive Officer of IBM Australia/New Zealand and previously held
several senior executive marketing and sales positions within IBM. David is the chairman of
TelstraClear in New Zealand, and is also the chairman of the KAZ Group. He holds a Bachelor of Arts
in Anthropology and English from Victoria University in New Zealand. David attended the Kellogg
Post-Graduate School General Management Program at Northwestern University in Chicago.
Greg Winn
Greg Winn was appointed Telstras Chief Operations Officer (COO) on 11 August 2005. His
responsibilities include Telstra Services, Product Management, Billing, Credit Management,
Procurement, Strategic Supplier Relations and Network, Information and Wireless Technologies. Greg
also manages the cross company Program Office, and serves as a director of FOXTEL. Greg Winn has
more than 30 years experience in the telecommunications industry, with more than ten years
experience as a senior operations officer. Prior to joining Telstra, Greg served as Executive Vice
President, Operations and Technologies at US West, where he established and led major initiatives
to increase productivity through process and technology improvements. Greg held positions in
network services, corporate finance, small business services, product management, marketing and
sales. Greg attended Arizona State University.
For a full discussion of the remuneration and benefits we paid our directors and officers, who
are our key management personnel, see Directors and Management Remuneration.
Directors and senior executives shareholdings in Telstra
As at 18 November 2006, the directors and key management personnels shareholdings in Telstra
are:
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Held |
|
|
Direct Interest |
|
Indirect Interest(1) |
|
Total |
Donald G McGauchie |
|
|
1,866 |
|
|
|
68,278 |
|
|
|
70,144 |
|
Sol Trujillo |
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey Cousins |
|
|
|
|
|
|
|
|
|
|
|
|
Belinda J Hutchinson |
|
|
38,912 |
|
|
|
40,426 |
|
|
|
79,338 |
|
Catherine B Livingstone |
|
|
11,637 |
|
|
|
27,800 |
|
|
|
39,437 |
|
Charles Macek |
|
|
|
|
|
|
53,704 |
|
|
|
53,704 |
|
John W Stocker |
|
|
2,953 |
|
|
|
99,985 |
|
|
|
102,938 |
|
Peter J Willcox |
|
|
|
|
|
|
31,897 |
|
|
|
31,897 |
|
John D Zeglis |
|
|
16,500 |
|
|
|
1,897 |
|
|
|
18,397 |
|
|
|
|
(1) |
|
Shares in which the director does not have a relevant interest, including shares held by
director related entities, are excluded from indirect interests. |
153
Key Management Personnel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Held |
|
|
Direct Interest |
|
Indirect Interest(1) |
|
Total |
Bruce Akhurst |
|
|
4,880 |
|
|
|
17,000 |
|
|
|
21,880 |
|
Kate McKenzie |
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
167,022 |
|
|
|
|
|
|
|
167,022 |
|
Deena Shiff |
|
|
5,680 |
|
|
|
|
|
|
|
5,680 |
|
John Stanhope |
|
|
75,715 |
|
|
|
|
|
|
|
75,715 |
|
David Thodey |
|
|
138,342 |
|
|
|
800 |
|
|
|
139,142 |
|
Greg Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Shares in which the director does not have a relevant interest, including shares held by
director related entities, are excluded from indirect interests. |
Remuneration
Refer to the Remuneration Report filed as part of our 2006 Annual Report, attached to this
Institutional Offering Memorandum as Annex A.
Corporate Governance and Board Practices
The Telstra Board is committed to best practice in the area of corporate governance. Our main
corporate governance and board practices in place during fiscal 2006 are described in this section
and, where appropriate, elsewhere in the Institutional Offering Memorandum, as indicated.
We regularly review and update our corporate governance practices. The Board evaluates and,
where appropriate, implements relevant proposals with the aim of ensuring that we maintain best
practice in corporate governance, having regard to developments in market practice as well as new
corporate governance requirements and guidance notes issued by the ASX.
We comply with the ASX Corporate Governance Councils Principles of Good Corporate Governance
and Best Practice Recommendations released in March 2003.
The Board of Directors
Role and responsibilities of the Board
The directors are accountable to shareholders for the management of our business and affairs
and the Board is responsible to shareholders for our overall strategy, governance and performance.
The Boards role includes:
|
|
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determining the corporate objective which is the foundation for all the actions and decisions
of the Board and management; |
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providing strategic direction to Telstra by approving the corporate strategy and associated
performance objectives, monitoring developments and approving any variations; |
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approving significant business decisions; |
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approving the annual corporate plan; |
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overseeing the review and update of corporate governance practices and procedures as
necessary to support its commitment to best practice corporate governance in Australia and
globally; |
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appointing, assessing the performance of and determining the remuneration of the CEO,
overseeing the performance of senior management and reviewing management succession plans and
senior management remuneration arrangements; |
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overseeing shareholder reporting and communications; |
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requiring appropriate compliance frameworks and controls to be in place and operating
effectively; |
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monitoring the integrity of internal control and reporting systems and monitoring strategic
risk management systems; |
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reviewing and approving our statutory accounts and overseeing our financial position; |
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approving decisions concerning our capital, including capital restructures and share
buy-backs, and determining our dividend policy; and |
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ensuring we comply with the reporting and other requirements of the Telstra Corporation Act. |
The Board has adopted a charter that details the role and responsibilities of the Board and its
members.
The Board has delegated responsibility for day-to-day management of Telstra to the CEO and has
put a formal delegations structure in place which sets out the powers delegated to the CEO and
those specifically retained by the Board.
Board membership, size and composition
The maximum number of directors provided for by our constitution is 13 and we currently have 8
directors on the Board.
A casual vacancy to the Board may be filled or an additional director appointed, up to the
maximum number of directors, either by:
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the directors after consulting with the Communications Minister; or |
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an ordinary resolution of shareholders. |
Any new director appointed by the Board is subject to re-election at the next annual general
meeting following his or her appointment.
The tenure of the CEO as a director is linked to his executive office, while one-third of all
other directors are subject to retirement by rotation each year. In accordance with the ASX Listing
Rules, no non-executive director may serve past the third AGM following their most recent
re-election or three years (whichever is longer) without submitting themselves for re-election. The
directors to retire by rotation are those who have been longest in office determined from the date
of their last election.
Prior to each annual general meeting, the Board will determine if the Board will recommend to
the shareholders that they vote in favour of the re-election of the directors due to stand for
re-election, having regard to those directors annual performance reviews and any other matters it
considers relevant.
The Nomination Committee may negotiate the retirement or resignation of individual directors
after consultation with the Board. However, the Boards general policy on Board membership for
non-executive directors is that, in general, directors are encouraged to retire at 72 years of age
and the maximum tenure is 12 years (usually four terms of three years).
A brief biography for each director setting out their experience and expertise, together with
details of the year of initial appointment and re-election (where applicable) of each director, is
outlined in Directors and Management Directors.
Role of the chairman
The chairman is an independent director and is appointed by the Board. The chairmans
principal responsibilities are to ensure that the Board fulfils its obligations under the Board
Charter and as required under the relevant legislation and to provide appropriate leadership to the
Board and Telstra. The chairman also has specific responsibilities which include:
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representing the views of the Board to all shareholders and maintaining appropriate ongoing
contact with major shareholders to ensure the Board understands their views; |
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establishing the timetable and working with the CEO and company secretary to agree the agenda
for Board meetings; |
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chairing Board meetings and shareholder meetings; |
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facilitating Board discussions with the aim of ensuring that: |
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the discussions are conducted in an open and professional manner where directors are
encouraged to express their views, leading to objective, robust analysis and debate; and |
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the core issues facing us are addressed; |
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working with the CEO to ensure that the CEO provides the Board with the information it
requires to contribute effectively to the Board decision making process and to monitor the
effective implementation of Board decisions; |
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guiding and promoting the on-going effectiveness and development of the Board and individual
directors; and |
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ensuring that the meetings of shareholders are conducted in an open and proper manner with
appropriate opportunity to ask questions. |
Director Independence
It is the Boards current policy that the CEO is the only executive director. It is also the
Boards current intention that the non-executive directors are also independent directors as
defined in the Board Charter. With the exception of the CEO, all directors are non-executive
directors and each non-executive director is considered by the Board to be independent.
Generally speaking, an independent director is a director who is independent of management and
free of any interest and business or other relationship that could, or could reasonably be
perceived to, materially interfere with the exercise of the directors unfettered and independent
judgment, and ability to act in our best interests.
The Board, at least annually, assesses the independence of each director. In assessing each
directors independence, the Board considers the effect of a directors business and other
relationships and interests from both our perspective and that of the director and has regard to a
specific set of criteria set out in the Board Charter. These criteria are consistent with the
definition of independence set out in the best practice recommendations of the ASX Corporate
Governance Council and the requirements of the NYSE. Materiality is assessed on a case-by-case
basis
from both our perspective and that of the relevant director and having regard to the
directors individual circumstances.
Meetings of the Board
The Board meets for both scheduled meetings and on other occasions to deal with specific
matters that require attention between scheduled meetings. The regular business of the Board
includes strategic matters, governance, oversight, senior executive appointments, performance and
remuneration, financial matters, risk management, compliance, and relationships with stakeholders
including the Commonwealth. The Board also liaises with senior management as required and may
consult with other Telstra employees and advisers and seek additional information.
Performance Evaluation
The Board regularly reviews its performance (including its performance against the
requirements of the Board Charter), the performance of individual committees and the performance of
individual directors. In fiscal 2006, the Board engaged an external consultant to facilitate this
review.
As noted earlier, the Board makes recommendations to shareholders regarding the re-election of
directors having regard to the outcome of such reviews.
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Declaration of Interests
Directors are required to take all reasonable steps to avoid actual, potential or perceived
conflicts of interest.
The Corporations Act, our constitution and the Board Charter require directors to disclose any
conflicts of interest and to generally abstain from participating in any discussion or voting on
matters in which they have a material personal interest. A director who believes he or she may have
ceased to be independent, or who believes that he or she may have a conflict of interest or
material personal interest in a matter, is required to disclose the matter in accordance with the
relevant Corporations Act and constitutional requirements and follow the procedures developed by
the Board to deal with such circumstances.
Board access to management and independent professional advice
Directors have complete access to our senior management through the chairman, CEO or company
secretary at any time. In addition to regular presentations by senior management to Board and Board
committee meetings, directors may seek briefings from senior management on specific matters.
The Board has the authority to conduct or direct any investigation required to fulfil its
responsibilities and has the ability to retain, at our expense, such legal, accounting or other
advisers, consultants or experts as it considers necessary from time to time in the performance of
its duties. Further, each director has the right to seek independent professional advice at our
expense, subject to the prior approval of the chairman. All committees of the Board have access to
independent professional advice on this basis.
Committees of the Board
The Board committees assist the Board in the discharge of its responsibilities. The role of
Board committees is to advise and make recommendations to the Board. There are four standing
committees:
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Audit Committee; |
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Nomination Committee; |
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Remuneration Committee; and |
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Technology Committee. |
Following each committee meeting, the Board receives a report from the committee on its
activities.
Each committee operates in accordance with a written charter approved by the Board. The Board
appoints the members and the chairman of each committee. Membership of the Audit, Nomination and
Remuneration Committees is confined to directors who are determined by the Board to be independent
as defined in the Board Charter.
The role, function, charter, performance and membership of each committee are reviewed on an
annual basis as part of the Boards evaluation process. Each committee:
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undertakes an annual assessment of its performance against the requirements of its charter
and provides that information to the Board; and |
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reviews and assesses the adequacy of its charter annually, discusses any required changes
with the Board and ensures any revisions to the charter are approved by the Board. |
In accordance with its policy of regular review, revisions to the charters for the Board and
each committee were approved by the Board in June 2006.
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Audit Committee
Role and responsibilities of the Audit Committee
The Audit Committee is a committee of the Board established to:
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assist the Board in discharging its responsibilities by monitoring and advising on: |
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financial reporting including: |
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the integrity, truth and fairness of the view given by our consolidated financial
statements; |
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the integrity of our financial systems and processes; and |
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the appropriateness of our accounting policies and practices and consistency with current
and emerging accounting standards; |
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our overall risk management process and the management of specific risk areas as directed
by the Board; |
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the effectiveness and operation of our internal controls over financial
operations and reporting; |
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the effectiveness and operation of other aspects of our internal
control environment as it sees fit; |
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compliance with legal and regulatory requirements and
company policies; |
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the external audit including the external auditors qualifications, scope, independence and
performance and the non-audit services disclosures to be made in our annual report including
the reasons for being satisfied that the auditors independence was not compromised by the
provision of these services; |
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the objectivity and performance of the internal audit function; and |
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the structure and operation of our corporate governance framework and related disclosures; |
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provide a forum for communication between the Board, management and both the internal and
external auditors; and |
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provide a conduit to the Board for external advice on audit, risk management and compliance
matters. |
The Audit Committee approves the provision of recurring audit services as part of the annual
approval of the audit plan. Additional audit and non-audit services are pre-approved by the Audit
Committee provided they fall within a defined list of services specified by the Audit Committee.
Those additional audit and non-audit services that are not listed have to be specifically approved
by the Audit Committee prior to the commencement of any engagement. In addition, all non-audit
services with a value over A$100,000 must be separately approved by the Audit Committee, even if
the service is listed as a pre-approved service.
Composition and membership of the Audit Committee
It is Board policy that the Audit Committee is comprised of at least three Board members, all
of whom are independent as defined in the Board Charter and who will not, other than in his or her
capacity as a member of the Board, Audit Committee or any other Board committee:
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accept directly or indirectly any consulting, advisory or other compensatory fee from us or
any of our subsidiaries or any Board committee; or |
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be an affiliated person of us or any of our subsidiaries. |
Each member is required to:
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be financially literate (i.e.; able to read and understand financial statements) and have
sufficient financial knowledge to allow them to discharge their duties and actively challenge
information presented by management, internal and external auditors; |
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have a reasonable knowledge of us, the industries in which we operate and our risks and
controls; and |
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have the capacity to devote the required time and attention to prepare for and attend
committee meetings. |
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In addition, the chairman of the Audit Committee must not be the chairman of the Board and no
director may serve as a member of the Audit Committee if that director serves on the audit
committee of more than two other public companies.
Meetings of the Audit Committee
Scheduled Audit Committee meetings are held on a regular basis, as determined annually in
advance by the Board, scheduled to correspond with our financial reporting cycle. Additional
meetings are also held as required.
Other members of the Board are entitled to attend Audit Committee meetings and the Audit
Committee may ask management, the external auditors and/or others to attend meetings and provide
such input and advice as required. The Audit Committee regularly meets with the internal auditor
and the external auditors in the absence of management.
Relationship with external auditor
In accordance with section 36 of the Telstra Act, it is a legislative requirement that the
Auditor-General of Australia is our auditor for the purposes of the Australian Corporations Act.
The Auditor-General has appointed an agent, Ernst & Young, to assist in performing independent
external audit duties.
The Audit Committee has the authority and responsibility to select, evaluate and, where
appropriate, replace the external auditor for filings outside of Australia. Through the Audit
Committee, we have appointed Ernst & Young as our external auditor for filings outside Australia
and in this respect and for the purposes of these audits, Ernst & Young is responsible for
financial reporting purposes rather than the Auditor-General.
The Auditor-General, as our auditor, owes duties to us and our shareholders as a whole. The
Auditor-General also owes statutory duties as an independent officer of the Commonwealth. Ernst &
Young, as the external auditor appointed by us for filings outside Australia, is accountable to the
Board, the Audit Committee and shareholders.
Restrictions on performance of non-audit services and auditor independence
The Audit Committee approves the provision of recurring audit services as part of the annual
approval of the audit plan. Additional audit and non-audit services are pre-approved by the Audit
Committee provided they fall within a defined list of services specified by the Audit Committee.
Those additional audit and non-audit services that are not listed have to be specifically approved
by the Audit Committee prior to the commencement of any engagement. In addition, all non-audit
services with a value over A$100,000 must be separately approved by the Audit Committee, even if
the service is listed as a pre-approved service. The Auditor-General does not provide non-audit
services. Ernst & Young does provide non-audit services, but are specifically prohibited from
performing any of the following services: (i) bookkeeping services and other services related to
preparing Telstras accounting records or financial statements, (ii) financial information system
design and implementation services, (iii) appraisal or valuation services, fairness opinions, or
contribution in kind reports, (iv) actuarial services, (v) internal audit services, (vi) management
function or human resources, (vii) broker or dealer, investment adviser, or investment banking
services, (viii) taxation advice of a strategic or tax planning nature and (ix) legal services or
expert services unrelated to the audit.
In addition, Ernst & Young may only provide non-audit services if the performance of the
non-audit service will not cause the total annual revenue to Ernst & Young from non-audit work to
exceed the aggregate annual amount of Ernst & Youngs audit fees. The Audit Committee will not
approve the provision of a non-audit service by Ernst & Young if the provision of the service would
compromise Ernst & Youngs independence. The provision of non-audit services by Ernst & Young is
monitored by the Audit Committee via bi-annual reports to the Audit Committee. In addition, where
engagements involve services from the defined list of services, these are reported to the Audit
Committee at the following meeting. The Audit Committee expects the Auditor-General and requires
Ernst & Young to submit annually to the Audit Committee a formal written report delineating all
relationships between the Auditor-General, Ernst & Young and the Telstra Group. This includes: (i)
a listing of all audit and non-audit fees billed by the Auditor General and Ernst & Young in the
most recent fiscal year, (ii) a statement on
whether the Auditor General and Ernst & Young are satisfied that the provision of the audit
and any non-audit services is
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compatible with auditor independence and (iii) a statement regarding the Auditor Generals and
Ernst & Youngs internal quality control procedures.
The Audit Committee submits annually to the Board a formal written report detailing the nature
and amount of any non-audit services rendered by Ernst & Young during the most recent fiscal year
and an explanation of why the provision of these non-audit services is compatible with auditor
independence. If applicable, the Audit Committee recommends that the Board take appropriate action
in response to the Audit Committees report to satisfy itself of Ernst & Youngs independence.
Details of amounts paid or payable to the auditor for non-audit services provided during the year
are located in note 8 to our consolidated financial statements.
External Auditor Rotation
As it is a legislative requirement that the Auditor-General is our auditor for the purposes of
the Australian Corporations Act, the Auditor-General is not subject to rotation. During fiscal 2004
we, together with the Auditor-General, conducted a tender process in respect of our audit
requirements and Ernst & Young was reappointed as the Auditor-Generals sub-contractor to assist
the Auditor-General with our audit functions in Australia and as our auditor for our US and other
overseas auditing requirements. It is our policy that a competitive tender for audit services is
conducted every three to five years. The last rotation of the lead audit partner of our audit also
occurred in fiscal 2004.
External Auditors Attendance at Annual General Meeting
Our external auditors attend our annual general meeting and are available to answer
shareholder questions about the conduct of our audit and the preparation and content of the
auditors report.
Audit Committee Processes
The Audit Committee:
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at least annually meets separately with our external auditors to discuss any matters that the
Audit Committee or our auditors believe should be discussed privately; |
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reviews the Directors report section of our annual report and considers whether the
information is clearly understood and consistent with the Audit Committees knowledge about us
and our operations. In addition, prior to release, the Audit Committee reviews key elements of
other related regulatory filings and discusses them with the external auditors as appropriate;
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reviews the interim and annual consolidated financial statements and preliminary
announcements and discusses them with the external auditors prior to their release to determine
whether they are complete, reflect appropriate accounting principles, contain appropriate
disclosures and are consistent with the information known to the Audit Committee. |
Nomination Committee
Role and responsibilities of the Nomination Committee
The Nomination Committee is a committee of the Board established to assist the Board in
discharging its responsibilities by monitoring and advising on:
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composition and performance of the Board; |
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director independence; and |
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appointment of the CEO. |
Composition and membership of the Nomination Committee
It is Board policy that the Nomination Committee is comprised of at least three Board members
including the chairman of the Board, all of whom are independent as defined in the Board Charter.
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Each member is expected to:
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have a reasonable knowledge of us and the industries in which we operate; and |
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have the capacity to devote the required time and attention to prepare for and attend
committee meetings. |
Meetings of the Nomination Committee
Meetings are held on a regular basis, as determined annually in advance by the Board.
Additional meetings are also held as required.
Other members of the Board are entitled to attend Nomination Committee meetings and the
Nomination Committee may invite other people including any of our employees to its meetings, as it
deems necessary. However, if a person has a material personal interest in a matter that is being
considered at a meeting, he/she must not be present for consideration of that matter.
Remuneration Committee
Role and responsibilities of the Remuneration Committee
The Remuneration Committee is a committee of the Board established to assist the Board in
discharging its responsibilities by monitoring and advising on:
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remuneration of the Board; |
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performance and remuneration of the CEO; |
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performance and remuneration of senior management; |
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remuneration strategies, practices and disclosures generally; and |
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employee share and option plans. |
The Committee also exercises the administrative powers delegated to it by the Board under our
share option plans and, in certain circumstances, makes offers to employees under those plans.
Composition and membership of the Remuneration Committee
It is Board policy that the Committee is comprised of at least three Board members including
the chairman of the Board, all of whom are independent as defined in the Board Charter.
Each member is expected to:
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be familiar with the current legal and regulatory disclosure requirements in relation to
remuneration; |
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have adequate knowledge of executive remuneration issues, including executive retention and
termination policies, and short-term and long-term incentive arrangements; |
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have a reasonable knowledge of us and the industries in which we operate; and |
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have the capacity to devote the required time and attention to prepare for and attend
committee meetings. |
Meetings of the Remuneration Committee
Meetings are held on a regular basis, as determined annually in advance by the Board,
scheduled to correspond with our remuneration review and reporting cycle. Additional meetings are
also held as required.
Other members of the Board are entitled to attend Remuneration Committee meetings and the
Remuneration Committee may invite other people including any of our employees to its meetings, as
it deems necessary. However, if a person has a material personal interest in a matter that is being
considered at a meeting, he/she must not be present for consideration of that matter.
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Our Remuneration Framework
Information in relation to our remuneration framework (including information regarding our
remuneration strategy and policies and their relationship to our performance), together with
details of the remuneration paid to Board members and senior executives who were our key management
personnel during fiscal 2006, can be found in Directors and Management Remuneration.
Each year, the Board reviews our CEOs performance against agreed measures and considers the
CEOs compensation and entitlement to performance based remuneration. Each year, the CEO undertakes
a similar exercise in relation to senior management. The results of the CEOs annual performance
review of senior management are considered by the Board.
Technology Committee
The Technology Committee is a committee of the Board established as a forum for the Board to
review technology developments relevant to us and the industries in which we operate in greater
detail than is possible at Board meetings. The Committees purpose is educative only.
Risk oversight and management
We are committed to the management of risks throughout our operations. The role of the Board
includes monitoring the integrity of internal control and reporting systems and monitoring the
effectiveness of our management of strategic, financial, operational and compliance risks. The
Audit Committee provides advice to the Board on the status of our business risks. The Audit
Committee relies on the work undertaken by the risk management and assurance function, which
independently assesses the adequacy and operating effectiveness of the controls in place
surrounding the management of risk.
Primary responsibility for risk oversight and management lies with our management, who
periodically review and update their significant business risks. The risk management and assurance
function also plays a key role in this process by developing, promoting and transferring a common
language and approach to the business units. This enables management to proactively identify,
manage and control their risks. The Audit Committee regularly receives reports independently
prepared by the risk management and assurance function on significant business risks with an
evaluation as to the adequacy and effective operation of controls that are in place surrounding the
strategies applied by business units to manage these risks.
The financial risk arising from our underlying business activities is largely managed through
a central treasury function which applies a prudential approach. The central treasury function
manages the liquidity, cash flow, foreign exchange, interest rate, borrowing and other financial
terms and conditions, financial support arrangements, counterparty credit risk and derivatives. The
treasury functions principal objectives are to minimise the volatility of economic and financial
outcomes and to establish sound operational controls.
We use insurance to transfer significant risk exposures arising in the key areas of property,
public and product liability, and directors and officers liability and this is also managed on a
group basis through the central treasury function. In view of our size, we accept substantial
excess levels and do not insure for risks that we can readily accommodate. Some risks cannot be
effectively insured such as potential claims in relation to electromagnetic energy and business
interruption.
Risk Management, internal compliance, control systems and our financial reports
The CEO and CFO have provided the Board with the certifications required by the Corporations
Act and those recommended by the ASX Corporate Governance Council Recommendations in relation to
our risk management and internal compliance and control systems and our financial reports.
The CEO and CFO have provided the Board with confirmation that, in all material respects, our
financial reports for the year ended 30 June 2006 present a true and fair view of our financial
position and performance and
are in accordance with relevant accounting standards. The CEO and CFO have confirmed this
statement is made based on a sound system of risk management and internal compliance and control
implemented in accordance with
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Board policy. In addition, the CEO and CFO have confirmed to the Board that our risk management and
internal compliance and control systems, to the extent they relate to financial reporting, are
operating efficiently and effectively in all material respects based on the risk management model
we have adopted.
Telstra Values, Telstra Business Principles, Code of Conduct and other company policies
We have a number of internal operating policies and principles which promote ethical and
responsible decision making and timely and balanced disclosure.
Telstra Values, Telstra Business Principles and company policies
We provide guidance to our directors, senior management and employees on the practices,
principles and standards of corporate and personal behaviour required of all of our officers and
employees in performing their daily business activities through our Company Values, the Telstra
Business Principles and our company policies (including our Code of Conduct). The Telstra Business
Principles, the Code of Conduct and other company policies reinforce the standards of appropriate
business and ethical behaviour we expect from all employees. We have a mandatory training program
for all employees to reinforce these standards.
Whistleblower policy and service
We have in place a whistleblower policy and confidential whistleblower service which provides
our staff with an avenue to raise concerns they might have with behaviour that is potentially
illegal, improper or unethical. The whistleblowing process is supported by an independent service
provider who specialises in receiving sensitive reports or disclosures. All reports or disclosures
are treated as confidential and reports can be made anonymously. Reports are referred to our Ethics
Committee, the management committee which oversees the investigation and implementation of any
recommendations considered appropriate. In addition to generally supporting our ethical
foundations, the Ethics Committee charter confirms that part of its role is to oversee our
whistleblowing policy and process. Our whistleblowing policy reflects the Telstra Values of
Accountability, Integrity, and Leadership, supports our Code of Conduct and complements existing
management structures and functions.
Share trading
We have in place a share trading policy that prohibits directors, the CEO, senior management
and certain other employees (and their associates) from engaging in short-term trading of our
securities (including the acquisition of derivatives and financial and other products issued or
created over our shares by us or any third party). This policy also restricts the buying or selling
of our securities to three window periods (between 24 hours and 1 month following the release of
our annual results, the release of our half-yearly results and the close of our annual general
meeting) and at such other times as the Board permits. Trading during these window periods is
subject to the overriding requirement that buying or selling of our securities is not permitted at
any time by any person who possesses price-sensitive information which is not generally available
in relation to those securities.
In addition, directors, the CEO, senior management and relevant employees must notify the
company secretary before they or their close relatives buy or sell our securities. Changes to the
interests of directors in our securities are, as required by law, notified to the ASX.
Our share trading policy also prohibits our directors, the CEO, senior management, other
employees and contractors from buying or selling securities of other companies (including shares,
derivatives and financial and other products issued or created over those securities by us or any
third party) when in possession of price-sensitive information relating to that other company which
is not generally available. This is so if the information is price-sensitive to the other company
(and not generally available), even though it may not be price-sensitive information to us.
Further, directors, the CEO, senior management and relevant employees are also restricted from
entering into arrangements which effectively operate to limit the economic risk of their security
holdings in shares allocated under our share plans during the period the shares are held in trust.
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Market disclosure
We have established procedures intended to ensure that we comply with our market disclosure
obligations. In particular, we have in place a comprehensive continuous disclosure procedure which
is reviewed and updated on a regular basis. The aim of this procedure is to ensure that we release
price-sensitive information in a timely fashion to the various stock exchanges on which our shares
and debt securities are listed.
Our procedure provides that:
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ultimate management responsibility for continuous disclosure rests with the CEO and the Chief
Financial Officer (CFO); |
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the responsibilities of the Continuous Disclosure Committee (the Committee), which is
chaired by the company secretary, include: |
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ensuring that there is an adequate system in place for the disclosure of all material
information to the ASX; |
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advising the CEO and the CFO in relation to the disclosure of information reported to the
Committee; |
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the Committees membership includes the company secretary, a representative of Public Policy
& Communications, the General Counsel Finance & Administration, a representative from Finance
& Administration and the General Manager Investor Relations or their delegates; |
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senior management (including Group Managing Directors other than the CFO and their direct
reports, all financial controllers and certain legal and regulatory counsel) must immediately
inform the Committee of any potentially price-sensitive information or proposal as soon as they
become aware of it; |
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in cases where material information has originated in the office of the CEO or the CFO or has
been reported directly to them, the CEO or CFO may, in his or her discretion, seek the advice
of, or a recommendation from, the Committee in deciding whether to make or approve an ASX
announcement in relation to that material information; |
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if the matter is disclosable, an announcement is prepared and immediately sent via the
company secretarys office electronically to all relevant stock exchanges. |
We implement several practices internally to reinforce the importance of our continuous
disclosure obligations and the need to keep the Committee informed about potentially disclosable
matters. These practices are reviewed regularly and include the following:
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every director is made aware of our continuous disclosure obligations upon taking office and
each member of senior management undertakes training with the General Counsel Finance and
Administration, in relation to our continuous disclosure obligations; |
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a weekly email is sent to all senior management reminding them to notify the Committee
immediately if they become aware of any potentially price-sensitive information or proposals; |
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the Committee maintains a list of issues which, although not yet disclosable, are monitored
in case they become disclosable; |
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all proposed media releases and external speeches and presentations to be made by senior
management are reviewed by internal legal counsel to determine whether they should be
disclosed; |
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a specific information paper is prepared for each Board meeting summarising ASX announcements
and details of significant matters considered by the Committee but judged not to be
disclosable; and |
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the Office of the Company Secretary maintains a record of all market announcements made. The
announcements are also posted on our website after market release is confirmed. |
We also have in place an investor relations policy governing communications and the provision
of information to external parties, including shareholders, brokers and analysts. The aim of this
policy is to ensure that we provide investors and the financial community with appropriate and
timely information while at the same time ensuring that we fulfil our statutory reporting
obligations under the Corporations Act and the ASX Listing Rules.
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Legal and Regulatory Compliance
We are committed to conducting our business in compliance with our legal and regulatory
obligations. Compliance with these obligations is not just a legal requirement but is integral to
our commitment to our employees, customers, shareholders and the community. Compliance is a key
element of the Telstra Values which are the foundation for our cultural priorities and the way we
pursue our vision and mission.
The Board and the senior management team are committed to ensuring there is an appropriate
compliance framework and complementary controls in place to provide an appropriate level of
confidence that we are operating in compliance with relevant laws, regulations and industry codes.
The Board has given the Audit Committee specific responsibility for reviewing our approach to
achieving compliance with laws, regulations and associated industry codes in Australia and overseas
and for the general oversight of compliance issues. This oversight is facilitated by the
preparation of a regular and comprehensive compliance report summarising our compliance initiatives
and issues.
We have recently reviewed and refined out internal approach to compliance and from the start
of fiscal 2007 we have moved to combine our compliance activities and the related activities
supporting our corporate ethics under a single Compliance and Corporate Ethics Framework. This
framework brings together our business units and the individual subject matter specific compliance
programs in a more integrated, consistent and collaborative way than we have in the past.
We have continued our comprehensive program based approach to compliance. This has been
fundamental to our approach to compliance for many years and this continues to be a key element of
our compliance framework with subject matter experts helping us to understand our many legal and
regulatory obligations and responsibilities and translate them into practice. The programs include
health, safety and environment, equal employment opportunity, privacy, trade practices and industry
regulation.
This program based approach at a corporate level is supported by a newly established network
of senior personnel appointed to the role of Business Unit Compliance Manager. These Compliance
Managers are supported by other personnel at the business unit level with specific responsibility
for the implementation of the compliance programs within their business unit. This structure has
been designed with the aim of ensuring that each business units operations are conducted in
accordance with our obligations in an efficient, effective and integrated manner. We seek to
achieve this through a focus on policies, procedures, work instructions and controls that is
intended to ensure that our actions, and those of our employees, are in accordance with these
requirements.
A number of programs, including the privacy compliance program, are subject to periodic,
independent external audits which are intended to:
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ensure that our approach is comprehensive, robust and rigorous; and |
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to provide an objective view of area for further improvement. |
Corporate Social Responsibility
Our corporate social responsibility vision is to connect with our people, customers,
communities and suppliers in an accessible, healthy and environmentally sound way. We are proud of
our record supporting the community.
Political and Other Donations
We do not make political donations. However, in line with other major publicly listed
companies, we do pay fees to attend events organised by political parties where those events allow
for discussion on major policy issues with key opinion leaders and policy makers.
We make donations and contribute funds to community and other organisations as part of our
approach to corporate social responsibility.
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Shareholder Communications Strategy
We have implemented a number of initiatives to promote effective communication with our
shareholders. These include:
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maintaining an investor relations website and introducing an alternate website
nowwearetalking.com. nowwearetalking is designed to provide shareholders and other interested
parties with information about the digital revolution and how it can improve our quality of
life in the 21st century. nowwearetalking is also designed to increase the level of public
dialogue about the future of telecommunications in Australia; |
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communicating directly with shareholders twice a year through our half-year and annual
review; |
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placing all announcements made to the market, including transcripts of investor and media
briefings, and related information on our website; |
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webcasting certain events such as briefings and our annual general meeting; |
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using electronic communications to advise investors, who have provided us with their email
address, of significant matters that may be of interest to them; and |
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writing directly to our shareholders on issues that affect their investment. For example,
when we announced the transformation strategy in November 2005, we followed this up with a
letter to shareholders from the CEO and a six page brochure explaining what the transformation
strategy would deliver for our shareholders. |
We are also seeking to encourage our shareholders to receive their communications from us
electronically through our participation in the eTree program, of which we are a foundation member.
Through the eTree program, we currently donate to Landcare Australia:
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A$2 for every shareholder who chooses to receive all of their communications from us
electronically; and |
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A$1 for those shareholders who choose just to receive electronic shareholder reports
and notices of meetings from us. |
During fiscal 2006, we donated over A$56,000 to Landcare Australia through this initiative.
Compliance with NYSE requirements
The NYSE has corporate governance requirements for companies listed on the NYSE. The NYSE has
granted foreign private issuers such as Telstra a home country exemption from most of these
requirements. We are, however, required to provide a brief description of the material differences
between our corporate governance practices and the NYSE corporate governance requirements. These
differences are described below.
Corporate Governance Committee
Under the NYSE listing rules, each listed company must have a nominating/corporate governance
committee with a written charter that requires the committee to, among other matters, develop and
recommend to the board of directors a set of corporate governance principles applicable to us. We
have determined that this function is best served by the Board of directors as a whole supported by
our Audit Committee, rather than our Nomination or Remuneration Committees. Accordingly, our
Nomination and Remuneration Committees charters do not require the Committees to perform this
function.
Equity Compensation Plans
Under the NYSE listing rules, each listed company must give its shareholders the opportunity
to vote on the adoption of, or material revisions to, equity compensation plans. Under the ASX
Listing Rules, shareholders are only provided with the opportunity to vote on new equity
compensation plans or material revisions to existing equity
compensation plans in limited circumstances, including an issue of shares under an employee
incentive scheme to a director. In accordance with the home country exemption, we only seek
shareholder approval in relation to equity compensation plans in the circumstances required under
Australian law.
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Exchange Controls and Foreign Ownership
Absence of exchange controls
The consent of the Reserve Bank of Australia will be required for the movement of funds into
and out of Australia if the funds are to be paid to, or received from:
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specified supporters of the former Government of the Federal Republic of Yugoslavia
(including certain government agencies and authorities); |
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specified ministers and senior officials of the Government of Zimbabwe; or |
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specified entities and an individual associated with the Democratic Peoples Republic of
Korea. |
There are also currently general prohibitions on:
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making payments to, or receiving payments from persons prescribed as having a connection with
terrorism; and |
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dealing with the financial resources of the previous government of Iraq, Saddam Hussein and
other senior officials of his regime and their immediate families. |
At the present time, the Reserve Bank of Australia has not imposed any exchange controls or
limitations on the remittance of dividends, interest or other payments by Telstra to non-Australian
holders of its securities, other than those described above.
Restrictions on foreign ownership
The Foreign Acquisitions and Takeovers Act prohibits the acquisition of an interest in the
shares of an Australian company in certain circumstances. There are also specific provisions
dealing with restrictions on foreign ownership in the Telstra Act.
Telstra Act
The Telstra Act provides that an unacceptable foreign ownership situation will exist in
relation to Telstra if foreign persons and their associates hold, in total, a particular type
of stake in us of more than 35% of shares held by persons other than the Commonwealth (the
Aggregate Limit) or if any foreign person and its associates hold a particular type of stake in
Telstra of more than 5% of shares held by persons other than the Commonwealth (the Individual
Limit). Foreign person, associate, group, particular type of stake, direct control
interest and interest in a share are all defined in the Telstra Act and are summarised below
under Definitions.
Where an acquisition of shares or interests in shares in any company results in:
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an unacceptable foreign ownership situation in relation to Telstra; |
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an increase in the total of any type of stake held by any group of foreign persons in Telstra
where there exists a breach of the Aggregate Limit; or |
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an increase in any type of stake in Telstra held by any foreign person who is already in
breach of the Individual Limit; |
and the person acquiring the shares knew or was reckless as to whether the acquisition would have
that result, that person is guilty of an offence punishable on conviction by a fine not exceeding
A$44,000.
A persons stake in us is calculated on the assumption that the only shares in us are shares
held by persons other than the Commonwealth. While the Commonwealth owns approximately 51.8% of us,
the Aggregate Limit is
effectively 16.87% and the Individual Limit is effectively 2.41%. If all of the shares
currently held by the Commonwealth are sold or transferred to the Future Fund, the effective
Aggregate Limit will be 35% rather than 16.87% and the effective Individual Limit will be 5% rather
than 2.41%.
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The Communications Minister or Telstra may apply to the Federal Court for remedial orders
where an unacceptable foreign ownership situation exists, including orders requiring the disposal
of shares, restricting the exercise of rights attaching to shares or prohibiting or deferring
receipt of sums due on shares. In addition, we are required under the Telstra Act to take all
reasonable steps to ensure that an unacceptable foreign ownership situation does not exist in
relation to us.
Our constitution and the trust deed contain provisions to enable us and the trustee (while
instalment receipts remain on issue (the IR period)) to monitor and enforce the foreign ownership
restrictions. These provisions in our constitution are binding on all shareholders. Our Board has
adopted rules to implement these provisions. These are outlined below. They may be amended at any
time by resolution of our board.
The trustee will publish procedures regulating foreign ownership of instalment receipts which
parallel our rules and which will bind all instalment receipt holders. The trustee will be obliged
to comply with such procedures under the trust deed and may only change them at the relevant
Ministers direction.
On or after registration of a transfer or transmission application for a share or an
instalment receipt, when the acquirer first becomes a shareholder or instalment receipt holder, the
acquirer must generally notify us or the trustee (during the IR period) whether it is either:
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a person with an interest in a share or instalment receipt who is either a foreign person or
an associate of a foreign person; or |
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a person who holds a share or instalment receipt in which a foreign person or an associate of
a foreign person has an interest, |
(in either case, a foreign holder).
The information derived from these notifications will be reflected in a register by means of a
foreign coding. Telstra may include in its register information relating to foreign ownership
recorded in the foreign ownership register of instalment receipts maintained by the trustee. The
foreign ownership rules and procedures will permit us and the trustee to maintain a joint foreign
register of shares and instalment receipts.
Systems have been established for shares or instalment receipts traded on the ASX so that
notifications are given by brokers as part of routine provision of ASX settlement information. The
Depository or its custodian under the American Depository Receipts (ADR facility) is
automatically treated as a foreign holder, as are all holders of shares on the New Zealand share
register. Purchasers of shares and instalment receipts in the International Offering (including the
New Zealand component of the Australian Offering) and holders of shares or instalment receipts on
the New Zealand branch share or instalment receipt registers will be automatically treated as
foreign holders for the purposes of the trust deed. In the case of other transfers or transmission
applications, the onus is on the acquirer to notify us if it is a foreign holder.
All shares or instalment receipts held by foreign holders will be treated as foreign unless
the holder notifies the trustee that some of its shares or instalment receipts are ones in which a
foreign person or associate of a foreign person has an interest (foreign shares or instalment
receipts) whereas others are not and either:
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divides its holding into separate Holder Identification Numbers or Security Holder Reference
Numbers (under the ASXs CHESS system or an issuer sponsored subregister respectively), one for
foreign shares or instalment receipts and one for shares or instalment receipts which are not
foreign; or |
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the directors decide to treat the foreign holder as if the foreign holder was two separate
members, one with domestic shares and the other with a foreign holding. |
Where a person has notified the trustee that it is a foreign holder with respect to instalment
receipts, we may treat that person as a foreign holder with respect to shares. The trustee may also
treat a foreign holder of shares as a foreign holder with respect to instalment receipts under its
procedures.
We may send notices to registered holders of shares with a view to determining whether they
are foreign holders or not, and requesting details of any foreign persons or associates of foreign
persons having interests in the relevant shares, and any other information relating to foreign
ownership which may be requested. Such notices must
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be answered within the time specified in the notice. The trustee has similar powers with respect to
registered holders of instalment receipts during the IR period. The rules and procedures will
permit us and the trustee to send notices jointly.
If we determine, as a result of information obtained from the notifications and responses to
notices referred to above, that an unacceptable foreign ownership situation exists in relation to
us, we have the power to require divestment of shares to remedy this situation. The trustee has
power to direct the disposal of instalment receipts in the same circumstances in which we would
otherwise direct the trustee to dispose of shares to remedy the situation. We may direct the
trustee to require divestment of instalment receipts in such circumstances. In exercising these
divestment powers, we and the trustee are entitled to rely on foreign codings in the relevant
register and upon the notifications and responses to notices referred to above. We and the trustee
will notify the ASX, NZX and NYSE if the level of foreign ownership comes within five percentage
points of the Aggregate Limit, and after that at one percentage point intervals.
The divestment powers are broadly framed, and we, our directors and the trustee and its
directors are not liable to shareholders or instalment receipt holders for the manner of their
exercise.
If we or the trustee believe that the Individual Limit has been breached, we or the trustee
may require that any shareholder or instalment receipt holder respectively whose shares or
instalment receipts are believed to form part of the contravening stake be divested within the
time specified in the notice requiring divestment (disposal notice).
If we believe the Aggregate Limit has been breached, the rules currently provide that disposal
notices will be given to all holders whose foreign shares became registered in their names or which
became coded as foreign, on the day that the aggregate number of foreign coded registrations on
the relevant register exceeded the limit. The position is similar with respect to foreign
instalment receipts under the procedures.
There are special provisions to prevent disposal notices being given in respect of foreign
instalment receipts issued in the Global Offering and in the event disposal notices would, but for
these provisions, have been given in respect of such foreign instalment receipts (offer instalment
receipts) such notices shall not be given. Disposal notices may be given to all holders whose
foreign shares were registered in their names (or became coded as foreign) on the day prior to the
date of registration of the Global Offering instalment receipts in the names of their holders, and
so on, until a situation is reached where the number of foreign shares and instalment receipts in
respect of which disposal notices have not been given is below the Aggregate Limit.
The recipient of a disposal notice is required to divest the shares or instalment receipts
that are the subject of the notice before the divestment date specified in the notice. The
divestment date will be the fifth business day of the month after the month in which the disposal
notice was issued unless that would be less than 30 days after the date of issue of the notice, in
which case the divestment date will be the fifth business day of the next month. However, in
relation to registrations of shares or instalment receipts in the 30 days after instalment receipts
are first traded on the ASX in 2006, the divestment date will be the day six months after first
trading.
No divestment will be required on a divestment date if foreign shares or instalment receipts,
as shown on the relevant register on that date do not exceed the Individual Limit or the Aggregate
Limit (as applicable). If a disposal notice is not complied with, we or the trustee (as relevant)
may sell the relevant shares or instalment receipts on behalf of the holder on or after the
relevant divestment date (and the holder will lose the ability to transfer the shares or instalment
receipts itself after that date).
In cases where the trustee sells instalment receipts, if the trustee has been notified that a
foreign holder is not a resident of Australia for Australian taxation purposes or if no
notification has been received but the foreign holder has a registered address outside Australia,
the trustee may retain from the proceeds of sale and remit to the Australian Taxation Office the
tax due and payable by the instalment receipt holder on any gain arising from the disposal of
instalment receipts.
Transfers among foreign holders
Special arrangements apply to certain transfers from one foreign holder to another.
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Disposal notices will not be given in respect of:
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foreign shares or instalment receipts acquired from the international underwriters on closing
of the International Offering; |
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foreign shares or instalment receipts acquired under a particular form of ASX special
crossing for transfers among foreign holders. Shares or instalment receipts can only be
transferred under such a special crossing if they are not, and are not liable to become, the
subject of a disposal notice; or |
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shares or instalment receipts registered on the New Zealand branch share register or
instalment receipt register or deposited in the ADR facility, though shares may only be
transferred onto the New Zealand branch share or instalment receipt register or ADR facility if
they are not, and are not liable to become, the subject of a disposal notice. |
NZSX trading will be only in instalment receipts or shares registered on the New Zealand
branch instalment receipt or share register.
The above summary does not purport to be complete and is subject to, and qualified by
reference to, the trust deed, our constitution, the rules and the procedures which have been
adopted by us and the trustee for administration of their foreign ownership provisions and the
Telstra Act. Copies of the trust deed, our constitution, the rules and procedures and the Telstra
Act are available for inspection through the Company Secretary at the Telstra Centre, 242
Exhibition Street, Melbourne, Victoria 3000, Australia during normal hours in Melbourne, Australia
prior to the closing of the Global Offering.
Definitions
Foreign person is defined in the Telstra Act as:
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a foreign citizen (defined in the Telstra Act as a non-Australian citizen) not ordinarily
resident in Australia (a foreign citizen); |
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a company where a foreign citizen or a foreign company (defined in the Telstra Act as an
overseas incorporated company) holds a particular type of stake in the company of 15% or more; |
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a company where a group of two or more persons, each of whom is either a foreign citizen or a
foreign company, holds, in total, a particular type of stake in the company of 40% or more; |
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the trustee of a trust estate in which a foreign citizen or a foreign company holds a
substantial interest (essentially a 15% beneficial interest, including such foreign citizens
or foreign companys associates interests); or |
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the trustee of a trust estate in which two or more persons, each of whom is either a foreign
citizen or a foreign company, hold an aggregate substantial interest (essentially a 40%
beneficial interest including each such foreign citizens or foreign companys associates
interests). |
A particular type of stake in any company held by any person is defined as the aggregate of
the direct control interests of that type in that company held by that person and that persons
associates.
An associate of a person is defined to include:
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a wide range of direct and indirect relationships such as relatives, partners, employees and
employers of the person; |
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if the person is an employee of an individual, other employees of the individual; |
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if the person is a company, an officer of the company and, if the person is an officer of a
company, the company and other officers of the company; |
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the trustee of a discretionary trust where the person or an associate of the person is a
beneficiary; |
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a company whose directors are accustomed, or under an obligation, to act in accordance with
the wishes, directions or instructions of the person; |
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a company where the person is accustomed, or under an obligation, to act in accordance with
the companys wishes, directions or instructions; |
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a company in which the person has a particular type of stake of at least 15% or, if the
person is a company, a person who holds a particular type of stake of at least 15% in it; and |
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an associate of an associate of the person. |
For purposes of determining foreign ownership of any company, a persons associates also
include any other person with whom the person has an arrangement enabling them to jointly control
any of the voting power of such company or certain types of power over, or over the appointment of,
the board of directors of such company.
Group, in relation to the foreign ownership limits, includes one person alone or a number of
persons, even if they are not in any way associated with each other or acting together.
A direct control interest of any person in any company is defined as the equivalent
percentage of:
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the total paid-up share capital of the company in which the person holds an
interest; |
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the voting power in the company that the person is in a position to control; |
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the total rights to distributions of capital or profits of the company to its shareholders on
a winding up held by the person; |
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the total rights to distributions of capital or profits of the company to its shareholders,
other than on a winding up, held by the person; and |
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traced interests held via interposed entities. |
Interest in a share is defined to include:
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legal or equitable interests in a share; |
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certain rights under a contract to purchase a share; |
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options to acquire a share or an interest in a share; |
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a right to have a share transferred to the persons order; and |
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an entitlement to acquire a share or an interest in a share or to exercise or control the
exercise of a right attached to the share. |
However, certain interests in shares are disregarded, including:
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certain interests of lenders under or following enforcement of security arrangements; |
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interests of a trustee or manager of, or a custodian for, a unit trust (except a
discretionary trust) or certain Australian complying or exempt superannuation funds if such
trustee, manager or custodian reasonably believes that foreign persons hold beneficial
interests in less than 40% of the capital and 40% of the income in the fund; |
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interests held by an Australian registered life insurance company or a custodian for it, in
respect of a statutory fund, if the company reasonably believes that less than 40% of
policyholder liabilities of the fund are owed to foreign persons; |
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interests held by nominees, custodians or depositaries, or brokers acting on clients
instructions in the ordinary course of business, provided in each case the holder has no
beneficial interest or discretionary voting authority in respect of the underlying shares; |
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certain interests held by the international underwriters and their related corporations; |
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interests existing solely as a result of a shareholder holding interests in companies other
than us, which are not foreign persons under the Foreign Acquisitions and Takeovers Act of
Australia; |
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interests held by persons who are not foreign persons who, although being associates of
foreign persons, are not themselves foreign persons and do not have any substantive foreign
associates (that is, persons who directly or indirectly control them, with whom they act in
concert or in accordance with whose wishes, instructions or directions they are obliged or
accustomed to act); |
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interests held by any person to the extent that, after such interests have been included in
the stake of that person and any of its substantive foreign associates, such interests would
also be included in the stake of a non-substantive associate of the person; and |
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interests held by any person who is not a foreign person to the extent that, in determining
the total of the stakes of a group of foreign persons, such interests would be counted more
than once for that purpose. |
References to interests in shares exclude disregarded interests.
Approvals required for foreign investment in Telstra
Foreign investment in Australia is regulated principally under Commonwealth legislation
including the Foreign Acquisitions and Takeovers Act 1975 (FATA) and by the Australian Federal
Governments Foreign Investment Policy (Policy). This regulatory regime applies in addition to
the specific limits on foreign ownership of Telstra mentioned above.
For the FATA or the Policy to apply, the acquiring entity must be a foreign person, as
defined in the FATA. This concept is broader than the ordinary meaning of those words and is
extended to include companies incorporated within Australia or overseas with certain levels of
foreign shareholding, as prescribed in the FATA.
The FATA requires a foreign person to notify the Federal Treasurer prior to acquiring a
substantial interest (i.e. an interest of 15% or more, held by the foreign person, together with
any associates) in an Australian corporation where the total (not net) assets of the corporation
amount to A$50 million or more (or A$52 million or more for certain US investors investing in a
sensitive sector such as the telecommunications sector). It is an offence to:
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enter into an agreement to acquire a substantial interest without lodging a notification
(unless the agreement is made subject to an appropriate condition); or |
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once a notification is lodged, to proceed with the acquisition before receiving a statement
of no objections from the Federal Treasurer, unless the relevant statutory period(s) has
expired without an order being made. |
Investments in Telstra of less than 15% do not attract the compulsory notification
requirements of FATA. However, depending on the circumstances of the acquisition, they may activate
the Treasurers powers to make orders in respect of the acquisition (including the power to
prohibit the acquisition). In these circumstances it can be advisable to lodge a voluntary
notification under FATA, seeking a statement of no objections from the Treasurer. The issue of such
a statement has the effect of deactivating the Treasurers powers in respect of that acquisition.
Notifications made under FATA are assessed against the test of whether the proposal is
contrary to Australias national interest. There is no definition of the national interest. It is
assessed on a case by case basis.
Australias foreign investment regime is complex, and advice should be sought for your
specific circumstances, and for the circumstances of your proposed acquisition.
Foreign ownership status
At 22 September 2006 the number of Telstra shares recorded as foreign on the Telstra register
was 868,845,773, equivalent to 14.49% of the total number of non-Commonwealth owned Telstra shares
on issue.
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Description of Shares and our Constitution
The following provides information on the shares and explains the material provisions of our
constitution. Our constitution prescribes many shareholder rights. Because this is a summary, it
does not contain all the information that is included in the constitution. The entire constitution
should be read for a more complete description of your rights as a shareholder.
We have 12,443,074,357 ordinary shares on issue. Currently we have only one class of shares,
being ordinary shares. Because Australia has abolished the concept of authorised share capital,
there is no limit on the number of shares we may issue. In Australia, there is also no longer any
concept of a par or nominal value for a share. This means that we may issue our shares at any
price.
Share registers
Our Australian register of shares is electronic
The Australian register of shares is electronic. All our members, except those registered on
our New Zealand register, are registered on our Australian register. We are admitted to participate
in the Clearing House Electronic Subregister System (CHESS), under the ASX Listing Rules, the ASX
Settlement and Transfer Corporation Settlement Rules (ASTC Settlement Rules) and the Australian
Clearing House Clearing Rules (ACH Clearing Rules). Under this system, we maintain an electronic
issuer-sponsored subregister and an electronic CHESS subregister. These two subregisters make up
the Australian register of shares. You may inspect the register of shares without charge if you are
a member. You may also purchase a copy of the register of shares. The Corporations Act limits the
way in which the information on the register of shares may be used or disclosed by a shareholder.
The directors may determine not to issue share certificates, subject to any requirements of
any law or the ASX Listing Rules. Because we maintain an electronic register of shares all
shareholders will receive a statement of holding upon payment of the final instalment and
satisfaction of any related obligations such as payment of any taxes. The statement is similar to a
bank account statement and will state how many shares are owned by the shareholder. A shareholder
will receive a new statement of holding at the end of the month if there has been a change in its
holding on the register. A shareholder will not receive a share certificate for its shareholding.
If you hold shares on the CHESS sub-register, your statement of holding will set out your
Holder Identification Number (HIN). If you hold shares on the issuer-sponsored sub-register, your
statement of holding will set out your Security Holder Reference Number (SRN). You must quote
your HIN or SRN when dealing with a stockbroker or our share registrar.
The share registrar for the shares in Australia is Link Market Services Limited.
Our New Zealand register of shares is electronic
Persons purchasing shares in the New Zealand offer will be registered on the New Zealand
register. Telstra shares will be traded and registered under the Fully Automated Screen Trading and
Electronic Registration System (FASTER). When you first become a shareholder, including upon
payment of the final instalment and satisfaction of any related obligations such as payment of any
duties and taxes, you will receive a FASTER statement for your shareholding. You will not receive a
share certificate for your shareholding. The FASTER statement is similar to a bank account
statement and will tell you how many shares you own. You will also receive separately a FASTER
Identification Number (FIN). If you sell any of your shares or if you purchase more shares, you
will receive a new statement of holding at the end of the month.
The directors may determine which shares may be recorded, or will remain, on a branch register
of shares.
You may be able to transfer your holding between the Australian and New Zealand registers
If you wish to transfer your holding between the Australian and New Zealand registers, you
should contact our registrar for more information as restrictions may apply to movements between
these registers. For further
information, you should also refer to the section below Our securities are traded on the ASX
and the NZSX and are quoted on the New York Stock Exchange and Exchange Controls and Foreign
Ownership.
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Transfer of shares
The following is a summary of how you may transfer your shares in Australia and New Zealand.
Transfer of shares in Australia
A shareholder may transfer shares if, in the case of an electronic transfer of shares, the
transfer is in accordance with the ACH Clearing Rules, the rules of any electronic system in which
we participate and which is established or recognised by the ASX Listing Rules, or in any other
case, by an instrument of transfer executed by the transferor and the transferee and stamped where
necessary. Our directors must register a transfer of shares which is in accordance with these
requirements subject to the Corporations Act, the ASX Listing Rules, and the ACH Clearing Rules,
our constitution and any other law including the Telstra Act.
The directors may ask the ACH to apply a holding lock to stop an electronic transfer under
certain circumstances.
Transfer of shares in New Zealand
A transfer of shares in New Zealand may be by a market transfer in accordance with the
electronic system for share trading established by the FASTER system or by a proper instrument of
transfer in writing.
Our securities are traded on the ASX and the NZSX and are quoted on the NYSE
Our securities are currently traded on the ASX, the NZSX and the NYSE. Unless you have made
special arrangements in advance with a stockbroker, you may not be able to trade your shares on an
exchange other than the exchange of the country in which the relevant share register is located.
If shareholders wish to transfer holdings between the Australian and New Zealand registers,
shareholders should contact the Telstra registrar for more information as restrictions may apply to
movements between these registers.
There are restrictions on the level of foreign ownership of our shares
Foreign persons must not hold particular stakes in us, if the level of foreign ownership of
our shares exceeds certain individual or aggregate levels. This is because of requirements in:
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the Telstra Act; |
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our constitution; and |
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the instalment receipts trust deed. |
Acquisitions of interests in Australian companies by foreign interests are also regulated by
the Foreign Acquisitions and Takeovers Act 1975 of Australia. See Exchange Controls and Foreign
Ownership for an explanation of the restrictions.
Constitution and Documents on Display
Our constitution
The following is a summary of the material provisions of our constitution which may affect
shareholders.
Our constitution was adopted at the 2006 annual general meeting held on 14 November 2006.
Our constitution reflects, among other things, the outcomes of the Global Offering, regulatory
changes under the Corporations Act and the ASX Listing Rules and developments in best practice
corporate governance.
A copy of our constitution has been lodged with the ASX and is also available on our website
at www.telstra.com.au/abouttelstra/investor.
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Issue of further shares
Our Board may issue shares at their discretion. They must, however, act in accordance with our
constitution, the Corporations Act, the Telstra Act, the ASX Listing Rules and any special rights
conferred on holders of any shares.
Calls
Our Board may only make calls on shareholders in respect of money unpaid on their shares. Our
shareholders have no other liability to further capital calls.
Restrictions on foreign ownership
The Telstra Act restricts the holding of particular foreign ownership stakes in us. Our
constitution contains provisions designed to enable us to monitor and enforce these restrictions.
We have adopted rules to implement these provisions which bind all shareholders. These are outlined
in the Exchange Controls and Foreign Ownership section of this Institutional Offering Memorandum.
Alteration of rights
The rights attaching to our shares may only be varied or abrogated with the written consent of
the holders of three quarters of the issued shares of that class or with the approval of a special
resolution passed at a separate meeting of the holders of the issued shares of that class.
Borrowing powers
Our directors may exercise all of our borrowing powers in their absolute discretion. This
power may only be varied by amending our constitution which would require a special resolution to
be passed by our shareholders at a general meeting.
Shareholders approval required
The management of the business and affairs of the company is vested in our directors. However,
the approval of shareholders is required for certain important matters, such as the election of
directors, and the sale or disposal of our main undertaking.
Directors and shareholders may call a meeting
The directors may call a general meeting at their discretion. The directors must also call and
arrange to hold a general meeting on the request of:
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shareholders who hold at least 5% of the votes that may be cast at the general meeting; or |
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at least 100 shareholders who are entitled to vote at the general meeting. |
General meeting attendance and notice
All shareholders are notified of and may attend all general meetings. We send a notice of the
meeting to all shareholders at least 28 days before the meeting.
Voting rights
Shareholders (whether residents or non-residents of Australia) may vote at a meeting of
shareholders in person or by proxy, attorney, or representative, depending on whether the
shareholder is an individual or a company.
Shareholders may also be able to vote directly on resolutions considered at a general meeting
by mailing their votes to us prior to the meeting. Permission to do this will be at the Boards
discretion. This option means that a shareholders vote can still be counted even where the
shareholder cannot attend personally and does not wish to appoint a proxy.
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Three shareholders must be present in person or by proxy, attorney or representative to form a
quorum. If there is no quorum present at a meeting thirty minutes after the time set for the start
of the meeting, then:
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if the meeting was called by a shareholder or shareholders, the meeting must be dissolved; or |
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in any other case, the meeting is adjourned to the same day, time and place in the next week
or to such other day, time and place as the directors present decide. The adjourned meeting is
dissolved if this quorum is not present within thirty minutes after the time specified for the
meeting. |
Shareholders present at the meeting must vote on a show of hands unless a poll is called. A
poll may be called either before a vote is taken or before or immediately after the voting results
on a show of hands are declared. A poll may be called by:
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the chairman of the meeting; |
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not less than five shareholders who may vote on the resolution; or |
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a shareholder or shareholders who together hold at least 5% of the votes that may be cast on
the resolution on a poll. |
If the demand for a poll is withdrawn, the vote is decided on a show of hands.
Subject to any rights or restrictions attaching to our shares, on a show of hands each
shareholder present in person or by proxy, attorney or representative has one vote and on a poll,
has one vote for each fully paid share held. Presently, we have only one class of fully paid
ordinary shares and these do not have any voting restrictions. If shares are not fully paid, the
voting rights attached to those shares cannot be exercised.
An ordinary resolution is passed:
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on a show of hands, by a majority of shareholders present in person or by proxy, attorney or
representative voting in favour of the resolution; and |
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on a poll, by shareholders present in person or by proxy, attorney or representative holding
at least a majority of the votes cast in favour of the ordinary resolution. |
A special resolution is passed:
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on a show of hands, by at least 75% of shareholders present in person or by proxy, attorney
or representative voting in favour of the resolution; and |
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on a poll, by shareholders present in person or by proxy, attorney or representative that
represent at least 75% of the votes cast in favour of the special resolution. |
Dividends
Subject to any special rights attaching to our shares and to the terms of any issue of shares
to the contrary, shareholders receive dividends according to the number of shares held and the
amount paid up on those shares. Currently, no special rights attach to any of our shares.
Shareholders may elect to receive dividends by electronic transfer into their nominated
account. Any unclaimed dividend moneys will, in certain circumstances, be able to be re-invested in
our shares.
Rights to profits
The power to declare dividends, pay dividends and fix the time for their payment is vested in
the Board.
Our directors may, before declaring or paying a dividend, set aside out of our profits any
amount that they think should be applied as a reserve. Our directors may also carry forward profits
which they consider should not be distributed as a dividend, without transferring those profits to
a reserve.
A declaration by our directors as to the amount of the profits available for dividend is
conclusive and binding on all shareholders.
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Documents to be sent to shareholders
Shareholders will receive a copy of any financial statements or other documents which we must
send to shareholders under our constitution, the Corporations Act or the ASX Listing Rules.
We also offer shareholders the opportunity to receive electronic copies of these documents via
email as an alternative to receiving hard copies.
Winding-up
If we are being wound up and the assets available for distribution among shareholders are more
than sufficient to pay all our debts and liabilities and the costs and expenses of winding up, the
excess must be divided:
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firstly, amongst the shareholders in proportion to the number of shares held by them; and |
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then among the shareholders in proportion to the number of restricted securities held by
them, irrespective of the amounts paid or credited as paid on the shares. |
However, in calculating this excess, any amount unpaid on a share is to be treated as our
property of the Company, and the amount of excess that would otherwise be distributed to the holder
of a partly paid share must be reduced by the amount unpaid on that share at the date of the
distribution. If the effect of this reduction would result in a negative amount the shareholder
must contribute the amount to Telstra.
Number of directors
At all times, we must have between three and thirteen directors on the Board. Shareholders may
vote to increase the maximum number of directors.
Directors share qualification
Our directors are not required to hold Telstra shares.
Retirement of directors
We must have an election of directors each year, and all directors must retire at the third
annual general meeting after the director was elected or last re-elected. If no director is to
retire on the basis of being at the third annual general meeting since their appointment, the
director that must retire is the one who has been longest in office.
In addition, the Boards general policy on Board membership for non-executive directors
is:
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in general, directors will be encouraged to retire at 72 years of age; and |
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the maximum tenure is 12 years (usually four terms of three years). |
Directors interests
A director who has a material personal interest in a proposal, arrangement or contract that is
being considered at a meeting of our directors has a limited right to be present at the relevant
meeting and to vote on the matter.
The power to be present and vote only exists in certain circumstances prescribed by the
Corporations Act. These are:
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when the Board has passed a resolution that identifies the director and his/her interest and
states that the other directors are satisfied that the interest should not disqualify the
director from voting or being present; or |
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where ASIC makes a declaration or class order that the director may be present and vote
notwithstanding his/ her material personal interest. |
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Officers indemnity and insurance
Our constitution provides for us to indemnify each officer, to the maximum extent permitted by
law, against any liability incurred as an officer provided that:
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the liability is not owed to us or a related body corporate; |
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the liability is not for a pecuniary penalty or compensation order made by a court under the
Corporations Act; and |
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the liability does not arise out of conduct involving a lack of good faith. |
Our constitution also provides for us to indemnify each officer, to the maximum extent
permitted by law, for legal costs incurred in defending civil or criminal proceedings.
If one of our officers or employees is asked by us to be a director or alternate director of a
company which is not related to us, our constitution provides for us to indemnify the officer or
employee out of our property for any liability he or she incurs. This indemnity only applies if the
liability was incurred in the officers or employees capacity as a director of that other company.
It is also subject to any corporate policy made by our CEO. Our constitution also allows us to
indemnify employees and outside officers in some circumstances. The terms officer, employee and
outside officer are defined in our constitution.
We may pay an insurance premium insuring a person who is or has been a director, secretary or
executive officer of us or of one of our related bodies corporate against certain liabilities
incurred by that person in such a capacity. The insurance will not cover liabilities which arise
out of conduct involving a wilful breach of that persons duty to us or a breach of their duty not
to improperly use their position or company information.
Commonwealth Specific Provisions
Provisions specific to the Commonwealths majority ownership in us are contained in a schedule
to the constitution. These include provisions:
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requiring the Commonwealth to be present as a shareholder of quorum in order for a meeting to
be valid; |
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regarding Commonwealth representation at shareholder meetings; and |
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requiring the Board to consult the relevant Commonwealth Minister before appointing a casual
vacancy or an additional director to the Board. |
The provisions of this schedule will fall away once the Commonwealth ceases to hold 50% or
more of the shares in us (upon completion of the Global Offering).
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Relationship between Shares and Instalment Receipts
If you purchase shares from the Commonwealth, you will have to pay for them in two instalments.
When you pay the first instalment, you will be an instalment receipt holder. When you pay the
final instalment, you will become a shareholder, assuming you have met any earlier related
obligations including the obligation to pay any duties and taxes. Holders of instalment receipts
and shareholders will generally have rights equivalent to those of shareholders. These rights
include:
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the right to receive any dividends declared by us; and |
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the right to attend and vote at
meetings of our shareholders (by directing the trustee to vote). |
You should refer to the summary of these topics in the section Description of Shares and our
Constitution to understand your rights and the section on Description of the Instalment Receipts
and Trust Deed for an explanation of the rights of instalment receipt holders.
Description of the Instalment Receipts and Trust Deed
The following information is a summary of the material provisions of the instalment receipts
and the trust deed dated on or about 8 October 2006 between the Commonwealth and the trustee. The
trust deed sets out many of your rights and obligations as an instalment receipt holder. You may
inspect a copy of the trust deed and the constitution of the trustee at our principal office at
Telstra Centre, 242 Exhibition Street, Melbourne, Victoria 3000, Australia during normal working
hours prior to the closing of the Global Offering.
Instalment receipts
You must purchase Telstra shares in two instalments
Shares are payable in two instalments. The first instalment is A$2.10. You must pay this
amount when you apply for shares. The final instalment is A$1.60 and you should pay this amount by
5:00 pm Sydney, Australia time on or by 29 May 2008. You must pay both instalments in Australian
dollars.
You may prepay the final instalment
You may prepay the final instalment owing on some (in minimum parcels of 2,000 instalment
receipts) or all of your instalment receipts by paying the relevant amount to the instalment
receipt and share registrar. If you prepay the final instalment payment before the final instalment
due date you will receive a discount for early payment. The prepayment discount is calculated by
discounting the final instalment for the period between the relevant prepayment date (the last day
of the month in which payment is received) and the final instalment due date, using the yield to
maturity of the benchmark Government bond 8.75% Coupon, maturing 15 August 2008, applicable as at
the end of the previous month, as published on the Reuters monitor system RBA 28 (or any page
which replaces that page) at 4:30 p.m. on such day.
Instalment receipt holders who wish to prepay the final instalment will need to contact the
instalment receipt and share registrar to obtain notification of the amount payable and the
applicable prepayment discount. Details of acceptable methods of payment, and of how cheques are to
be made payable, will be provided by the instalment receipt and share registrar. The instalment
receipt and share registrar will receive the amount on behalf of the Commonwealth and will pay it
to the Commonwealth.
Prepayments will be processed in monthly batches. The first available prepayment date is 28
February 2007 and the last prepayment date is 31 March 2008. Instalment receipt holders can only
prepay the final instalment on a prepayment date by:
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contacting the instalment receipt and share registrar by the eighth business day of the month in which the prepayment date falls (so, for
example, instalment receipt holders wishing to prepay on 31 March 2008 must contact the instalment
receipt and share registrar by the eighth business day of March 2008); and |
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paying the final instalment (less any applicable prepayment discount) on or before the relevant prepayment date. |
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Where the instalment receipt and share registrar has received a prepayment by the relevant
prepayment date and that prepayment has cleared within five business days after the relevant
prepayment date, the trustee will transfer the shares underlying your instalment receipts to you
within eight business days after the relevant prepayment date. Once the shares are transferred to
you, the Commonwealths security interest will be extinguished and your instalment receipts
cancelled. The prepayment discount is not available to instalment receipt holders with a registered
address in New Zealand.
Each holder that prepays the final instalment will, by paying the prepayment, be deemed to
represent, acknowledge and agree that:
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outside of the United States, is not a U.S. person and is not acting on behalf of, or for
the account of, a U.S. person; or |
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in the United States or a U.S. person and is a QIB; |
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it understands that the shares to be delivered upon prepayment of the final instalment have
not been and will not be registered under the Securities Act or with any securities regulatory
authority of any state or other jurisdiction of the United States; |
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it understands that the shares to be delivered upon prepayment of the final instalment may
not be offered, sold, pledged or otherwise transferred except: |
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in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S under
the Securities Act; or |
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to, or for the account of, a QIB, in reliance on Rule 144A under the Securities Act and,
in each case in accordance with any applicable securities laws of any state of the United
States; |
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for so long as the shares are restricted securities within the meaning of Rule 144(a)(3)
under the Securities Act, it will not deposit or cause to be deposited any of such shares to be
issued upon prepayment of the final instalment in any unrestricted depositary receipt facility
established or maintained by a depositary bank in the United States. |
The Commonwealth will transfer shares to the trustee and you will become an instalment receipt
holder
Once your application for shares has been accepted and you have paid the first instalment, the
Commonwealth will transfer the legal title to the shares to the trustee. Subject to a security
interest in favour of the Commonwealth securing the obligation on you to pay the final instalment,
the trustee will hold those shares on trust for you. This means that you have a beneficial interest
in those shares. Your interest is registered on an instalment receipt register. You will be
regarded as the beneficial owner of the same number of shares as instalment receipts registered in
your name on the instalment receipt register. Because you do not hold the legal title to your
shares, you are not a shareholder. You are an instalment receipt holder. In almost all respects, an
instalment receipt holder has equivalent rights to those of a shareholder.
The instalment receipt register
The instalment receipt register is the only evidence of your holding of an instalment receipt
and of the beneficial interest in the share underlying your instalment receipt. The instalment
receipt register will be maintained by the instalment receipt and share registrar. You may inspect
or obtain a copy of the instalment receipt register (for a fee, in some cases) if you provide an
undertaking regarding the use of the information you obtain in inspecting, or obtaining a copy of,
that register.
The instalment receipt and share registrar in Australia is Link Market Services Limited who is
also Telstras share registrar in Australia.
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You should notify the instalment receipt and share registrar if you change your name or your
address so that this change may be made to the instalment receipt register. The Commonwealth, the
trustee and the instalment receipt and share registrar may (but need not) act as though any notice
so given has been properly reflected in the instalment receipt register (whether or not it has
been), but an instalment receipt holder will only be entitled to expect that a notice so given has
been properly reflected in the instalment receipt register if the instalment receipt holder has
received and produces a written confirmation to that effect from the instalment receipt and share
registrar.
Except as required by law or by a court of competent jurisdiction, neither the trustee nor the
instalment receipt and share registrar will recognise any trust and, therefore no trust will be
entered upon the instalment receipt register.
The Australian instalment receipt register is electronic
Everyone acquiring instalment receipts pursuant to the global offering other than those
applying in the portion of the offering made in New Zealand will be recorded on the Australian
instalment receipt register. Most transfers of instalment receipts on the Australian instalment
receipt register will be handled electronically through CHESS. See the section on Description of
Shares and our Constitution for an explanation of this system.
Certificates will not be issued for instalment receipts on the Australian instalment receipt
register. Instead, you will receive a statement of holding advising you of the number of instalment
receipts you hold. If you sell any of your instalment receipts or if you purchase more instalment
receipts, you will receive a new statement of holding at the end of the month. You may obtain an
additional statement of holding at any time for a fee.
If you hold instalment receipts on the CHESS subregister, your statement of holding will set
out your Holder Identification Number (HIN). If you hold instalment receipts on the
issuer-sponsored subregister, your statement of holding will set out your Security Holder Reference
Number (SRN). You must quote your HIN or SRN when dealing with a stockbroker or the instalment
receipt and share registrar.
You may transfer or sell your instalment receipts subject to the terms of the trust deed
You may transfer some or all of your instalment receipts to another person, subject to the
terms of the trust deed.
The trust deed provides that you may transfer any of your instalment receipts
by:
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a Proper ASTC Transfer (as defined in the Corporations Regulations); |
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a Sufficient Transfer (as defined in the Corporations Regulations); |
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an electronic transfer under the NZSXs FASTER system; |
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a written instrument of transfer in the form in the schedules to the trust deed or in any
other form approved by the trustee (a number of standard forms of transfer used in Australia
and New Zealand will be approved by the trustee for this purpose); or |
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any other method of transfer of marketable securities which is introduced by ASX, ACH or ASTC
or operates in accordance with the ASX Listing Rules, ACH Clearing Rules, ASX Market Rules or
ASTC Settlement Rules and recognised under the Corporations Act and approved by the trustee. |
The trustee may, in the case of a transfer other than a Proper ASTC Transfer, direct the
instalment receipt and share registrar to refuse to register any transfer of instalment receipts
where the ASX Listing Rules applying to the trustee and the instalment receipts or the ACH Clearing
Rules, ASX Market Rules or ASTC Settlement Rules permit such refusal.
If you transfer some or all of your instalment receipts and the transfer is registered on the
instalment receipt register at end of day on 15 May 2008, the person to whom you transfer your
instalment receipts will have to pay the final instalment.
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In addition, the person to whom you transfer your instalment receipts automatically agrees to
be bound by the trust deed and the instalment receipts as soon as they take a transfer of your
instalment receipts. If the ASIC declaration to the effect that transferees of instalment receipts
are bound by the terms of the trust deed is varied or revoked, any off-ASX transfer must be
accompanied by a deed of acknowledgement executed by the transferee or equivalent. Such an ASIC
declaration has been obtained and is in force.
Instalment receipts will be listed on the ASX and the NZSX
The trustee will apply to list the instalment receipts (and the underlying shares) on ASX
within seven days after the date of the Australian prospectus (9 October 2006). An application has
been made to the New Zealand Exchange Limited for quotation of the instalment receipts (and the
underlying shares) on the NZSX and all requirements of the New Zealand Exchange Limited relating to
this application that can be complied with on or before the date of the distribution of the
Australian prospectus and the New Zealand Investment Statement have been duly complied with.
However, the New Zealand Exchange Limited accepts no responsibility for any statements in this
Institutional Offering Memorandum.
There are restrictions on the level of foreign ownership of us
Foreign persons must not hold particular stakes in us. See Exchange Controls and Foreign
Ownership for an explanation of the restrictions.
Trust deed
The following is a summary of the material provisions of the trust deed relating to the
instalment receipts. These provisions are set out in the trust deed. You may inspect the trust deed
if you need more information.
Instalment receipt holders may call a meeting
Instalment receipt holders may require the trustee to requisition or call a meeting of our
shareholders if they hold the number of instalment receipts representing shares which, if those
shares were held by those instalment receipt holders, would entitle the instalment receipt holders
to call or require the calling of the meeting themselves in accordance with the Corporations Act or
our Constitution. You should refer to Description of Shares and our Constitution for more
information.
If you wish to call, or require the calling of, a meeting, you must ask the trustee to do so
on your behalf because the trustee is the legal owner of the shares underlying the instalment
receipts.
You may attend a general meeting of shareholders and must receive notice of the meeting
You generally have equivalent rights to those of shareholders including the right to attend
and speak at a general meeting of our shareholders. You cannot vote directly at a general meeting
of our shareholders but can direct the trustee how to vote the shares underlying your instalment
receipts.
The trustee will direct the instalment receipt and share registrar to make arrangements with
us and the share registrar to ensure that, so far as practicable, the share registrar sends to you
any notice of meeting of shareholders at the same time and in the same manner it sends that notice
to shareholders.
You should refer to the section Description of Shares and our Constitution for more
information.
As you are not strictly a shareholder, the trust deed sets out a procedure that the trustee
must follow to ensure that you may direct the votes attached to the underlying shares at a general
meeting. That procedure may be summarised as follows:
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you will receive the notice of meeting and will also receive a direction form to enable you
to give directions to the trustee on how to exercise the votes attached to the underlying shares. The trustee can be directed to ensure the votes are cast for or against each resolution
at the meeting, or can be directed to abstain.
Alternatively, the trustee can be directed to appoint the chair of the meeting as open proxy
in respect of the relevant votes; |
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the trustee will appoint proxies to exercise the votes in accordance with the directions
received; |
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if you do not provide a valid voting direction, the trustee must not cast a vote on any
resolution in respect of the underlying shares to which your instalment receipts relate. |
Directions will only be valid if:
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they are received by 5:00pm Sydney, Australia time on the day two business days before the
last day for our shareholders to lodge proxies in relation to the relevant general meeting; and |
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the person giving the direction remains the registered holder of the relevant instalment
receipts at end of day on the day two business days before the snapshot time fixed by us for
determining which shareholders are entitled to vote at the relevant general meeting. |
Dividends
If we declare or pay a dividend (other than by way of bonus issue), the trustee must:
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if the dividend is to be paid wholly or partly in cash, direct us to pay the cash part of the
dividend directly to you according to the number of instalment receipts registered in your
name; and |
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if the dividend is not wholly in cash, take all reasonable steps (as defined in the trust
deed) to cause the non-cash part of the dividend to vest in you. The trustee is not required to
take steps which are unlawful or impracticable or which may involve unindemnified expense to
the trustee or which may potentially expose the trustee to liability. |
The trustee will take all reasonable steps (as defined in the trust deed) to require that the
payment of any dividend to you is made at the same time and in the same manner as we pay dividends
to shareholders.
Payments will be made to you if you are on the instalment receipt register at the relevant
time. See The trustee will set record dates for more information.
It is the responsibility of instalment receipt holders to ensure they comply with any
requirements imposed by us from time to time in relation to payment of dividends (for example, by
nominating a bank account of a type approved by us). The trustee is not responsible to you for any
neglect or default on our part in relation to dividends.
Tax may be withheld from dividends and other distributions. See the section on Taxation.
If there is a question of whether a dividend belongs to you or forms part of the
Commonwealths security interest over the shares (such as where the Commonwealth is required to
exercise its security due to a default by you), the trustee will need to assess the situation and
determine who the dividend belongs to. It will apply the same principles as it will apply to an
accretion that is not specifically provided for in the trust deed. In that case, the trustee will
determine whether the accretion is an addition to or a replacement of the share. If it is an
addition to or replacement of the share, the trustee will hold the accretion on trust in the same
way that it holds the security interest in the shares. If the accretion is an incident of the
beneficial interest which you hold, the trustee will take reasonable steps (as defined in the trust
deed) to transfer the accretion to you or, if that is not possible, it will hold the accretion for
your benefit in the same way that it holds your beneficial interest.
The trustee will set record dates
The trustee will fix a record date whenever we propose to:
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pay a cash dividend; |
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make any other cash or non-cash distribution; or |
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issue rights in regard to the shares. |
This is the date on which you will need to be registered on the instalment receipt register in
order to receive the dividend, distribution or rights. This date will, to the extent practicable,
be the same as the record date fixed by us for shareholders except in the case of meetings where
the record date for determining who is entitled to vote at the
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meeting will be two business days before the record date for shareholders. You should refer to the
topic You may attend a general meeting of shareholders and must receive notice of the meeting in
this section for an explanation of the record date for meetings.
Documents to be sent to instalment receipt holders
Your rights in this regard are equivalent to those of shareholders. You should refer to the
section Description of Shares and our Constitution for more information.
You may participate in a new issue of shares
If we make an entitlements offer to our shareholders to participate in a new issue of shares
or other securities (other than a bonus issue), the trustee is not obliged to respond to that offer
or, if it is renounceable, to dispose of it. The trustee will seek advice from the instalment
receipt and share registrar, us, the share registrar or some other suitably qualified person and if
that advice is that reasonable steps (as defined in the trust deed) can be taken to confer the
benefit of the offer on you as an instalment receipt holder, the trustee will take those reasonable
steps. Any securities you receive under a new issue cannot be sold by the trustee if you fail to
pay the final instalment.
You cannot mortgage or charge the shares underlying your instalment receipts
As discussed below, the trustee may sell some or all of the shares underlying your instalment
receipts if you do not pay the final instalment by the final instalment due date. This is because
the Commonwealth has a security interest over your shares. You cannot create any security
interest, such as a mortgage or a charge, over the shares the trustee is holding on your behalf. In
addition, you cannot do anything which would have the effect of giving another person any right
over the shares until you have paid the final instalment and the trustee has transferred the shares
to you. For this reason, the trustee and the instalment receipt and share registrar will not
recognise or give effect to any security interest over your beneficial interest in, or your future
right to receive, the shares underlying your instalment receipts.
You must pay any duties and taxes on your instalment receipts or shares
If the trustee receives a demand or an assessment relating to you, your instalment receipt
holding or shares underlying your instalment receipt holding from a revenue or other authority for
any duties and taxes or becomes aware that it may be liable to pay such duties and taxes, then if
the trustee is advised that it must pay that amount, you must pay that amount to the trustee upon
demand.
If you do not pay the amount demanded by the trustee in the manner and within the period set
out in the notice provided by the trustee, the trustee may take action to recover that amount as a
debt due from you. It may choose to sell all or any of your instalment receipts or, if the
Commonwealth directs, the shares to which your instalment receipts relate. If the trustee sells the
shares relating to your instalment receipts, your instalment receipts will be cancelled. In either
case, the proceeds of the sale will be applied in accordance with a priority order set out in the
trust deed.
You are not responsible for Excepted Duties. This means that you are not required to pay
stamp duty on the transfer of the shares from the Commonwealth to the trustee and from the trustee
to you after the final instalment is paid and on constitution of the trusts on which the shares are
held.
You must pay the final instalment
You will receive a reminder notice approximately four weeks before the final instalment is
due. The reminder notice will be sent to the address recorded against your name in the instalment
receipt register. See generally the topic The instalment receipt register in this section.
So that the Commonwealth can determine who must pay the final instalment, we will ask the ASX
to suspend trading of the instalment receipts on or about 9 May 2008. If you are on the instalment
receipt register at end of day on 15 May 2008, you will have to pay the final instalment. This is
so even if you do not receive the reminder notice.
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If you pay the final instalment, the trustee will transfer the shares to you
If you pay the final instalment by 5:00 pm Sydney, Australia time on 29 May 2008 and the
payment is cleared by 5:00 pm Sydney, Australia time on 10 June 2008, the trustee will transfer the
shares to you within 12 business days (or a longer period if the ASX permits) of 29 May 2008.
If the funds you send to pay for the final instalment are not cleared by 5:00 pm Sydney,
Australia time on 10 June 2008, the trustee will transfer the shares to you as soon as practicable
after receiving a notice that those funds are cleared.
When the trustee transfers the shares to you, your instalment receipts will be cancelled. At
that point, you will become an ordinary shareholder.
The shares underlying your instalment receipts may be sold if you fail to pay the final
instalment and you may have to pay interest and other charges
If you default in paying the final instalment, you will have to pay interest on the amount of
the final instalment. Interest will be calculated at 12% per annum.
If you default in paying the final instalment, the trustee may sell some or all of the shares
underlying your instalment receipts. This includes all dividends, rights or other benefits accruing
or received on the shares after 29 May 2008.
The trustee will apply the proceeds of sale of your shares sold in the following order:
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in payment of the costs and expenses of the trustee in attempting to recover the final
instalment from you (including the costs associated with the giving of default notices
demanding payment, at a minimum cost of A$75 per notice given to you one or more such notices
may be given to you); |
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in payment of the costs and expenses incurred in the sale of your shares plus an
administration charge of A$75; |
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in payment of any duties and taxes relating to the relevant shares or instalment receipts; |
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in payment of interest on all the above amounts and on the final instalment; |
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if only some of your shares for which you have not paid the final instalment are sold, in
payment to the Commonwealth of the above amounts owing in respect of the remaining shares; and |
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in satisfaction of the final instalment due by you. |
You will receive the balance remaining after the proceeds have been applied in this way.
If the proceeds of the sale of the shares are insufficient to cover the above amounts, you
remain liable for the shortfall. The trustee must take action against you to recover the shortfall
unless the Commonwealth instructs it to cease that action. The Commonwealth can also take recovery
action against you directly.
Powers and duties of the trustee and limits on its liability
All the powers and duties of the trustee are set out in the trust deed.
The trustees liability is generally limited to circumstances of gross negligence or fraud on
the part of the trustee.
The trustee is not liable for failing to do anything that it is forbidden from doing by any
law or other requirements by which it is bound, or for doing anything that it is required to do
under those laws or requirements.
The trustee may delegate its powers and duties in relation to the foreign ownership
restrictions set out in the Telstra Act, including its power to dispose of instalment receipts for
the purpose of seeking to prevent the occurrence or continuation of an unacceptable foreign
ownership situation (as defined in the Telstra Act).
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The trust deed contains provisions designed to enable the trustee to monitor and enforce the
foreign ownership restrictions. These are outlined above at the section Exchange Controls and
Foreign Ownership. The trustee has the power to adopt rules to implement these provisions, which
will bind all instalment receipt holders.
Events concerning us
The trust deed has provisions which deal with the duties of the trustee
if:
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a takeover bid is made for our company; |
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a takeover bid is made for instalment receipts; |
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we subdivide, consolidate or reconstruct our shares; |
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we reduce our capital. If it is a return of capital, the Commonwealth will receive the return
and the final instalment will be reduced accordingly; |
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we make a buy-back offer for shares. The trustee may accept only buy-back offers where the
buy-back price is equal to or exceeds the final instalment and you direct the trustee to accept
the offer. In that case, the trustee will direct us to pay the final instalment (reduced by the
prepayment discount calculated as though the buy-back payment was a prepayment) to the
Commonwealth and any balance will be paid to you; or |
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we make a bonus issue or our shareholders receive rights under a scheme of arrangement. If
the benefits received relate solely to your beneficial interest and do not impair the
Commonwealths security interest, the trustee will take reasonable steps (as defined in the
trust deed) to transfer them to you. Otherwise, they will be treated as an accretion to the
Commonwealths security interest. |
The trust deed may be amended by the Commonwealth and the trustee
The trust deed may be amended by a supplemental deed between the Commonwealth and the trustee.
However, any amendment must not:
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impair your right to enjoy your beneficial interest in the shares before you pay the final instalment; |
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impair your rights to receive a transfer of the shares once the final instalment is paid; |
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vary the date on which you must pay the final instalment; or |
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remove your right to receive dividends unless that amendment results from an event, transaction or resolution by, or concerning, our company. |
The trust deed is governed by the law of the Australian Capital Territory
The trust deed is governed by the law of the Australian Capital Territory. The courts of the
ACT shall have non-exclusive jurisdiction to settle any dispute, action, claim, suit or proceeding
relating to the trust deed, the Commonwealths security interest or the beneficial interest in the
shares underlying the instalment receipts. You are deemed to have submitted to the non-exclusive
jurisdiction of the courts of the ACT.
You are also deemed to have irrevocably waived any immunity that you may now or in the future
have in regard to your obligations under the trust deed.
Nothing in the above clauses limits the right of the Commonwealth or the trustee to recover
unpaid amounts from you or to take any proceedings against you in any manner permitted by law or in
any court having jurisdiction. Even if the Commonwealth or the trustee takes proceedings in one
jurisdiction, it may still take proceedings in another jurisdiction, whether concurrently or not.
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Other provisions
The trust deed also contains other provisions, including:
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the Commonwealth may remove the trustee if it appoints a wholly-owned Commonwealth company as
the new trustee. A court may be able to remove the trustee in some circumstances; |
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the Commonwealth must pay all expenses of the trustee. However, you must pay any expenses of
the sale of your shares arising from enforcement action taken by the Commonwealth to recover
the final instalment and certain other costs and charges; |
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the Commonwealth indemnifies the trustee for all liabilities arising from the performance of
its responsibilities under the trust deed, subject to certain limitations in the case of bad
faith, malice, fraud or recklessness on the part of the trustee; |
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the Commonwealth indemnifies you for all losses or damages which you may suffer as a result
of a breach by the trustee of its obligations under the trust deed, except to the extent that
the breach by the trustee is a result of your negligence, bad faith or wilful default; |
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if the trustee takes action to recover amounts owing by you to the Commonwealth, the trustee
acts as the Commonwealths agent. It must have regard solely to the Commonwealths interest so
far as the law permits; |
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there are provisions that limit your ability to affect the timing and manner of the sale of
shares or instalment receipts; |
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the trustee may provide information it has to us and the Commonwealth. Information you
provide in your application for shares may be provided by the Commonwealth to the trustee; |
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the trust deed contains provisions dealing with the situation where the trustee is obliged by
law or court order to dispose of the shares underlying your instalment receipts and dealing
with circumstances where rights attaching to shares are cancelled or suspended or shares become
vested in a third party or authority under any law, court order or otherwise. The trust deed
also contains provisions in relation to compulsory acquisition of shares under takeover laws; |
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joint holders of instalment receipts owe the obligations imposed on them under the trust deed
jointly and severally; |
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you must make all payments required to be made by you by cleared payment without deduction of
any kind and free of any counter-claim or set-off; |
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there are general provisions in the trust deed which allow changes to times and dates to
avoid administrative difficulties. However, the date for payment of the final instalment cannot
be changed; and |
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instalment receipts may be cancelled by agreement with their holder and the relevant shares
re-transferred to the Commonwealth if the Commonwealth has repaid the first instalment to the
instalment receipt holder. |
Administration arrangements
The Commonwealth, the trustee and ourselves have entered into an agreement dated on or about 8
October 2006 that deals with administrative arrangements in regard to instalment receipt holdings,
such as payment of dividends, and foreign ownership restrictions, such as administration of the
foreign ownership rules.
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Taxation
This section describes the principal United States federal income and Australian tax
consequences of owning shares or instalment receipts. It applies to you only if you purchase your
shares through this offering and hold your shares or instalment receipts as capital assets for tax
purposes. This section is the advice of Sullivan & Cromwell insofar as it relates to matters of
United States federal income tax law and is the advice of Mallesons Stephen Jaques insofar as it
relates to matters of Australian law. This section does not address all material tax consequences
of owning shares. It does not address special classes of holders, some of whom may be subject to
other rules, including:
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tax-exempt entities; |
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certain insurance companies; |
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dealers in securities or currencies; |
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traders in securities that elect to mark to market; |
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investors liable for alternative minimum tax; |
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investors that actually or constructively own 10% or more of our voting stock; |
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investors that hold shares as part of a straddle or a hedging or conversion transaction; or |
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investors whose functional currency is not the US dollar. |
This section is based on the tax laws of the United States, including the Internal Revenue
Code of 1986, as amended, (the Code), its legislative history, existing and proposed regulations,
and published rulings and court decisions, and the tax laws of Australia each as currently in
effect, as well as on the Convention between the United States of America and Australia for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income
(the Treaty). These laws are subject to change, possibly on a retroactive basis.
You should consult your own tax advisor regarding the United States federal, state and local
and the Australian and other tax consequences of owning and disposing of shares or instalment
receipts, in your particular circumstances.
United States Taxation
United States Internal Revenue Service Circular 230 Notice: To ensure compliance with Internal
Revenue Service Circular 230, prospective investors are hereby notified that: (a) any discussion of
US federal tax issues contained or referred to in this institutional offering memorandum or any
document referred to herein is not intended or written to be used, and cannot be used by
prospective investors for the purpose of avoiding penalties that may be imposed on them under the
United States Internal Revenue Code; (b) such discussion is written for use in connection with the
promotion or marketing of the transactions or matters addressed herein; and (c) prospective
investors should seek advice based on their particular circumstances from an independent tax
advisor.
This discussion addresses only United States federal income taxation.
A US holder (as defined below) of instalment receipts should be treated for United States
federal income tax purposes as the owner of the shares represented by such instalment receipts.
You are a US holder if you are a beneficial owner of shares and you
are:
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a citizen or resident of the United States; |
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a domestic corporation; |
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an estate whose income is subject to United States federal income tax regardless of its
source; or |
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a trust if a United States court can exercise primary supervision over the trusts
administration and one or more United States persons are authorised to control all substantial
decisions of the trust. |
As used in this discussion, United States Taxation, unless the context otherwise requires,
the term share refers to a share or instalment receipt.
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Treatment of instalment payments
The following is a discussion of original issue discount (OID) and foreign currency gain or
loss and is based, in part, on Code provisions and US Treasury Department regulations that may be
subject to varying interpretations.
Deduction of interest
Your obligation to make the final instalment payment under the trust deed will be treated, for
United States federal income tax purposes, as a debt obligation (the purchase obligation), which
will bear OID to the extent that the amount of the final instalment payment exceeds the difference
between the fair market value of a share at the date of the issuance of the instalment receipt and
the amount of the first instalment payment, all calculated in Australian dollars.
Whether you are a cash-basis or accrual-basis taxpayer, you will be generally entitled to
deduct as interest expense (subject to the limitations on the deductions of investment interest
by non-corporate taxpayers and to other applicable limitations) the sum of the daily portions of
OID with respect to each purchase obligation you have issued for each day during the taxable year
in which your obligation remains outstanding. You can determine the daily portion by allocating to
each day in any accrual period a pro rata portion of the OID allocable to that period.
You can determine the amount of OID allocable to an accrual period by multiplying your
purchase obligations adjusted issue price in Australian dollars at the beginning of the accrual
period by your purchase obligations yield to maturity. You determine your purchase obligations
yield to maturity on the basis of compounding at the close of each accrual period and adjusting for
the length of each accrual period. Your purchase obligations adjusted issue price at the beginning
of any accrual period will be your purchase obligations issue price increased by any previously
accrued OID. You may select an accrual period of any length of not longer than one year, provided
that the scheduled payment of the final instalment occurs at the end of an accrual period.
The daily amounts of OID in Australian dollars should be converted into US dollars using the
average of the spot exchange rates in effect during the relevant accrual period or other average
exchange rate for the period reasonably derived and consistently applied by you. You may elect
under a spot accrual convention to determine OID accrued on the basis of the exchange rate in
effect on the last day of the accrual period. Additionally, under this method, if the payment date
is within five business days of the last day of your accrual period or taxable year, you may
instead translate the OID accrued into US dollars at the exchange rate in effect on the day of
payment. You can make the election to use the spot accrual convention by filing a statement with
your first tax return in which the election is effective, clearly indicating that the election has
been made. Once made, the election must be applied consistently to all debt instruments from year
to year and may not be changed without the consent of the US Internal Revenue Service.
Unrelated business taxable income
The purchase obligation constitutes acquisition indebtedness as defined in section 514 of
the Code. Accordingly, if you are a US holder exempt from United States federal income tax, e.g.,
Individual Retirement Accounts, Keogh plans and pension and other employee benefit plans with tax
exempt trusts, dividends and gains, if any, on the sale of shares may be taxed, in part, as
unrelated business taxable income to the extent your total unrelated business taxable income for
the taxable year exceeds US$1,000. The tax will apply to a portion of the dividends you receive
during a taxable year during any part of which you were an obligor on the purchase obligation and
to a portion of the gains on the sale of shares if you were an obligor on the purchase obligation
during any part of the 12-month period preceding the sale (although you would generally be
permitted to deduct a portion of the interest expense referred to above and the Australian
withholding tax on dividends, if any, would generally be creditable against your United States
federal income tax liability).
Foreign currency gain or loss
You will recognise any foreign currency gain or loss realised in respect of a purchase
obligation as an ordinary gain or loss in the earlier of the taxable year in which you paid the
final instalment or in the taxable year of sale of the
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share. Foreign currency gain or loss would be calculated separately in respect of the OID portion,
if any, and the principal portion of the instalment payment.
Your foreign currency gain or loss in respect of the principal portion of the instalment
obligation would be based upon the difference, if any, between the US dollar amount of the adjusted
issue price of the instalment obligation as translated at the exchange rate in effect on the date
of payment and the US dollar amount of such adjusted issue price as translated at the exchange rate
in effect on the date of purchase of the shares. Your foreign currency gain or loss in respect of
any accrued OID portion for the instalment payment would equal the difference between the US dollar
amount of the accrued OID as translated at the exchange rate in effect on the date of payment and
the US dollar amount of the accrued OID as described above under Deduction of Interest.
Payment of OID and Default Interest
Payment of OID (and default interest, if any) to the Commonwealth may be subject to United
States information reporting requirements on US Internal Revenue Service Form 1042-S.
Effect of purchase obligations upon disposition of shares
For purposes of calculating gain or loss on a disposition of shares, your tax basis in the
shares will include, in addition to the amount of the first instalment payment, the US dollar
equivalent issue price of the purchase obligation, based upon the spot rate prevailing on the date
of purchase. The amount you realise on the disposition of shares will include, in addition to other
amounts received, the US dollar equivalent of the amount of any remaining purchase obligation
assumed by the transferee less the amount of unaccrued OID, if any, in respect of the purchase
obligation, all as based upon the spot rate prevailing on that date. You would recognise foreign
currency gain or loss, if any, in the manner described above under Foreign Currency Gain or Loss
as if you had made an instalment payment in an amount equal to the amount of any remaining purchase
obligation.
If you default on the final instalment payment, and the trustee sells the shares pursuant to
the procedure described above under Description of Instalment Receipts and Trust Deed, you would
treat as an amount realised for purposes of the above the amount of the sale proceeds used by the
trustee to pay the instalment (less the amount of unaccrued OID, if any) and any amount paid to
you. Foreign currency gain or loss, if any, would be recognised upon a default. If the sale
proceeds are insufficient to pay in full the instalment in default, under certain circumstances,
the amount by which the instalment exceeds the sale proceeds or the fair market value of the shares
may constitute ordinary income.
Taxation of distributions on shares
Under the United States federal income tax laws, if you are a US holder, the gross amount of
any dividend we pay out of our current or accumulated earnings and profits (as determined for
United States federal income tax purposes) is subject to United States federal income taxation. If
you are a noncorporate US holder, dividends paid to you in taxable years beginning before January
1, 2011 that constitute qualified dividend income will be taxable to you at a maximum tax rate of
15%, provided that you hold the shares for more than 60 days during the 121-day period beginning 60
days before the ex-dividend date and meet other holding period requirements. Dividends we pay with
respect to the shares generally will be qualified dividend income.
You must include any Australian tax withheld from the dividend payment in this gross amount
even though you do not in fact receive it. The dividend is taxable to you when you receive the
dividend, actually or constructively. The dividend will not be eligible for the dividends-received
deduction generally allowed to United States corporations in respect of dividends received from
other United States corporations. The amount of the dividend distribution that you must include in
your income as a US holder will be the US dollar value of the Australian dollar payments made,
determined at the spot Australian dollar / US dollar rate on the date the dividend distribution is
includible in your income, regardless of whether the payment is in fact converted into US dollars.
Generally, any gain or loss resulting from currency exchange fluctuations during the period from
the date you include the dividend payment in income to the date you convert the payment into US
dollars will be treated as ordinary income or loss and will not be eligible for the special tax
rate applicable to qualified dividend income. The gain or loss generally will be income or loss
from sources within the United States for foreign tax credit limitation purposes. Distributions
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in excess of current and accumulated earnings and profits, as determined for United States federal
income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis
in the shares and thereafter as capital gain.
Subject to certain limitations, the Australian tax withheld in accordance with the Treaty and
paid over to Australia will be creditable or deductible against your United States federal income
tax liability. Special rules apply in determining the foreign tax credit limitation with respect to
dividends that are subject to the maximum 15% tax rate.
Dividends will be income from sources outside the United States, but dividends paid in taxable
years beginning before 1 January 2007 generally will be passive or financial services income,
and dividends paid in taxable years beginning after 31 December 2006 will, depending on your
circumstances, be passive or general income which, in either case, is treated separately from
other types of income for purposes of computing the foreign tax credit allowable to you.
Taxation of capital gains
If you are a US holder and you sell or otherwise dispose of your shares, you will recognize
capital gain or loss for United States federal income tax purposes equal to the difference between
the US dollar value of the amount that you realize and your tax basis, determined in US dollars, in
your shares. Capital gain of a noncorporate US holder that is recognized in taxable years beginning
before 1 January 2011 is generally taxed at a maximum rate of 15% where the holder has a holding
period greater than one year. The gain or loss will generally be income or loss from sources within
the United States for foreign tax credit limitation purposes.
Backup withholding and information reporting.
If you are a noncorporate US holder, information reporting requirements, on Internal Revenue
Service Form 1099, generally will apply to:
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dividend payments or other taxable distributions made to you within the United States, and |
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the payment of proceeds to you from the sale of shares effected at a United States office of
a broker. |
Additionally, backup withholding may apply to such payments if you are a noncorporate
US holder that:
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fails to provide an accurate taxpayer identification number, |
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is notified by the Internal Revenue Service that you have failed to report all interest and
dividends required to be shown on your federal income tax returns, or |
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in certain circumstances, fails to comply with applicable certification requirements. |
Payment of the proceeds from the sale of shares effected at a foreign office of a broker
generally will not be subject to information reporting or backup withholding. However, a sale of
shares that is effected at a foreign office of a broker will be subject to information reporting
and backup withholding if:
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the proceeds are transferred to an account maintained by you in the United States, |
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the payment of proceeds or the confirmation of the sale is mailed to you at a United States
address, or |
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the sale has some other specified connection with the United States as provided in US
Treasury regulations, |
unless the broker does not have actual knowledge or reason to know that you are a United States
person and the documentation requirements described above are met or you otherwise establish an
exemption.
In addition, a sale of shares effected at a foreign office of a broker will be subject to
information reporting if the broker is:
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a United States person, |
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a controlled foreign corporation for United States tax purposes, |
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a foreign person 50% or more of whose gross income is effectively connected with the conduct
of a United States trade or business for a specified three-year period, or |
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a foreign partnership, if at any time during its tax year: |
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one or more of its partners are US persons, as defined in US Treasury regulations, who in
the aggregate hold more than 50% of the income or capital interest in the partnership, or |
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such foreign partnership is engaged in the conduct of a United States trade or business, |
unless the broker does not have actual knowledge or reason to know that you are a United States
person and the documentation requirements described above are met or you otherwise establish an
exemption. Backup withholding will apply if the sale is subject to information reporting and the
broker has actual knowledge that you are a United States person.
You generally may obtain a refund of any amounts withheld under the backup withholding rules
that exceed your income tax liability by filing a refund claim with the United States Internal
Revenue Service.
Australian taxation
A Class Ruling has been sought from the Australian Taxation Office (ATO) for participants in
the Global Offering. A draft class ruling has been provided which accords with a number of
statements contained in this summary. A final class ruling is expected to be issued by the ATO
after the release of this Institutional Offering Memorandum. While it is not anticipated to be the
case, the ATO may express views in the final class ruling which may be different to the draft
ruling.
The Australian income tax consequences for a particular investor will depend on the investors
tax profile and own circumstances. For example, the tax consequences for some investors, such as
financial institutions, who hold their investments on income account rather than on capital account
will be different. Similarly, the taxation treatment of certain Tax Non-Residents may also be
significantly different.
This discussion does not seek to deal with the treatment of individuals who are temporary
residents under Australias tax laws.
This discussion is based on the law in force at the date of this Prospectus. The Commonwealth
has proposed changes to the Australian income tax law in relation to capital gains. Tax Laws
Amendment (2006 Measures No 4) Bill 2006 (Bill) which incorporates the proposed changes was
introduced into Federal Parliament on 22 June 2006. The proposed changes were referred to the
Senate Economics Legislation Committee (Committee) on 16 August 2006. On 4 October 2006 the
Committee recommended that the Bill be passed.
Under the proposed changes, a capital gain from a disposal of an instalment receipt or a share
by a Tax NonResident should be subject to Australian income tax under the capital gains tax
provisions only in limited circumstances. The proposed changes are discussed in taxation of
capital gains below in relation to instalment receipts and shares.
It is proposed the changes will apply to a disposal for capital gains tax purposes of an
asset, including an instalment receipt or a share, by a Tax Non-Resident after the date that the
legislation that will introduce the proposed changes receives Royal Assent.
Treatment of instalment receipts
Taxation of distributions
The income taxation treatment of distributions to holders of instalment receipts will reflect
the income taxation treatment of distributions to holders of shares.
While the distributions on instalment receipts are, strictly speaking, trust distributions,
they will retain the character of dividends on the underlying shares and will be treated in the
same way for Australian income tax purposes as dividends on the underlying shares.
192
An imputation system operates in Australia in respect of company income tax. In the absence
of an exemption or concession, Australian resident companies are liable for Australian income tax
on their taxable income at the prevailing corporate rate (currently 30%). The payment of Australian
income tax by an Australian company, such as Telstra, generates a franking credit for the company.
Broadly, an amount of tax paid flows through to shareholders (as a franking credit) when the
company pays a dividend which is franked by the company.
Distributions paid to Australian resident holders of instalment receipts will generally be
included in the assessable income of those holders of instalment receipts.
Where the distribution to Australian resident holders of instalment receipts is a franked
dividend, the franking credit associated with that dividend will generally also be included in the
assessable income of those holders of instalment receipts.
An offset of tax equivalent to the franking credit (known as a tax offset) is available only
to Australian resident holders of instalment receipts.
There are circumstances where an instalment receipt holder may not be entitled to the benefit
of franking credits. The application of these rules depends on the instalment receipt holders own
circumstances including the period for which the instalment receipts are held and the extent to
which the instalment receipt holder is at risk in relation to their investment.
Fully franked dividends (being a dividend which is franked) paid to non-resident shareholders
are not subject to the Australian non-resident dividend withholding tax (DWHT). Dividends to the
extent that they are not fully franked are generally subject to DWHT at the rate of 30% (unless
reduced under the provisions of a double tax treaty).
In the case of a resident of the United States, the rate may be reduced under Article 10 of
the Convention between Australia and the United States for the Avoidance of Double Taxation (the
US Treaty) to 15%. This requires that the instalment receipts are not effectively connected with
a permanent establishment or a fixed base of the Tax Non-Resident in Australia through which the
Tax Non-Resident carries on business in Australia or provides independent personal services.
If a Tax Non-Resident who is a resident of the United States directly holds at least 10% of
the voting power in the Australian company, then the DWHT rate may be further reduced to 5%. The
restrictions on the extent of foreign ownership in Telstra are likely to ensure that a Tax
Non-Resident does not qualify for this reduced rate.
The unfranked part of any dividends paid by us to Tax Non-Residents will be subject to DWHT.
We will deduct DWHT from dividends and pay the balance to the Tax Non-Resident.
Fully franked dividends paid to Tax Non-Residents and dividends that have been subject to DWHT
are not subject to any further Australian income tax.
Taxation of capital gains
Under the current Australian income tax law, Tax Non-Residents will be liable for Australian
income tax under the capital gains tax provisions on any gains realised from the disposal of
certain assets. These assets include a share (or interest in a share) in a public company where at
any time in the preceding five years the non-residents holding (together with the holding of
associates) in the public company is 10% or more; and an interest in an Australian resident trust
estate (Australian CGT assets).
An instalment receipt is an interest in an Australian resident trust estate, and so is an
Australian CGT asset for the purpose of the Australian income tax on capital gains. Because the
10% ownership threshold that applies to shares in public companies does not apply to interests in
trust estates, a gain from a disposal of an instalment receipt by a Tax Non-Resident under the
current capital gains tax provisions will be subject to Australian income tax.
Under proposed changes to the Australian income tax law in relation to capital gains tax, a
capital gain from a disposal of an instalment receipt by a Tax Non-Resident will be subject to
Australian income tax under the capital gains provisions only in limited circumstances.
193
Generally, under the proposed changes, a Tax Non-Resident may only be subject to Australian
income tax under the capital gains provisions where the Tax Non-Resident holds an interest in
taxable Australian property.
Taxable Australian property includes direct and indirect interests in real property located
in Australia or the business assets of an Australian permanent establishment of a Tax Non-Resident.
Indirect interests in Australian real property includes shares in interposed companies or
interests in other interposed entities that hold Australian real property, where the value of those
shares or interests is wholly or principally attributable to taxable Australian real property.
Prospective instalment receipt holders should seek their own independent taxation advice in
relation to the potential impact of the proposed changes to take into account their own
circumstances.
Certain Tax Non-Residents may be liable to tax in respect of a profit on a dealing in the
assets as ordinary income, rather than under the capital gains tax provisions.
A double tax treaty between Australia and the country of residence of the instalment receipt
holder may give relief from liability to pay Australian income tax.
Generally, the business profits articles of Australias double tax treaties provide that a
resident of a treaty party is not subject to Australian income tax on business profits derived in
Australia, unless derived at or through a permanent establishment in Australia. In the case of a
resident of the United States, Article 7(1) of the US Treaty provides that the business profits of
a US enterprise are only taxable in the US unless the enterprise carries on business in Australia
through a permanent establishment situated in Australia. The term permanent establishment is
defined in Article 5 of the US Treaty.
If the instalment receipts are held by an instalment receipt holder either as trading stock or
a revenue asset, then gains realised on the disposal of those instalment receipts may be treated as
business profits. Certain of Australias double tax treaties, including the US Treaty,
specifically exclude capital gains from business profits.
Prospective instalment receipt holders should seek their own independent taxation advice
should they wish to rely on a double tax treaty for relief from liability to pay Australian income
tax upon the disposal of an instalment receipt.
A capital gain, for Australian tax purposes, will generally be the excess of the arms-length
consideration in respect of the disposal of the instalment receipt over its cost base.
For capital gains tax purposes, the arms-length consideration for the disposal of the
instalment receipt will include the amount of the final instalment liability assumed by the
purchaser.
The cost base of an instalment receipt will include:
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if the instalment receipt holder was the original holder of the instalment receipt the sum
of the amount of the first instalment and the amount of the final instalment; or |
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otherwise the sum of the amount paid for the instalment receipt and the amount of the final
instalment. |
If an instalment receipt holder is an individual, an Australian complying superannuation
entity or a trust, they may be eligible to discount any net capital gain they make under the
capital gains tax discount concession. This will only be the case if the instalment receipt holder
has held the instalment receipts for at least 12 months prior to disposal.
If an instalment receipt holder is an individual or a trust (other than a trust that is an
Australian complying superannuation entity), the net capital gain is discounted by half.
If an instalment receipt holder is an Australian complying superannuation entity, the net
capital gain is discounted by one-third.
If the instalment receipt holder is a company, the capital gains tax discount concession will
not be available in respect of any net capital gain on a disposal of the instalment receipt.
194
Instalment receipt holders who incur a liability for Australian income tax will be required to
file an income tax return in Australia.
Transfer of shares from instalment receipt trustee following payment of final instalment
The payment of the final instalment and transfer of legal title in the share from the
instalment receipt trustee to the instalment receipt holder does not constitute a disposal of an
asset for the purposes of the Australian income tax on capital gains, and does not give rise to any
Australian income tax liability.
Failure to pay final instalment
The failure to pay the final instalment and subsequent sale by the instalment receipt trustee
of the underlying share may have Australian income tax implications for instalment receipt holders.
Instalment receipt holders should seek their own advice in relation to this issue.
Treatment of shares
Taxation of dividends
An imputation system operates in Australia in respect of company income tax. In the absence
of an exemption or concession, Australian resident companies are liable for Australian income tax
on their taxable income at the corporate rate (currently 30%). The payment of Australian income tax
by an Australian company, such as Telstra, generates a franking credit for the company. Broadly, an
amount of tax flows through to shareholders (as a franking credit) when the company pays a
dividend which is franked by the company.
Distributions paid to Australian resident shareholders will generally be included in the
assessable income of those holders of those shares.
Where the distribution is a franked dividend, the franking credit associated with that
dividend will generally also be included in the assessable income of Australian resident
shareholders.
An offset of tax equivalent to the franking credit (known as a tax offset) is available only
to Australian resident shareholders.
There are circumstances where a shareholder may not be entitled to the benefit of franking
credits. The application of these rules depends on the shareholders own circumstances including
the period for which the shares are held and the extent to which the shareholder is at risk in
relation to their investment.
Fully franked dividends (being a dividend which is franked) paid to non-resident shareholders
are not subject to DWHT. Dividends to the extent that they are not fully franked are generally
subject to DWHT at the rate of 30% (unless reduced under the provisions of a relevant double tax
treaty).
In the case of a resident of the United States, the rate may be reduced under Article 10 of
the US Treaty to 15%. This requires that the shares are not effectively connected with a permanent
establishment or a fixed base of the Tax Non-Resident in Australia through which the Tax
Non-Resident carries on business in Australia or provides independent personal services.
If a Tax Non-Resident who is a resident of the United States directly holds at least 10% of
the voting power in the Australian company, then the DWHT rate may be further reduced to 5%. The
restrictions on the extent of foreign ownership in Telstra are likely to ensure that a Tax
Non-Resident does not qualify for this reduced rate.
The unfranked part of any dividends paid by us to Tax Non-Residents will be subject to DWHT.
We will deduct DWHT from the relevant dividend paid and pay the balance to the Tax Non-Resident.
Fully franked dividends paid to Tax Non-Residents and dividends that have been subject to DWHT
are not subject to any further Australian income tax.
195
Taxation of capital gains
Under the current Australian income tax law, Tax Non-Residents will be liable for income tax
under the capital gains tax provisions on any gains realised on the disposal of Australian
CGT assets. Australian CGT assets include a share (or interest in a share) in a public company where
at any time in the preceding five years the non-residents holding (together with the holding of
associates) in the public company is 10% or more.
Tax Non-Residents who, together with their associates, hold less than 10% of the shares (or an
interest in a share) in Telstra for the relevant period will, on disposal of the shares, not be
subject to any Australian income tax on capital gains under the capital gains tax provisions.
Restrictions on the extent of foreign ownership in Telstra should ensure that Tax Non-Resident
shareholders qualify for this exemption.
Under proposed changes to the Australian income tax law in relation to capital gains tax, a
capital gain from a disposal of a share by a Tax Non-Resident will be subject to Australian income
tax under the capital gains tax provisions only in limited circumstances.
Generally, under the proposed changes, a Tax Non-Resident may only be subject to Australian
income tax under the capital gains tax provisions where the Tax Non-Resident holds an interest in
taxable Australian property.
Taxable Australian property includes direct and indirect interests in real property located
in Australia or the business assets of an Australian permanent establishment of a Tax Non-Resident.
Indirect interests in Australian real property includes shares in interposed companies or
interests in other interposed entities that hold Australian real property, where the value of those
shares or interests is wholly or principally attributable to taxable Australian real property.
Prospective shareholders should seek their own independent taxation advice in relation to the
potential impact of the proposed changes to take into account their own circumstances.
Certain Tax Non-Residents may be liable to tax in respect of a profit on a dealing in the
assets as ordinary income, rather than under the capital gains tax provisions.
A double tax treaty between Australia and the country of residence of the shareholder may give
relief from liability to pay the Australian income tax.
Generally, the business profits articles of Australias double tax treaties provide that a
resident of a treaty party is not subject to Australian income tax on business profits derived in
Australia, unless derived at or through a permanent establishment in Australia. In the case of a
resident of the United States, Article 7 (1) of the US Treaty provides that the business profits of
a US enterprise are only taxable in the US unless the enterprise carries on business in Australia
through a permanent establishment situated in Australia. The term permanent establishment is
defined in Article 5 of the US Treaty.
If the shares are held by a shareholder either as trading stock or a revenue asset, then gains
realised on the disposal of those shares should be treated as business profits. Certain of
Australias double tax treaties, including the US Treaty, specifically exclude capital gains from
business profits.
Prospective shareholders should seek their own independent taxation advice should they wish to
rely on a double tax treaty for relief from liability to pay Australian income tax upon the
disposal of a share.
A capital gain, for Australian tax purposes, will generally be the excess of the arms-length
consideration in respect of the disposal of the share over its cost base. The cost base of a share
will include the consideration on acquisition and incidental costs associated with acquisition.
If a shareholder is an individual, an Australian complying superannuation fund or a trust,
then that shareholder may be eligible to discount any net capital gain they make under the capital
gains tax discount concession. This will only be the case if the shareholder has held the shares
for at least 12 months prior to disposal.
If a shareholder is an individual or a trust (other than a trust that is an Australian
complying superannuation entity), the net capital gain is discounted by half.
196
If a shareholder is an Australian complying superannuation entity, the net capital gain is
discounted by one-third.
If the shareholder is a company, the capital gains tax discount concession will not be
available in respect of any net capital gain on a disposal of the share.
Shareholders who incur a liability for Australian income tax will be required to file an
income tax return in Australia.
Australian Stamp Duty
The stamp duty laws of the Australian Capital Territory are relevant to dealings in the
instalment receipts of shares of Telstra. Under those laws, the transfer of marketable securities
or an interest in marketable securities is a dutiable transaction.
The transfer of shares:
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from the Commonwealth to the trustee; and |
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from the trustee to the holder of an instalment receipt on payment of the final instalment |
are, however, exempt from duty under the Commonwealth legislation relating to the privatisation of
Telstra.
No duty is payable in respect of an agreement for sale or transfer of:
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shares which are quoted on the Australian Stock Exchange Limited, another stock exchange
which is a member of the World Federation of Exchanges or another stock exchange which as been
approved by the relevant Minister (a Relevant Stock Exchange); or |
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an interest in shares where the underlying shares are quoted on a Relevant Stock Exchange
(whether the interest is quoted on such an exchange or not). |
Therefore, stamp duty will not be payable by a subsequent purchaser or transferee of Telstra shares
or instalment receipts if at the time of both any agreement for sale and any transfer, shares the
subject of the transfer are quoted on a Relevant Stock Exchange.
If at the time of a transfer or agreement for transfer of the shares or instalment receipts,
Telstra shares have been suspended from quotation, this exemption may not apply. The ACT Revenue
Office is currently considering whether to treat marketable securities as being quoted when there
is a suspension from quotation. If the exemption does not apply, any duty payable would be payable
by the subsequent acquirer of the shares or instalment receipts.
Apart from the exemptions referred to above, other exemptions may apply depending on the
circumstances.
197
Notice to Investors
Because of the following transfer restrictions, purchasers are advised to consult legal
counsel prior to making any offer, resale, pledge or transfer of instalment receipts or shares.
No actions have been taken to register or qualify the instalment receipts or shares, or
otherwise permit a public offering of the instalment receipts or shares in any jurisdiction outside
Australia, New Zealand and Japan.
Neither the instalment receipts nor the shares have been or will be registered under the
Securities Act, or with any securities regulatory authority of any state or other jurisdiction of
the United States. The instalment receipts and shares may not be offered, sold or otherwise
transferred except (i) in compliance with the registration requirements of the Securities Act and
any other applicable securities laws or (ii) pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and any other applicable securities
laws.
Accordingly, the instalment receipts and shares are only being offered (1) within the United
States to QIBs in reliance on the exemption from registration under the Securities Act afforded by
Rule 144A (the US Offering) (2) outside the United States in offshore transactions to certain
non-US persons (as such terms are defined in Regulation S) in reliance on Regulation S (the ROW
Offering).
Each purchaser of instalment receipts or shares in the US Offering will be deemed to have
represented, warranted and agreed as follows:
1. It is a QIB, and is acquiring the instalment receipts or shares for its own account or
for the account of one or more QIBs as to which it is authorized to exercise sole investment
discretion and not with a view to any resale or distribution thereof.
2. It is aware that the seller may be relying on the exemption from the registration
requirements of the Securities Act provided by Rule 144A thereunder.
3. It understands that the instalment receipts and shares have not been and will not be
registered under the Securities Act or the securities laws of any state in the United States
and may be offered, sold, pledged or otherwise transferred only (i) outside the United States
in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of Regulation S
under the Securities Act or (ii) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 thereunder (if available) or (iii) to a person whom it
reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A or (iv)
pursuant to an effective registration statement under the Securities Act covering the
instalment receipts or shares (which it acknowledges that neither Telstra nor the Commonwealth
are under any obligation to prepare), in each case in accordance with any applicable securities
laws of any state of the United States or other jurisdiction.
4. It understands that the instalment receipts or shares sold in reliance on Rule 144A
will constitute restricted securities within the meaning of Rule 144(a)(3) under the
Securities Act, and for so long as they remain restricted securities such instalment receipts
or shares may not be transferred except as described in paragraph (3) above. It will not
deposit any such instalment receipts or shares into any unrestricted depositary receipt
facility, including but not limited to Telstras American Depositary Facility for which the
Bank of New York acts as depositary, unless and until such time as such shares are no longer
restricted securities within the meaning of Rule 144(a)(3).
Each purchaser of instalment receipts or shares in the ROW Offering will be deemed to have
represented, warranted and agreed as follows:
1. Neither the instalment receipts nor the shares have been or will be registered under
the Securities Act, or with any securities regulatory authority of any state or other
jurisdiction of the United States, and may not be offered, sold or otherwise transferred in the
United States or to any US person as defined under Regulation S (US Person) except in
accordance with an available exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any other applicable securities laws.
2. It is not in the United States, and is not a US Person or acting for the
account or benefit of, a US Person.
198
3. It is not engaged in the business of distributing securities or, if it is, it agrees
that it will not offer or resell in or to persons in, the United States or to US Persons (a)
any instalment receipts or shares it acquires in the ROW Offering at any time or (b) any
instalment receipts or shares it acquires other than in the ROW Offering until 40 days after
the completion of the Global Offering, in either case other than in a transaction meeting the
requirements of Rule 144A; provided, however, that the foregoing shall not prohibit any sale of
instalment receipts or shares in regular way transactions on the ASX or the NZSX if neither the
seller nor any person acting on its behalf knows, or has reason to know, that the sale has been
pre-arranged with, or that the purchaser is, a person in the United States.
4. It is entitled to participate in the Global Offering under the laws of the jurisdiction
in which the offer and sale is made to it.
Each purchaser of instalment receipts or shares in the ROW Offering will be deemed by its
purchase to confirm that the purchaser is aware of the restrictions on the offer and sale of the
instalment receipts or shares offered pursuant to Regulation S described in this Institutional
Offering Memorandum.
Upon the expiration of the 40-day period following the completion of the Global Offering (the
Distribution Compliance Period), instalment receipts or shares offered in the Global Offering in
reliance on Regulation S will no longer be subject to the restrictions set out above, if, at the
time of such expiration, the offer or sale of such instalment receipts or shares in the United
States would not be restricted under the securities laws of the United States or any state of the
United States or any other jurisdiction.
All purchasers of instalment receipts or shares will be deemed to have represented, warranted
and agreed as follows:
1. Each purchaser of instalment receipts or shares acknowledges that Telstra, the
Commonwealth, the Syndicate Members and others will rely upon the truth and accuracy of the
foregoing acknowledgements, representations and agreements, and agrees that if any of the
acknowledgements, representations and warranties deemed to have been made by its purchase of
the instalment receipts or shares are no longer accurate, it shall promptly notify Telstra, the
Commonwealth and the Joint Global Coordinators. If it is acquiring the instalment receipts or
shares as a fiduciary or agent for one or more other QIBs, it represents that it has full power
to make the foregoing acknowledgements, representations and agreements on behalf of such other
QIBs.
2. Each purchaser of instalment receipts or shares will also be deemed to have
acknowledged and agreed that no person is authorised to give any information or to make any
representations other than those contained in this Institutional Offering Memorandum, and if
given or made, such information or representations will not be relied upon as having been
authorised by Telstra, the Commonwealth, the Joint Global Coordinators or their respective
affiliates, nor will any such persons have any liability or responsibility therefor.
3. Each purchaser of instalment receipts or shares will also be deemed to have
acknowledged and agreed that it has received, read and reviewed this Institutional Offering
Memorandum and it agrees that it has held and will hold this Institutional Offering Memorandum
in confidence, it being understood that this Institutional Offering Memorandum and any other
information it receives is intended solely for it and may not be redistributed or duplicated.
Holders of instalment receipts that elect to prepay the final instalment will be deemed to
make additional representations at the time of prepayment. See Description of the Instalment
Receipts and Trust Deed You may pre-pay the final instalment.
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Plan of Distribution
The Commonwealth, Telstra and the Joint Global Coordinators, acting as representatives of the
initial purchasers, have entered into an international purchase agreement dated 18 November 2006,
in relation to the International Offering (the International Purchase Agreement). Pursuant to the
terms of the
International Purchase Agreement, offers and sales of the shares in the US Offering will be
made through registered broker-dealer affiliates of the initial purchasers, and offers and sales of
the shares in the ROW Offering will be made through the respective selling agents of the initial
purchasers. The Commonwealth and the Joint Global Coordinators have entered into a share borrow
agreement dated on or about 9 October 2006 with regard to the Over-allocation Option (the Share
Borrow Agreement).
Subject to the terms and conditions of the International Purchase Agreement, the Commonwealth
has agreed to sell to each of the initial purchasers named below, and each of the initial
purchasers have agreed, severally and not jointly, to purchase from the Commonwealth the respective
number of shares set forth opposite its name below in connection with the US Offering:
Initial Purchasers
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Number of Shares |
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in the US Offering |
ABN AMRO Rothschild |
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37,989,301 |
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Goldman Sachs JBWere Pty Ltd |
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59,195,710 |
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UBS AG, Australia Branch |
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9,563,866 |
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Daiwa Securities SMBC Europe |
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0 |
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Citigroup Global Markets Australia Pty Ltd |
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0 |
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Credit Suisse (Australia) Limited |
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0 |
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JPMorgan Australia Limited |
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0 |
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Lehman
Brothers Inc. |
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0 |
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Morgan
Stanley & Co. International Limited |
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0 |
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RBC Capital Markets |
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0 |
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Total |
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106,748,877 |
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Subject to the terms and conditions of the International Purchase Agreement, the Commonwealth
has agreed to sell, and each of the initial purchasers have agreed, severally and not jointly, to
procure purchasers for, or purchase from the Commonwealth, the respective number of shares set
forth opposite its name below in connection with the ROW Offering:
Initial Purchasers
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Number of Shares |
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in the ROW Offering |
ABN AMRO Rothschild |
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62,040,363 |
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Goldman Sachs JBWere Pty Ltd |
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87,880,296 |
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UBS AG, Australia Branch |
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91,015,126 |
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Daiwa Securities SMBC Europe |
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120,000,000 |
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Citigroup Global Markets Australia Pty Ltd |
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86,948 |
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Credit Suisse (Australia) Limited |
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0 |
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JPMorgan Australia Limited |
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0 |
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Lehman
Brothers Inc. |
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0 |
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Morgan
Stanley & Co. International Limited |
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13,501 |
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RBC Capital Markets |
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0 |
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Total |
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361,036,234 |
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The purchase price for each share in the US Offering and the ROW Offering will be the final
price. The final price of A$3.70 per share will be payable in two instalments, consisting of a
first instalment of A$2.10 per share and a final instalment of A$1.60 per share.
The International Purchase Agreement provides that the obligations of the initial purchasers
are subject to certain conditions precedent. In addition, the International Purchase Agreement
provides that, in the event of a default by an initial purchaser, in certain circumstances the
purchase commitments of non-defaulting initial purchasers may be increased or the International
Purchase Agreement may be terminated.
Neither the instalment receipts nor the shares have been, or will be, registered under the
Securities Act or the securities laws of any state of the United States. The instalment receipts
and the shares may not be offered or sold in the United States or to, or for the account or benefit
of, US Persons, except pursuant to an exemption from, or in a transaction not subject to, the
registration requirement of the Securities Act and applicable state securities laws. See Notice to
Investors. The Institutional Offering consists of (1) the US Offering, to persons in the United
States or US Persons, in each case that are reasonably believed to be QIBs, in transactions exempt
from the registration requirements of the Securities Act pursuant to Rule 144A thereunder, (2) the
Australian Institutional Offering, in Australia and New Zealand to institutional investors that are
not US Persons in offshore transactions (as defined in Regulation S under the Securities Act) in
compliance with Regulation S under the Securities Act, and (3) the ROW Offering in certain
countries other than the United States, Australia and New Zealand to institutional investors that
are not US Persons in offshore transactions (as defined in Regulation S under the Securities Act)
in compliance with Regulation S under the Securities Act and applicable private placement
exemptions under the laws of those jurisdictions in which the ROW Offering is made. This
Institutional Offering Memorandum relates to the US Offering and the ROW Offering. The POWL, which
forms part of the ROW Offering, is made pursuant to a Japanese Prospectus to be lodged with the
relevant Japanese regulatory authorities. The Australian Institutional Offering is made pursuant to
the Australian Prospectus or the New Zealand Investment Statement, as applicable. The Retail
Offering is being conducted solely in Australia and New Zealand.
The Institutional Offering was conducted via a bookbuild process managed by the Commonwealth.
The final price at which bids were accepted at the close of the bookbuild was determined by the
Commonwealth, in consultation with the Joint Global Coordinators and the Commonwealths financial
adviser, after the close of the Institutional Offering. The number of shares allocated for sale
between the US Offering, the ROW Offering and the Australian Institutional Offering, and among
investors in each of the US Offering, the ROW Offering and the Australian Offering, was determined
by the Commonwealth, in consultation with the Joint Global Coordinators and the Commonwealths
financial adviser.
Under the Share Borrow Agreement, the Commonwealth has granted to the Joint Global
Coordinators the Over-allotment Option, exercisable within 30 days from the date of commencement of
trading of the instalment receipts on the ASX, to over-allocate up to 15% of the offer size. The
Over-allotment Option may be exercised to cover over-allotments, if any, to institutional investors
under the Institutional Offering. All or some portion of the Over-allotment Option in any of the US
Offering or the ROW Offering may be allocated to cover over-allotments. In connection with the
Global Offering, the Joint Global Coordinators may effect borrowing arrangements (including
arrangements to borrow instalment receipts from the Commonwealth) in order to facilitate settlement
of the instalment receipts so allocated.
In connection with the Global Offering, the Joint Global Coordinators, or agents thereof, may
purchase and sell instalment receipts in the open market. These transactions may include short
sales, stabilising transactions and purchases to cover positions created by short sales. Short
sales involve the sale by the Joint Global Coordinators, or agents thereof, of a greater number of
shares than they are required to purchase in the US Offering and the ROW Offering. Stabilising
transactions consist of certain bids or purchases made for the purpose of preventing or retarding a
decline in the market of the instalment receipts while the Global Offering is in progress.
The Joint Global Coordinators also may impose a penalty bid. This occurs when a particular
Joint Global Coordinator repays to the Joint Global Coordinators a portion of the fees received by
it because the Joint Global Coordinators have repurchased shares sold by or for the account of such
Joint Global Coordinator in stabilising or short covering transactions.
201
Such activities may affect the market price of the instalment receipts. As a result, the price
of the shares may be higher than it would otherwise be in the absence of these transactions. These
transactions may be effected on the ASX or NZSX and, if commenced, may be discontinued at any time.
The US Offering, the ROW Offering and the Australian Institutional Offering are conditioned on
closing concurrently except that the International Offering may close if funds representing at
least 85% of the total purchase price of the instalment receipts to be sold in the Australian
Institutional Offering have been received by the Commonwealth.
Under the International Purchase Agreement, Telstra has agreed that it will not offer to sell,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the
SEC a registration statement under the Securities Act relating to, any shares (or securities
convertible into or exchangeable or exercisable for any shares) or deposit any such securities in
an ADR facility, or publicly disclose the intention to make any such offer, sale, pledge,
disposition, filing or deposit, except under the Global Offering, for a period of 180 days after
the date of the International Purchase Agreement without the prior written consent of the Joint
Global Coordinators. This lock up does not prohibit (and no consent will be required for) any offer
to sell, sale, contract to sell, pledge or other disposition of, directly or indirectly, any shares
by Telstra pursuant to or in connection with any employee, executive, director or agent share
option or purchase plans, or any dividend reinvestment plan, that Telstra has.
On the day that shares are transferred to the Future Fund, the Finance Minister will direct
the Future Fund Board not to dispose of or agree to dispose of the Future Funds Telstra shares for
a period of two years from the date instalment receipts are first listed on the ASX except (a) in
order to satisfy demand from eligible Telstra shareholders under a Telstra initiated dividend
reinvestment plan (if any); (b) as part of a Telstra capital management initiative (if any), such
as a buy-back or capital reduction or (c) to a single investor, provided that (i) the disposal
relates involves at least 3% of Telstra issued ordinary shares at the time of the disposal; (ii)
the disposal does not take place until at least six months after the date instalment receipts are
first listed on the ASX; (iii) the investor provides an acceptable undertaking for at least the
balance of the escrow period; (iv) the price per share is no less than the final price payable by
institutional investors; and (v) Telstra is advised prior to such disposal. After the two year
lock-up period, the Future Fund Board will be required to sell down its Telstra shareholding over
the medium term as directed under its investment mandate. The current Government intends that the
lock-up direction will not be varied or revoked. However, a future Government may take a different
approach.
Under the International Purchase Agreement, Telstra has agreed to indemnify the several
initial purchasers against certain liabilities, including liabilities incurred in the event of
certain misstatements of material facts in, or omissions of material facts from, this Institutional
Offering Memorandum, and may be required to contribute to any payments the Joint Global
Coordinators are required to make in respect thereof. In the event that Telstra fails for any
reason to indemnify the several initial purchasers against such liabilities, the Commonwealth has
agreed to do so. The Commonwealth has agreed to indemnify Telstra, its directors and certain of its
executives against certain liabilities that may arise as a result of their participation in the
Global Offering.
It is expected that delivery of the instalment receipts will be made against payment therefor
on or about
24 November 2006, which is the fourth business day following the date hereof (such settlement cycle
being hereafter referred to as T+4). Purchasers of instalment receipts should note that trading
of the instalment receipts on the first or second day of trading may be affected by the T+4
settlement.
Interests of the Initial Purchasers
One or more of the Joint Global Coordinators or their respective affiliates from time to time
have performed investment banking and financial advisory services for Telstra and the Commonwealth
and may in the future perform investment banking and financial advisory services to Telstra and the
Commonwealth. Customary fees and commissions have been paid for such services in the past and would
be expected to be paid for any such services in the future.
The Commonwealth has agreed to reimburse the initial purchasers for certain of their expenses
in relation the Global Offering. The Joint Global Coordinators have acted as project managers to
the Commonwealth in connection with the Global Offering for which they will collectively receive a
fee of A$9 million. Certain of
202
the net profits, if any, accruing to the Joint Global Coordinators from stabilisation trading
and/or syndicate short covering transactions (other than from exercise of the initial purchasers
Over-allotment Option) will be paid by the Joint Global Coordinators to the Commonwealth. The
Commonwealth has also agreed to pay certain of the Joint Global Coordinators expenses.
The Joint Global Coordinators, the Co-Lead Managers and the Co-Manager will receive
collectively a commission of 0.4% of the net present value of the total amount payable by
institutional investors under the Global Offering and a further 0.04% of the amount of the first
instalment representing an underwriting fee. The underwriting fee component will not apply to
shares that are the subject of the Over-allotment Option and associated stock borrowing.
Restrictions on Offers and Sales
United States
Through their US broker-dealer affiliates, the initial purchasers have agreed to sell the
instalment receipts and the shares acquired by them in the United States only to persons reasonably
believed by them to be QIBs in reliance on Rule 144A under the Securities Act.
The instalment receipts and the shares have not been and will not be registered under the
Securities Act and may not be offered or sold (i) in the United States or to, or for the account or
benefit of, US Persons except to persons who are reasonably believed to be QIBs in transactions
exempt from, or not subject to, the registration requirements of the Securities Act in reliance
upon Rule 144A under the Securities Act and applicable state securities laws or (ii) outside the
United States except to non-US Persons in offshore transactions (as such terms are defined in
Regulation S under the Securities Act) in reliance on Regulation S under the Securities Act and in
compliance with applicable laws of the jurisdiction where the offer is made.
The initial purchasers have agreed that they will not offer, sell or deliver the instalment
receipts or the shares (i) as part of their distribution at any time, or (ii) until the expiration
of the Distribution Compliance Period within the United States or to, or for the account or benefit
of, US Persons, other than to QIBs in reliance on Rule 144A under the Securities Act, and they will
have sent to each distributor, dealer or person receiving a selling concession, fee or other
remuneration to which they sell the instalment receipts or the shares during the Distribution
Compliance Period a confirmation or other notice setting forth the restrictions on offers and sales
of the instalment receipts or shares within the United States or to, or for the account or benefit
of, US Persons. Terms used in this paragraph have the meanings given to them by the Securities Act
and Regulation S thereunder.
In addition, until 40 days after the commencement of the Global Offering, an offer or sale of
the instalment receipts or shares within the United States by any dealer (whether or not
participating in the Global Offering) may violate the registration requirements of the Securities
Act if such offer or sale is made otherwise than in accordance with Rule 144A or another exemption
from registration under the Securities Act.
Hong Kong
The instalment receipts and the shares may not be offered or sold in Hong Kong, by means of
any document other than (i) to professional investors as defined in the Securities and Futures
Ordinance (Cap.571) of Hong Kong (the Securities and Futures Ordinance) and any rules made under
that ordinance; or (ii) in other circumstances which do not result in the document being a
prospectus as defined in the Companies Ordinance (Cap.32) of Hong Kong or which do not constitute
an offer to the
public within the meaning of that ordinance. Further, no person shall issue or have in its
possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,
invitation or document relating to the instalment receipts or the shares which is directed at, or
the contents of which are likely to be accessed or read by, the public in Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other than with respect to the
instalment receipts or the shares which are or are intended to be disposed of only to persons
outside Hong Kong or only to professional investors as defined in the Securities and Futures
Ordinance and any rules made under that ordinance.
203
Singapore
This Institutional Offering Memorandum has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this Institutional Offering Memorandum and any other
document or material in connection with the offer or sale, or invitation for subscription or
purchase, of the instalment receipts or the shares may not be circulated or distributed, nor may
the instalment receipts or the shares be offered or sold, or be made the subject of an invitation
for subscription or purchase, whether directly or indirectly, to persons in Singapore other than
(i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289
of Singapore (the SFA), (ii) to a relevant person, or any person pursuant to Section 275(1A), and
in accordance with the conditions, specified in Section 275 of the SFA, or (iii) otherwise pursuant
to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the instalment receipts or the shares are subscribed or purchased under Section 275 by a
relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the
SFA)) the sole business of which is to hold investments and the entire share capital of which
is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to
hold investments and each beneficiary of the trust is an individual who is an accredited
investor,
shares, debentures and units of shares and debentures of that corporation or the beneficiaries
rights and interest (howsoever described) in that trust shall not be transferred within 6 months
after that corporation or that trust has acquired the instalment receipts or the shares pursuant to
an offer made under Section 275 except:
(1) to an institutional investor (for corporations, under
Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any
person pursuant to an offer that is made on terms that such shares, debentures and units of shares
and debentures of that corporation or such rights and interest in that trust are acquired at a
consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each
transaction, whether such amount is to be paid for in cash or by exchange of securities or other
assets, and further for corporations, in accordance with the conditions specified in Section 275 of
the SFA;
(2) where no consideration is or will be given for the transfer; or
(3) where the transfer
is by operation of law.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a Relevant Member State), each initial purchaser represents and agrees
that with effect from and including the date on which the Prospectus Directive is implemented in
that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an
offer of instalment receipts or shares to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the instalment receipts or the shares which has been
approved by the competent authority in that Relevant Member State or, where appropriate, approved
in another Relevant Member State and notified to the competent authority in that Relevant Member
State, all in accordance with the Prospectus Directive, except that it may, with effect from and
including the Relevant Implementation Date, make an offer of instalment receipts and the shares to
the public in that Relevant Member State at any time:
(a) to legal entities which are authorised or
regulated to operate in the financial markets or, if not so authorised or regulated, whose
corporate purpose is solely to invest in securities;
(b) to any legal entity which has two or more
of (1) an average of at least 250 employees during the last financial year; (2) a total balance
sheet of
more than EUR43,000,000 and (3) an annual net turnover of more than EUR50,000,000, as shown in
its last annual or consolidated accounts; or
(c) in any other circumstances which do not require
the publication by the issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.
204
For the purposes of this provision, the expression an offer of Shares to the public in
relation to any instalment receipts or shares in any Relevant Member State means the communication
in any form and by any means of sufficient information on the terms of the offer and the instalment
receipts and the shares to be offered so as to enable an investor to decide to purchase the
instalment receipts or the shares, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State, and the expression Prospectus
Directive means Directive 2003/71/EC and includes any relevant implementing measure in each
Relevant Member State.
United Kingdom
This Institutional Offering Memorandum is for distribution only to persons who (i) are outside
the United Kingdom, or (ii) have professional experience in matters relating to investments, or
(iii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated
associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2005, or (iv) are persons to whom an invitation or inducement to engage in investment activity
(within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection
with the issue or sale of any instalment receipts or any shares may otherwise lawfully be
communicated or caused to be communicated (all such persons together being referred to as relevant
persons). This Institutional Offering Memorandum is directed only at relevant persons and must not
be acted on or relied on by persons who are not relevant persons. Any investment or investment
activity to which this Institutional Offering Memorandum relates is available only to relevant
persons and will be engaged in only with relevant persons.
France
Neither this Institutional Offering Memorandum nor any other offering material relating to the
instalment receipts or the shares has been prepared in the context of a public offer of securities
in the Republic of France within the meaning of Article L.411-1 of the French Financial and
Monetary Code (Code monétaire et financier) and articles 211-1 et seq. of the General Regulations
(Règlement Général) of the Autorité des marchés financiers and has therefore not been and will not
be submitted to the clearance procedures of the Autorité des marchés financiers in France or the
competent authority of another member state of the European Economic Area and notified to the
Autorité des marchés financiers.
Neither the instalment receipts nor the shares have been offered, sold or otherwise
transferred and will not be offered, sold or otherwise transferred, directly or indirectly, to the
public in the Republic of France. Neither this Institutional Offering Memorandum nor any other
offering material relating to the instalment receipts or the shares has been or will be (i)
released, issued, distributed or caused to be released, issued or distributed to the public in the
Republic of France or (ii) used in connection with any offer for subscription or sale of the
instalment receipts or the shares to the public in the Republic of France other than to investors
to whom offers, sales or other transfers of the instalment receipts or the shares in the Republic
of France may be made as described below.
Such offers, sales or other transfers of the instalment receipts or the 8shares in the
Republic of France will be made in accordance with Article L.411-2 of the French Code monétaire et
financier only (i) to qualified investors (investisseurs qualifiés) and/or to a restricted circle
of investors (cercle restreint dinvestisseurs), in each case, and except as otherwise stated under
French laws and regulations, investing for their own account, all as defined in and in accordance
with Articles L.411-2, D.411-1 to D.411-4, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code
monétaire et financier and/or (ii) to persons providing portfolio management investment services on
behalf of third parties, or (iii) in a transaction that, in
accordance with
Article L.411-2-II-1o
-or-2o -or 3o of the French Code monétaire et financier and article
211-2 of the General Regulations of the Autorité des marchés financiers, does not constitute a
public offer (appel public à lépargne), in each case in compliance with Articles L.341-1 to
L.341-17 of the French Code monétaire et financier. Such shares may be resold directly or
indirectly only in compliance with Articles L.411-1, L.411-2, L.412-1, L.621-8 through L.621-8-3
and L.341-1 to L.341-17 of the French Code monétaire et financier.
205
Germany
The instalment receipts and the shares have not been admitted to trading on a German stock
exchange and no sales prospectus has been published with regard to the offer of instalment receipts
or shares in Germany. Accordingly, the instalment receipts and the shares may not be offered or
sold in Germany to the public by means of this Institutional Offering Memorandum or otherwise,
either directly or indirectly, except to qualified investors pursuant to para. 3 section 2 no. 1,
para. 2 section 6 WpPG, or pursuant to any other exemption under the German Securities Prospectus
Act. Neither this Institutional Offering Memorandum, nor any other document issued in connection
with the offer or sale of the instalment receipts and the shares, may be issued or distributed to
any person in Germany except under circumstance which do not constitute an offer to the public
pursuant the German Securities Sales Prospectus Act.
Italy
The Offering in the Republic of Italy (Italy) has not been registered with the Commissione
Nazionale per le Societá e la Borsa (CONSOB) (the Italian securities and exchange commission)
pursuant to Italian securities legislation and, accordingly, neither the instalment receipts nor
the shares can be offered, sold or delivered in Italy nor may any copy of this Institutional
Offering Memorandum or any other document relating to the instalment receipts or the shares be
distributed in Italy in a solicitation to the public at large (sollecitazione allinvestimento)
and, therefore, they shall only be:
(a) offered or sold to professional investors (operatori qualificati) within the meaning
of Article 30, second paragraph, and Article 100(a) of Legislative Decree No 58 of 24 February
1998 (the Financial Services Act) and as defined in Articles 25 and 31, second paragraph, of
CONSOB Regulation No 11522 of 1 July 1998 (the Regulation No 11522), as amended; or
(b) offered or sold in circumstances where an exemption from the rules governing
solicitations to the public at large applies, pursuant to Article 100 of the Financial Services
Act and Article 33, first paragraph, of CONSOB Regulation No 11971 of 14 May 1999 (the
Regulation No 11971), as amended.
Any offer, sale or delivery of the instalment receipts or the shares or distribution of copies
of this Institutional Offering Memorandum or any other document relating to the instalment receipts
or the shares in Italy must be made (a) by investment firms (as defined in the Financial Services
Act), banks or financial intermediaries enrolled in the special register provided for by Article
107 of Legislative Decree No. 385 of September 1, 1993, as amended (the Banking Act) to the
extent such entities are permitted to engage in the placement and/or purchase of financial
instruments in Italy in accordance with the Financial Services Act, the Italian Banking Act, the
Regulation No 11522, the Regulation No 11971 and any other applicable laws and regulations; (b) in
compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of
Italy, pursuant to which the issue or the offer of shares in Italy may need to be preceded and
followed by an appropriate notice to be filed with the Bank of Italy depending, inter alia, on the
aggregate value of the securities issued or offered in Italy and their characteristics, and (c) in
compliance with any other applicable laws and regulations and other possible requirements or
limitations which may be imposed by Italian authorities.
Insofar as the requirements above are based on laws that are superseded at any time pursuant
to the implementation of the Directive 2003/71/EC (the Prospectus Directive), such requirements
shall be deemed to be automatically replaced by the applicable requirements under the Prospectus
Directive.
Switzerland
This Institutional Offering Memorandum does not constitute an issue prospectus pursuant to
Article 652a of the Swiss Code of Obligations. The instalment receipts and the shares will not be
listed on the SWX Swiss Exchange and, thus, this Institutional Offering Memorandum may not comply
with the disclosure standards of the listing rules of the SWX Swiss Exchange. This Institutional
Offering Memorandum is being communicated in Switzerland only to a selected and limited circle of
institutional investors which do not subscribe to the instalment receipts or the shares with a view
to distribution. Investors will be individually approached by the syndicate members from time to
time. This Institutional Offering Memorandum is personal to each offeree and does not
206
constitute an offer to any other person. This Institutional Offering Memorandum may only be used by
those persons to whom it has been handed out in connection with the Institutional Offer described
herein and may neither be copied nor directly or indirectly distributed or made available to other
persons without express consent of the issuer and the selling shareholder.
Canada
Neither the instalment receipts nor the shares will be sold in Canada or to residents of
Canada other than in compliance with applicable securities laws (Canadian Securities Laws).
Without limiting the foregoing, offers and sales of the instalment receipts or the shares included
in the Global Offering in Canada or to residents of Canada may be made only (i) through an
appropriately registered securities dealer or in accordance with an available exemption from the
applicable registered securities dealer requirements under the Canadian Securities Laws and (ii)
pursuant to an exemption from the prospectus requirements under Canadian Securities Laws.
Japan
A public offering without a listing of the instalment receipts or shares will be made in Japan
under a Japanese Prospectus lodged with the relevant Japanese regulatory authorities. No instalment
receipts or shares have been or will be offered or sold directly or indirectly in Japan or to or
for the account of any resident of Japan, except in accordance with the terms and conditions of a
public offering without listing of the instalment receipts or shares in Japan, as stated in the
securities notice filed on 27 October 2006 as amended, with the Japanese authority under, or
pursuant to any exemption from the registration requirements of, the Securities and Exchange Law of
Japan and otherwise in compliance with any applicable laws and regulations of Japan. Each initial
purchaser will send any dealer who purchases from it any instalment receipts a notice stating in
substance that, by purchasing such instalment receipts, the dealer represents and agrees that it
has not offered or sold, and will not offer or sell, any instalment receipts or shares, directly or
indirectly, in Japan or to or for the account of any resident thereof, except in accordance with
the terms and conditions of the public offering without a listing of the instalment receipts or
shares in Japan, as stated in the securities notice filed on 27 October 2006 as amended, with the
Japanese authority under, or pursuant to any exemption from the registration requirements of, the
Securities and Exchange Law of Japan and otherwise in compliance with applicable provisions of
Japanese law, and that such dealer will send to any other dealer to whom it sells any of such
instalment receipts or shares a notice containing substantially the same statement as is contained
in this sentence. As used in this paragraph, resident of Japan means any person residing in
Japan, including any corporation or other entity organized under the laws of Japan. Each Syndicate
Member has also acknowledged that it may not conduct marketing activities in Japan.
Ireland
The issue of this Institutional Offering Memorandum in Ireland has not been authorised by the
Irish Financial Services Regulatory Authority in Ireland. The Institutional Offering Memorandum
does not constitute an offer for sale of the instalment receipts or the shares to the public within
the meaning of the Unit Trusts Act 1990. The Institutional Offering Memorandum may not be
distributed to the public in
Ireland and an Irish recipient of the Institutional Offering Memorandum may not in any way
forward the Institutional Offering Memorandum to the public in Ireland.
Netherlands
This Institutional Offering Memorandum has not been submitted to the Autoriteit Financiële
Markten for approval pursuant to the Dutch Securities Act (Wet toezicht effectenverkeer 1995).
Accordingly, the instalment receipts and the shares have not been offered or sold and will not be
offered or sold to the public in the Netherlands, other than to individuals and legal entities who
or which qualify as professional market parties within the meaning of Section 1a(3) of the
Exemption Regulation, which was promulgated pursuant to this Act (Vrijstellingsregeling Wet
toezicht effectenverkeer 1995).
207
Other jurisdictions
The instalment receipts and the shares may not be offered or sold in any other jurisdiction by
means of this Institutional Offering Memorandum or otherwise, except to persons to whom such offer,
sale or distribution is permitted under applicable law.
No action has been or will be taken in any jurisdiction that would permit a public offering of
the instalment receipts or the shares (other than in Australia, New Zealand and Japan), or
possession or distribution of this Institutional Offering Memorandum or any other offering material
in any country or jurisdiction where action for that purpose is required. Offers and sales to
eligible institutional investors in Australia, New Zealand and Japan will only be made pursuant to
an Australian prospectus, a New Zealand investment statement and a Japanese prospectus,
respectively. Accordingly, neither the instalment receipts nor the shares may be offered or sold,
directly or indirectly, and neither this Institutional Offering Memorandum nor any other offering
material or advertisement in connection with instalment receipts and the shares may be distributed
or published in or from any country or jurisdiction except under circumstances that will result in
compliance with any and all applicable rules and regulations of any such country or jurisdiction.
Persons into whose possession this document comes should inform themselves about and observe any
restrictions on the distribution of this document and the offer, subscription and sale of
instalment receipts and the shares, including those in the paragraphs below. Any failure to comply
with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
This Institutional Offering Memorandum does not constitute an offer to subscribe for or buy any of
the instalment receipts or the shares offered hereby to any person in any jurisdiction to whom it
is unlawful to make such offer or solicitation in such jurisdiction.
208
Validity of Securities
The validity of the shares will be passed upon for us by Mallesons Stephen Jaques, Melbourne,
Australia; for the Commonwealth by Freehills, Sydney, Australia; and for the initial purchasers by
Allens Arthur Robinson, Sydney, Australia. As to certain matters of United States federal law and
New York law, we are represented by Sullivan & Cromwell, Melbourne, Australia; the Commonwealth is
represented by Skadden, Arps, Slate, Meagher & Flom, Sydney, Australia; and the initial purchasers
are represented by Pillsbury Winthrop Shaw Pittman (International), Sydney, Australia.
Independent Auditors
Our audited consolidated financial statements as at 30 June 2006 and 2005 and for each of the
two years in the period ended 30 June 2006 included in this Institutional Offering Memorandum have
been so included in reliance on the report of Ernst & Young, independent accountants, given on
their authority as experts in accounting and auditing.
209
Glossary
|
|
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1xRTT:
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(One Times Radio Transmission Technology) a 3G development of CDMA technology for |
|
|
high speed packet switched data |
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2.5G:
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technology designed to expand the bandwidth and data handling capacity of existing |
|
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mobile telephony systems such as GSM using GPRS |
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3G:
|
|
third generation technology designed to further expand the bandwidth and functionality of |
|
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existing mobile telephony systems beyond 2.5G |
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A$:
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Australian Dollars |
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ACCC:
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|
Australian Competition and Consumer Commission |
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ACIF:
|
|
Australian Communications Industry Forum |
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ACMA:
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Australian Communications and Media Authority |
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ACT:
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|
Australian Capital Territory |
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ADR:
|
|
American Depositary Receipt |
|
|
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ADS:
|
|
American Depositary Share |
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|
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ADSL:
|
|
(Asymmetric Digital Subscriber Line) a technology for transmitting digital information at a
high bandwidth on existing phone lines |
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AGM:
|
|
Telstra Annual General Meeting |
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A-IFRS:
|
|
Australian accounting standards equivalent to International Financial Reporting Standards |
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ARPANSA:
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(Australian Radiation Protection and Nuclear Safety Agency) a Commonwealth agency
responsible for protecting the health and safety of people and the environment from the
harmful effects of radiation |
|
|
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ARPU:
|
|
average revenue per user |
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ASX:
|
|
Australian Stock Exchange Limited |
|
|
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ATM:
|
|
(Asynchronous Transfer Mode) a high bandwidth, low delay technology for transmitting
voice, data and video signals |
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AUSTAR:
|
|
Austar United Communications Limited |
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|
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Australian |
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|
Offering:
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|
refer to the cover page of this Institutional Offering Memorandum |
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Bandwidth:
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the capacity of a communication link |
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Broadband |
|
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network:
|
|
a network to support subscription television and online services |
|
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|
Carriage service |
|
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provider:
|
|
a supplier of a telecommunications services to the public using Carrier network
infrastructure |
|
|
|
Carrier:
|
|
a licenced owner of certain specified transmission infrastructure that is used to supply
telecommunications carriage services to the public; any person holding a carrier licence |
|
|
|
CDMA:
|
|
(Code Division Multiple Access) a mobile telephone system based on digital transmission |
|
|
|
Churn:
|
|
(where expressed as a rate) the rate at which subscribers to a service disconnect from the
service, which is usually expressed as total disconnects for a period divided by the average
number of customers for that period |
|
|
|
Churn:
|
|
(where expressed as an activity) the transfer of a customers telecommunications service
from one supplier to another in the case of a transfer involving a resale arrangement, no
disconnection occurs and a churn relates to a change in the legal entity responsible for a
telecommunications service or account |
|
|
|
CGT:
|
|
Australian capital gains tax |
|
|
|
CN:
|
|
Converged Networks Group |
210
|
|
|
Code:
|
|
the US Internal Revenue Code of 1986, as amended |
|
|
|
Communications |
|
|
Minister:
|
|
the Commonwealth Minister for Communications, Information Technology and the Arts |
|
|
|
Commonwealth:
|
|
the Commonwealth of Australia |
|
|
|
CONSOB:
|
|
Commissione Nazionale per le Societá e la Borsa |
|
|
|
Corporations Act |
|
|
and Australian |
|
|
Corporations |
|
|
Act:
|
|
Corporations Act 2001 (Cwth) |
|
|
|
CPE:
|
|
customer premises equipment |
|
|
|
CRM:
|
|
customer relationship management |
|
|
|
CSG:
|
|
customer service guarantee |
|
|
|
CSL:
|
|
Hong Kong CSL Limited |
|
|
|
CSL New World:
|
|
CSL New World Mobility Group |
|
|
|
CSP:
|
|
carriage service providers |
|
|
|
CustomNet®:
|
|
a fully managed telephone system with a premium voice communication application that
delivers cost effective and flexible solutions for enterprises with up to 50,000 employees |
|
|
|
DAR:
|
|
Telstra Wholesale Data Access Radial |
|
|
|
DDN:
|
|
digital data network |
|
|
|
DDS:
|
|
digital data service |
|
|
|
DDSO:
|
|
digital data service obligation |
|
|
|
Declared |
|
|
Services:
|
|
a particular telecommunications service, or other service that facilitates the supply of
services, that is subject to the regulated access regime the ACCC has the responsibility
for determining declared services, based on public inquiries |
|
|
|
DSL:
|
|
digital subscriber line |
|
|
|
DVN:
|
|
Digital Video Network |
|
|
|
DWHT:
|
|
dividend withholding tax |
|
|
|
e-commerce:
|
|
e-commerce includes buying and selling electronically over a network |
|
|
|
EFTPOS:
|
|
electronic funds transfer at point of sale |
|
|
|
EME:
|
|
electromagnetic energy |
|
|
|
EPG:
|
|
electronic program guide |
|
|
|
EVDO:
|
|
(Evolution Data Optimised) additional service for mobiles supporting high speed packet
data transmission |
|
|
|
FASTER:
|
|
Fully Automated Screen Trading and Electronic Registration System |
|
|
|
FIN:
|
|
FASTER Identification Number |
|
|
|
Finance |
|
|
Minister:
|
|
The Minister for Finance and Administration |
|
|
|
Frame relay:
|
|
a packet switching technology for voice, data and video signals which uses packets of
varying length, or frames that can be used with any data protocol |
|
|
|
FTTN:
|
|
(Fibre to the Node) an access infrastructure that brings fibre close to the customer with the
last few hundred metres to the customer premises being fed by copper and delivers
telephony, broadband data and potentially television services to customer premises |
|
|
|
Gbps:
|
|
gigabyte per second |
|
|
|
Global Offering:
|
|
refer to the cover page of this Intitutional Offering Memorandum |
211
|
|
|
GPRS:
|
|
(General Packet Radio Service) a service that will allow compatible mobile phones and
mobile data devices to access Internet and other data networks on a packet basis and
remain connected to the net and send or receive data information and email at any time |
|
|
|
GSM:
|
|
(Global System for Mobile
Communications) a mobile telephone system based on digital transmission |
|
|
|
HFC:
|
|
hybrid-fibre coaxial |
|
|
|
HIN:
|
|
holder identification number |
|
|
|
HSDPA:
|
|
high speed downlink packet access |
|
|
|
IASB:
|
|
International Accounting Standards Board |
|
|
|
ICT:
|
|
information and communication technology |
|
|
|
IN:
|
|
intelligent network |
|
|
|
Initial Allocation |
|
|
Benefit:
|
|
refer to Summary Overview The Global Offering Initial Allocation Benefit |
|
|
|
Institutional |
|
|
Offering:
|
|
refer to the cover page of this Intitutional Offering Memorandum |
|
|
|
INP:
|
|
inbound number portability |
|
|
|
International |
|
|
Offering:
|
|
refer to the cover page of this Institutional Offering Memorandum |
|
|
|
International |
|
|
Purchase |
|
|
Agreement:
|
|
refer to Plan of Distribution |
|
|
|
IP:
|
|
internet protocol |
|
|
|
IPND:
|
|
Integrated Public Number Database |
|
|
|
IPMAN:
|
|
IP Metropolitan Area Network |
|
|
|
IP/MPLS:
|
|
Internet Protocol / Multiprotocol Label Switching |
|
|
|
IP-VPN:
|
|
Internet protocol virtual private network |
|
|
|
ISDN:
|
|
(Integrated Services Digital Network) a digital service providing switched and dedicated
integrated access to voice, data and video |
|
|
|
ISP:
|
|
(Internet Service Provider) an Internet service provider provides the link between an end
user and the Internet by means of a dial-up or broadband service is likely to provide help
desk, web hosting and email services to the end user and ISP may connect to the Internet
via their own backbone or via services acquired from an Internet access provider |
|
|
|
LCS:
|
|
local carriage services |
|
|
|
LTIs:
|
|
lost-time injuries |
|
|
|
MAN:
|
|
metropolitan area network |
|
|
|
MCF:
|
|
Mobile Carriers Forum |
|
|
|
MPLS:
|
|
multi-protocol label switching |
|
|
|
MTAS:
|
|
mobile terminating access service |
|
|
|
NEXT GTM |
|
|
wireless network:
|
|
our recently launched 3GSM 850Mhz national wireless broadband network |
|
|
|
News |
|
|
Corporation:
|
|
The News Corporation Limited |
212
|
|
|
New Zealand |
|
|
Investment |
|
|
Statement:
|
|
the investment statement in terms of the Securities Act 1978 (NZ) under which the New
Zealand offer will be made |
|
|
|
NGN:
|
|
next-generation network |
|
|
|
Number |
|
|
portability:
|
|
the ability of end users to keep their telephone number when they change their telephone
service provider |
|
|
|
NYSE:
|
|
New York Stock Exchange |
|
|
|
NZSX:
|
|
the main board equity security market operated by the NZX |
|
|
|
NZX:
|
|
New Zealand Exchange Limited |
|
|
|
OCMF:
|
|
Online Customer Management Facility |
|
|
|
OTA:
|
|
PSTN originating and terminating access |
|
|
|
PBL:
|
|
Publishing & Broadcasting Ltd |
|
|
|
PDR:
|
|
personal digital recorder |
|
|
|
Preselection:
|
|
the ability of a customer to choose a service provider to provide a basket of services
including national and international long distance and fixed-to-mobile services which is on
a permanent basis when the customer selects a provider for all calls placed without an
override code |
|
|
|
POWL:
|
|
Refer to the cover page of this Institutional Offering Memorandum |
|
|
|
PSTN:
|
|
(Public Switched Telephone Network) our national fixed network delivering basic and
enhanced telephone service |
|
|
|
QIB:
|
|
qualified institutional buyer as defined in Rule 144A |
|
|
|
RDN:
|
|
routed data network |
|
|
|
REACH:
|
|
Reach Ltd, a 50:50 joint venture with PCCW Limited |
|
|
|
Regulation S:
|
|
Regulation S under the US Securities Act of 1933 |
|
|
|
Relevant Stock |
|
|
Exchange:
|
|
refer Summary Overview The Global Offering Australian stamp duty |
|
|
|
Reseller:
|
|
providers of telecommunications services who are not carriers |
|
|
|
Retail Offering:
|
|
refer to the cover page of this Institutional Offering Memorandum |
|
|
|
RMRC:
|
|
retail minus retail costs |
|
|
|
ROW Offering:
|
|
refer to the cover page of this Institutional Offering Memorandum |
|
|
|
Rule 144A:
|
|
Rule 144A under the Securities Act |
|
|
|
SDH:
|
|
synchronous digital hierarchy |
|
|
|
SDN:
|
|
switched data network |
|
|
|
SEATS:
|
|
Stock Exchange Automated Trading System |
|
|
|
SEC:
|
|
US Securities and Exchange Commission |
|
|
|
Securities Act:
|
|
US Securities Act of 1933, as amended |
|
|
|
Seven:
|
|
Seven Network Limited and C7 Pty Limited |
|
|
|
SIO:
|
|
services in operation |
|
|
|
SME:
|
|
small and medium enterprises |
|
|
|
SMS:
|
|
short messaging service |
|
|
|
SPAN:
|
|
Service Providers Association Incorporated |
|
|
|
SRN:
|
|
security holder reference number |
213
|
|
|
SSS:
|
|
spectrum sharing service |
|
|
|
Telecommunica- |
|
|
tions Act:
|
|
Telecommunications Act 1997 (Cwth) |
|
|
|
Telstra or Telstra |
|
|
Group:
|
|
Telstra Corporation Limited and its controlled entities as a whole |
|
|
|
Telstra Act:
|
|
Telstra Corporation Act 1991 (Cwth) |
|
|
|
TelstraClear:
|
|
TelstraClear Limited, the second largest full service service carrier in New Zealand |
|
|
|
Telstra Entity:
|
|
Telstra Corporation Limited |
|
|
|
TLS:
|
|
the trading symbol for shares quoted on the ASX and the NZSX |
|
|
|
TPA:
|
|
Trade Practices Act 1974 (Cwth) |
|
|
|
TSLRIC:
|
|
total service long run incremental cost |
|
|
|
TTY:
|
|
Teletypwriter |
|
|
|
ULLS:
|
|
(Unconditioned Local Loop service) one or more twisted copper pairs between the
exchange and the network boundary at a customers premises |
|
|
|
US:
|
|
United States of America |
|
|
|
US$:
|
|
US Dollars |
|
|
|
US-GAAP:
|
|
generally accepted accounting principles in the US |
|
|
|
USO:
|
|
(Universal Service Obligation) obligation imposed on carriers to ensure that standard
telecommunications services are reasonably available to all persons in the universal service
area |
|
|
|
US Offering:
|
|
refer to the cover page of this Institutional Offering Memorandum |
|
|
|
US Person:
|
|
U.S. person as defined under Regulation S |
|
|
|
VoDSL:
|
|
voice over DSL |
|
|
|
VoIP:
|
|
voice over internet protocol |
|
|
|
VPN:
|
|
virtual private network |
|
|
|
WAN:
|
|
wide area network |
|
|
|
WAP:
|
|
wireless application protocol |
|
|
|
WHO:
|
|
World Health Organisation |
|
|
|
Wireless Local |
|
|
Loop:
|
|
a range of radio technologies used to provide fixed access to customers in lieu of copper |
|
|
|
WLR:
|
|
wholesale line rental |
214
Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities
Australian Business Number (ABN): 33 051 775 556
|
|
|
|
|
|
|
Page |
|
|
|
Number |
|
Independent Audit Report |
|
|
F-2 |
|
|
|
|
|
|
Financial Statements for the years 30 June 2006 and 2005 |
|
|
|
|
Income Statement |
|
|
F-3 |
|
Balance Sheet |
|
|
F-4 |
|
Statement of Recognised Income and Expense |
|
|
F-5 |
|
Statement of Cash Flows |
|
|
F-6 |
|
Notes to the Financial Statements |
|
|
F-7 |
|
Directors Declaration |
|
|
F-204 |
|
F-1
Telstra Corporation Limited and controlled entities
Report of Independent Registered Public Accounting Firm to the Shareholders and Board of
Directors of Telstra Corporation Limited
We have audited the accompanying consolidated balance sheets of Telstra Corporation Limited and
its controlled entities (the Telstra Group) and the unconsolidated balance sheets of Telstra
Corporation Limited (the Telstra Entity) as of 30 June 2006 and 2005, and the related consolidated
and unconsolidated statements of income, recognised income and expense and cash flows for each of
the two years in the period ended 30 June 2006. These financial statements are the responsibility
of the Telstra Groups and the Telstra Entitys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with Australian Auditing Standards and the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an audit of the Telstra Groups or
the Telstra Entitys internal controls over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Telstra Groups or the Telstra Entitys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Telstra Corporation Limited and its controlled
entities and the unconsolidated financial position of Telstra Corporation Limited at 30 June 2006
and 2005 and the related consolidated and unconsolidated results of their operations and their
cashflows for each of the two years in the period ended 30 June 2006, in conformity with Australian
Accounting Standards.
Australian Accounting Standards vary in certain significant respects from accounting principles
generally accepted in the United States of America. Information relating to the nature and effect
of such differences is presented in note 37 to the financial statements.
Ernst & Young
Melbourne, Australia
Date: 10 August 2006
F-2
Telstra Corporation Limited and controlled entities
Income Statement
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
|
|
|
|
Year ended 30 June |
|
Year ended 30 June |
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
|
$m |
|
|
$m |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
6 |
|
|
|
22,772 |
|
|
|
16,904 |
|
|
|
22,181 |
|
|
|
20,485 |
|
|
|
19,831 |
|
Other income |
|
|
6 |
|
|
|
328 |
|
|
|
243 |
|
|
|
261 |
|
|
|
163 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,100 |
|
|
|
17,147 |
|
|
|
22,442 |
|
|
|
20,648 |
|
|
|
19,964 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
7 |
|
|
|
4,364 |
|
|
|
3,239 |
|
|
|
3,858 |
|
|
|
3,483 |
|
|
|
3,082 |
|
Goods and services purchased |
|
|
7 |
|
|
|
4,730 |
|
|
|
3,511 |
|
|
|
4,211 |
|
|
|
3,305 |
|
|
|
2,958 |
|
Other expenses |
|
|
7 |
|
|
|
4,427 |
|
|
|
3,286 |
|
|
|
3,815 |
|
|
|
4,562 |
|
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,521 |
|
|
|
10,036 |
|
|
|
11,884 |
|
|
|
11,350 |
|
|
|
9,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net (gain)/loss from jointly controlled
and associated entities |
|
|
30 |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,516 |
|
|
|
10,032 |
|
|
|
11,978 |
|
|
|
11,350 |
|
|
|
9,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation
and amortisation (EBITDA) |
|
|
|
|
|
|
9,584 |
|
|
|
7,115 |
|
|
|
10,464 |
|
|
|
9,298 |
|
|
|
10,446 |
|
Depreciation and amortisation |
|
|
7 |
|
|
|
4,087 |
|
|
|
3,034 |
|
|
|
3,529 |
|
|
|
3,657 |
|
|
|
3,206 |
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
5,497 |
|
|
|
4,081 |
|
|
|
6,935 |
|
|
|
5,641 |
|
|
|
7,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
6 |
|
|
|
66 |
|
|
|
49 |
|
|
|
83 |
|
|
|
63 |
|
|
|
101 |
|
Finance costs |
|
|
7 |
|
|
|
1,002 |
|
|
|
744 |
|
|
|
963 |
|
|
|
985 |
|
|
|
943 |
|
|
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
936 |
|
|
|
695 |
|
|
|
880 |
|
|
|
922 |
|
|
|
842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
4,561 |
|
|
|
3,386 |
|
|
|
6,055 |
|
|
|
4,719 |
|
|
|
6,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
9 |
|
|
|
1,380 |
|
|
|
1,024 |
|
|
|
1,746 |
|
|
|
1,482 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (cents per share) |
|
|
|
|
|
cents |
|
US cents |
|
cents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
3 |
|
|
|
25.7 |
|
|
|
19.0 |
|
|
|
34.7 |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
3 |
|
|
|
25.7 |
|
|
|
19.0 |
|
|
|
34.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends declared (cents per share) |
|
|
4 |
|
|
|
34.0 |
|
|
|
25.0 |
|
|
|
40.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
F-3
Telstra Corporation Limited and controlled entities
Balance Sheet
as at 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
|
|
|
|
As at 30 June |
|
As at 30 June |
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
10 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,548 |
|
|
|
474 |
|
|
|
1,368 |
|
Trade and other receivables |
|
|
11 |
|
|
|
3,701 |
|
|
|
2,747 |
|
|
|
3,549 |
|
|
|
3,344 |
|
|
|
3,538 |
|
Inventories |
|
|
12 |
|
|
|
224 |
|
|
|
166 |
|
|
|
232 |
|
|
|
175 |
|
|
|
194 |
|
Derivative financial assets |
|
|
16 |
|
|
|
21 |
|
|
|
16 |
|
|
|
4 |
|
|
|
21 |
|
|
|
4 |
|
Prepayments |
|
|
|
|
|
|
244 |
|
|
|
181 |
|
|
|
249 |
|
|
|
172 |
|
|
|
173 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
4,879 |
|
|
|
3,621 |
|
|
|
5,582 |
|
|
|
4,186 |
|
|
|
5,277 |
|
|
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
11 |
|
|
|
87 |
|
|
|
65 |
|
|
|
97 |
|
|
|
127 |
|
|
|
115 |
|
Inventories |
|
|
12 |
|
|
|
20 |
|
|
|
15 |
|
|
|
15 |
|
|
|
20 |
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
13 |
|
|
|
23 |
|
|
|
17 |
|
|
|
48 |
|
|
|
18 |
|
|
|
41 |
|
Investments other |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,953 |
|
|
|
6,136 |
|
Property, plant and equipment |
|
|
14 |
|
|
|
23,622 |
|
|
|
17,535 |
|
|
|
22,891 |
|
|
|
21,765 |
|
|
|
21,223 |
|
Intangibles |
|
|
15 |
|
|
|
6,123 |
|
|
|
4,545 |
|
|
|
6,329 |
|
|
|
2,465 |
|
|
|
2,751 |
|
Deferred tax assets |
|
|
9 |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Derivative financial assets |
|
|
16 |
|
|
|
391 |
|
|
|
290 |
|
|
|
|
|
|
|
391 |
|
|
|
|
|
Defined benefit assets |
|
|
28 |
|
|
|
1,029 |
|
|
|
764 |
|
|
|
247 |
|
|
|
1,004 |
|
|
|
242 |
|
|
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
31,296 |
|
|
|
23,232 |
|
|
|
29,629 |
|
|
|
31,743 |
|
|
|
30,523 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
36,175 |
|
|
|
26,853 |
|
|
|
35,211 |
|
|
|
35,929 |
|
|
|
35,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
17 |
|
|
|
3,570 |
|
|
|
2,650 |
|
|
|
2,807 |
|
|
|
3,065 |
|
|
|
1,956 |
|
Borrowings |
|
|
18 |
|
|
|
1,969 |
|
|
|
1,462 |
|
|
|
1,507 |
|
|
|
3,374 |
|
|
|
3,892 |
|
Current tax liabilities |
|
|
|
|
|
|
428 |
|
|
|
318 |
|
|
|
534 |
|
|
|
400 |
|
|
|
519 |
|
Provisions |
|
|
19 |
|
|
|
737 |
|
|
|
547 |
|
|
|
421 |
|
|
|
679 |
|
|
|
356 |
|
Derivative financial liabilities |
|
|
20 |
|
|
|
12 |
|
|
|
9 |
|
|
|
11 |
|
|
|
12 |
|
|
|
11 |
|
Revenue received in advance |
|
|
|
|
|
|
1,170 |
|
|
|
868 |
|
|
|
1,132 |
|
|
|
919 |
|
|
|
912 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,886 |
|
|
|
5,854 |
|
|
|
6,412 |
|
|
|
8,449 |
|
|
|
7,646 |
|
|
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
17 |
|
|
|
197 |
|
|
|
146 |
|
|
|
250 |
|
|
|
65 |
|
|
|
61 |
|
Borrowings |
|
|
18 |
|
|
|
11,409 |
|
|
|
8,469 |
|
|
|
10,941 |
|
|
|
11,376 |
|
|
|
10,907 |
|
Deferred tax liabilities |
|
|
9 |
|
|
|
1,704 |
|
|
|
1,265 |
|
|
|
1,804 |
|
|
|
1,832 |
|
|
|
1,961 |
|
Provisions |
|
|
19 |
|
|
|
974 |
|
|
|
723 |
|
|
|
894 |
|
|
|
924 |
|
|
|
837 |
|
Derivative financial liabilities |
|
|
20 |
|
|
|
768 |
|
|
|
570 |
|
|
|
864 |
|
|
|
768 |
|
|
|
864 |
|
Revenue received in advance |
|
|
|
|
|
|
405 |
|
|
|
301 |
|
|
|
388 |
|
|
|
400 |
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,457 |
|
|
|
11,474 |
|
|
|
15,141 |
|
|
|
15,365 |
|
|
|
15,011 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
23,343 |
|
|
|
17,328 |
|
|
|
21,553 |
|
|
|
23,814 |
|
|
|
22,657 |
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
12,115 |
|
|
|
13,143 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
21 |
|
|
|
5,569 |
|
|
|
4,134 |
|
|
|
5,536 |
|
|
|
5,569 |
|
|
|
5,536 |
|
Reserves |
|
|
22 |
|
|
|
(160 |
) |
|
|
(119 |
) |
|
|
(153 |
) |
|
|
210 |
|
|
|
194 |
|
Retained profits |
|
|
23 |
|
|
|
7,177 |
|
|
|
5,327 |
|
|
|
8,273 |
|
|
|
6,336 |
|
|
|
7,413 |
|
|
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
12,586 |
|
|
|
9,342 |
|
|
|
13,656 |
|
|
|
12,115 |
|
|
|
13,143 |
|
Minority interests |
|
|
23 |
|
|
|
246 |
|
|
|
183 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
12,115 |
|
|
|
13,143 |
|
|
|
|
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
F-4
Telstra Corporation Limited and controlled entities
Statement of Recognised Income and Expense
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
Year ended 30 June |
|
Year ended 30 June |
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Foreign currency translation reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity accounting our interest in
jointly controlled and associated
entities |
|
|
1 |
|
|
|
1 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
Translation of financial statements
of non-Australian controlled
entities |
|
|
(36 |
) |
|
|
(27 |
) |
|
|
(193 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net hedging gains recognised
directly in equity |
|
|
327 |
|
|
|
243 |
|
|
|
|
|
|
|
327 |
|
|
|
|
|
Net hedging gains removed from
equity and included in profit for
the year |
|
|
(420 |
) |
|
|
(312 |
) |
|
|
|
|
|
|
(421 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity accounting our interest in
jointly controlled and associated
entities |
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gain/(loss) on our
defined benefit plans |
|
|
958 |
|
|
|
711 |
|
|
|
(90 |
) |
|
|
945 |
|
|
|
(85 |
) |
|
|
|
|
|
|
|
|
830 |
|
|
|
616 |
|
|
|
(280 |
) |
|
|
851 |
|
|
|
(85 |
) |
Income tax on equity items |
|
|
(256 |
) |
|
|
(190 |
) |
|
|
24 |
|
|
|
(256 |
) |
|
|
24 |
|
|
|
|
|
|
Net income/(expense) recognised
directly in equity |
|
|
574 |
|
|
|
426 |
|
|
|
(256 |
) |
|
|
595 |
|
|
|
(61 |
) |
Profit for the year |
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
|
|
|
|
|
Total recognised income for the year |
|
|
3,755 |
|
|
|
2,788 |
|
|
|
4,053 |
|
|
|
3,832 |
|
|
|
4,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of changes in accounting
policy attributable to Telstra
Entity |
|
|
74 |
|
|
|
55 |
|
|
|
1,223 |
|
|
|
77 |
|
|
|
737 |
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
F-5
Telstra Corporation Limited and controlled entities
Statement of Cash Flows
for the year ended 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
|
|
|
|
Year ended 30 June |
|
Year ended 30 June |
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receipts from customers (inclusive of goods and services tax (GST)) |
|
|
|
|
|
|
25,229 |
|
|
|
18,779 |
|
|
|
24,526 |
|
|
|
21,928 |
|
|
|
21,343 |
|
Payments to suppliers and to employees (inclusive of GST) |
|
|
|
|
|
|
(14,785 |
) |
|
|
(11,026 |
) |
|
|
(13,848 |
) |
|
|
(11,754 |
) |
|
|
(11,079 |
) |
|
|
|
|
|
|
|
|
|
Net cash generated by operations |
|
|
|
|
|
|
10,444 |
|
|
|
7,753 |
|
|
|
10,678 |
|
|
|
10,174 |
|
|
|
10,264 |
|
Income taxes paid |
|
|
|
|
|
|
(1,882 |
) |
|
|
(1,397 |
) |
|
|
(1,718 |
) |
|
|
(1,863 |
) |
|
|
(1,712 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
24 |
|
|
|
8,562 |
|
|
|
6,356 |
|
|
|
8,960 |
|
|
|
8,311 |
|
|
|
8,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- property, plant and equipment |
|
|
|
|
|
|
(3,636 |
) |
|
|
(2,699 |
) |
|
|
(2,995 |
) |
|
|
(3,483 |
) |
|
|
(2,715 |
) |
- intangibles |
|
|
|
|
|
|
(619 |
) |
|
|
(459 |
) |
|
|
(544 |
) |
|
|
(502 |
) |
|
|
(460 |
) |
|
|
|
|
|
|
|
|
|
Capital expenditure (before investments) |
|
|
|
|
|
|
(4,255 |
) |
|
|
(3,158 |
) |
|
|
(3,539 |
) |
|
|
(3,985 |
) |
|
|
(3,175 |
) |
- shares in controlled entities (net of cash acquired) |
|
|
24 |
|
|
|
(43 |
) |
|
|
(32 |
) |
|
|
(573 |
) |
|
|
(27 |
) |
|
|
(28 |
) |
- payments for other investments |
|
|
|
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
Total capital expenditure |
|
|
|
|
|
|
(4,303 |
) |
|
|
(3,194 |
) |
|
|
(4,129 |
) |
|
|
(4,012 |
) |
|
|
(3,209 |
) |
Proceeds from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- sale of property, plant and equipment |
|
|
|
|
|
|
50 |
|
|
|
37 |
|
|
|
68 |
|
|
|
72 |
|
|
|
79 |
|
- sale of shares in controlled entities |
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- sale of other investments |
|
|
|
|
|
|
89 |
|
|
|
66 |
|
|
|
176 |
|
|
|
89 |
|
|
|
164 |
|
Net proceeds from CSL New World Mobility merger |
|
|
24 |
|
|
|
42 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of additional shares by controlled entities |
|
|
|
|
|
|
6 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of PCCW converting note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
|
|
|
|
76 |
|
Proceeds from share buy-back by jointly controlled and associated entities |
|
|
|
|
|
|
34 |
|
|
|
25 |
|
|
|
|
|
|
|
34 |
|
|
|
|
|
Loan to jointly controlled and associated entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
Interest received |
|
|
|
|
|
|
66 |
|
|
|
49 |
|
|
|
78 |
|
|
|
63 |
|
|
|
79 |
|
Dividends received |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(4,012 |
) |
|
|
(2,979 |
) |
|
|
(3,766 |
) |
|
|
(3,754 |
) |
|
|
(2,810 |
) |
|
|
|
|
|
|
|
|
|
Operating cash flows less investing cash flows |
|
|
|
|
|
|
4,550 |
|
|
|
3,377 |
|
|
|
5,194 |
|
|
|
4,557 |
|
|
|
5,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
|
|
|
|
8,641 |
|
|
|
6,413 |
|
|
|
6,433 |
|
|
|
8,680 |
|
|
|
6,611 |
|
Proceeds from Telstra bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
983 |
|
|
|
|
|
|
|
983 |
|
Repayment of borrowings |
|
|
|
|
|
|
(7,624 |
) |
|
|
(5,659 |
) |
|
|
(5,735 |
) |
|
|
(7,703 |
) |
|
|
(6,478 |
) |
Repayment of Telstra bonds |
|
|
|
|
|
|
(517 |
) |
|
|
(384 |
) |
|
|
(272 |
) |
|
|
(517 |
) |
|
|
(272 |
) |
Repayment of finance lease principal amounts |
|
|
|
|
|
|
(7 |
) |
|
|
(5 |
) |
|
|
(16 |
) |
|
|
(6 |
) |
|
|
(11 |
) |
Staff repayments of share loans |
|
|
|
|
|
|
24 |
|
|
|
18 |
|
|
|
19 |
|
|
|
24 |
|
|
|
19 |
|
Purchase of shares for employee share plans |
|
|
21 |
|
|
|
(6 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
Finance costs paid |
|
|
|
|
|
|
(940 |
) |
|
|
(698 |
) |
|
|
(879 |
) |
|
|
(953 |
) |
|
|
(892 |
) |
Dividends paid |
|
|
4 |
|
|
|
(4,970 |
) |
|
|
(3,689 |
) |
|
|
(4,124 |
) |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
Share buy-back |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
(756 |
) |
|
|
|
|
|
|
(756 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
|
|
|
|
(5,399 |
) |
|
|
(4,008 |
) |
|
|
(4,347 |
) |
|
|
(5,451 |
) |
|
|
(4,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash |
|
|
|
|
|
|
(849 |
) |
|
|
(631 |
) |
|
|
847 |
|
|
|
(894 |
) |
|
|
822 |
|
Foreign currency translation on opening balances |
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
Cash at the beginning of the year |
|
|
|
|
|
|
1,534 |
|
|
|
1,139 |
|
|
|
690 |
|
|
|
1,368 |
|
|
|
546 |
|
|
|
|
|
|
|
|
|
|
Cash at the end of the year |
|
|
24 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,534 |
|
|
|
474 |
|
|
|
1,368 |
|
|
|
|
|
|
|
|
|
|
The notes following the financial statements form part of the financial report.
F-6
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements
1. Basis of preparation
In this financial report, we, us, our, Telstra and the Telstra Group all mean Telstra
Corporation Limited, an Australian corporation and its controlled entities as a whole. Telstra
Entity is the legal entity, Telstra Corporation Limited.
Our financial or fiscal year ends on 30 June. Unless we state differently the following applies;
|
|
year, fiscal year or financial year means the year ended 30 June; |
|
|
|
balance date means the date 30 June; and |
|
|
|
2006 means fiscal 2006 and similarly for other fiscal years. |
The financial report of the Telstra Group and the Telstra Entity for the year ended 30 June 2006
was authorised for issue in accordance with a resolution of the Telstra Board of Directors on 10
August 2006.
The principal accounting policies used in preparing the financial report of the Telstra Group and
the Telstra Entity are listed 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 prepared in accordance with the
requirements of the Australian Corporations Act 2001 and Accounting Standards applicable in
Australia.
Both the functional and presentation currency of the Telstra Entity and its Australian controlled
entities is Australian dollars. The functional currency of certain non Australian controlled
entities is not Australian dollars. As a result, the results of these entities are translated to
Australian dollars for presentation in the Telstra Group financial report.
This financial report is prepared in accordance with historical cost, except for some categories of
investments, which are equity accounted and some financial assets and liabilities (including
derivative instruments) which are recorded at fair value. Cost is the fair value of the
consideration given in exchange for net assets acquired.
In preparing this financial report, we are required to make judgements and estimates that impact:
|
|
income and expenses for the year; |
|
|
|
the reported amounts of assets and liabilities; and |
|
|
|
the disclosure of off balance sheet arrangements, including contingent assets and contingent
liabilities. |
We continually evaluate our judgements and estimates. We base our judgements and estimates on
historical experience, various other assumptions we believe to be reasonable under the
circumstances and, where appropriate, practices adopted by international telecommunications
companies.
Actual results may differ from our estimates in the event that the scenarios on which our
judgements are based prove to be different.
1.2 Statement of compliance
This financial report complies with Accounting Standards applicable in Australia, which include
Australian equivalents to International Financial Reporting Standards (A-IFRS). Compliance with
A-IFRS ensures that the Telstra Group and Telstra Entity financial statements and notes comply with
International Financial Reporting Standards (IFRS). The financial statements of Telstra Entity are
considered separate financial statements.
This is our first full year financial report prepared in accordance with A-IFRS. AASB 1: First
time adoption of Australian equivalents to International Financial Reporting Standards (AASB 1)
has been applied in preparing this financial report. Our financial reports up to 30 June 2005 had
been prepared in accordance
with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in
certain respects from A-IFRS.
When preparing this financial report we have amended certain accounting and valuation methods
applied in the previous AGAAP financial statements to comply with A-IFRS. With the exception of
financial instruments, the comparative figures were restated to reflect these adjustments. We have
taken the exemption available under AASB 1 to only apply AASB 132: Financial Instruments:
Disclosure and Presentation (AASB 132) and AASB 139: Financial Instruments: Recognition and
Measurement (AASB 139), from 1 July 2005. In addition, we have elected to early adopt AASB 7:
Financial Instruments: Disclosures, which supersedes the disclosure requirements of AASB 132.
Reconciliations and descriptions of the impact of the transition to A-IFRS on the Telstra Group and
Telstra Entitys income statement, balance sheet and statement of cash flow are provided in note
36.
1.3 Clarification of terminology used in our income statement
Under the requirements of AASB 101: Presentation of Financial Statements, we must classify
all of our expenses (apart from any finance costs and our share of net (gain)/loss from jointly
controlled and associated entities) according to either the nature (type) of the expense or the
function (activity to which the expense relates). We have chosen to classify our expenses using
the nature classification as it more accurately reflects the type of operations we undertake.
F-7
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
1. Basis of preparation (continued)
1.3 Clarification of terminology used in our income statement (continued)
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) reflects
our profit for the year prior to including the effect of net finance costs, income taxes,
depreciation and amortisation. We believe that EBITDA is a relevant and useful financial measure
used by management to measure the companys operating profit.
Our management uses EBITDA, in combination with other financial measures, primarily to evaluate the
companys operating performance before financing costs, income tax and non-cash capital related
expenses. In consideration of the capital intensive nature of our business, EBITDA is a useful
supplement to net income in understanding cash flows generated from operations that are available
for payment of income taxes, debt service and capital expenditure.
In addition, we believe EBITDA is useful to investors because analysts and other members of the
investment community largely view EBITDA as a key and widely recognised measure of operating
performance.
Earnings before interest and income tax expense (EBIT) is a similar measure to EBITDA, but takes
into account the effect of depreciation and amortisation.
When a specific item from continuing operations is of such a size, nature or incidence that its
disclosure is relevant in explaining our operating performance for the reporting period, its nature
and amount is disclosed separately in note 7(b).
1.4 Adoption of accounting standards before their application date
Certain new accounting standards and Urgent Issues Group (UIG) interpretations have been issued
with an application date after the year ended 30 June 2006. As a result, these accounting
standards and UIG interpretations are not mandatory for adoption in our financial report for the
year ended 30 June 2006.
Under subsection 334(5) of the Corporations Act 2001, we elected to early adopt the following
accounting standards before the application date:
|
|
AASB 119: Employee Benefits (issued December 2004)(AASB 119); and |
|
|
|
AASB 7: Financial Instruments: Disclosures (AASB 7). |
Due to the early adoption of the revised AASB 119, we also elected to adopt the related omnibus
accounting standard, AASB 2005-3: Amendments to Australian Accounting Standards. Our
comparatives for the year ended 30 June 2005 were fully restated for these accounting standards in
accordance with AASB 1.
Due to the early adoption of AASB 7, we also elected to adopt the related omnibus accounting
standard, AASB 2005-10: Amendments to Australian Accounting Standards. We have taken the
exemption available under AASB 1 to only apply these standards from 1 July 2005.
1.5 United States generally accepted accounting principles (USGAAP)
This financial report combines the disclosure requirements for both A-IFRS and United States
Generally Accepted Accounting Principles (USGAAP). Note 37 contains a reconciliation of the major
differences between our financial report prepared under A-IFRS and USGAAP.
This financial report has been prepared using our presentation currency, Australian dollars (A$).
For the convenience of readers outside Australia we have converted our financial statements and
USGAAP disclosures from A$ to US$ for fiscal 2006.
These conversions appear under columns headed US$m and represent rounded millions of US dollars.
The conversion has been made using the noon buying rate in New York City for cable transfers in
non-US currencies. This rate is certified for custom purposes by the Federal Reserve Bank of New
York. The rate on 30 June 2006 was A$1.00 = US$0.7423.
These conversions are indicative only and do not mean that the A$ amounts could be converted to US$
at the rate indicated.
1.6 Recently issued accounting standards to be applied in Australia in future reporting
periods
The accounting standards and UIG interpretation that have not been early adopted for the year
ended 30 June 2006, but will be applicable to the Telstra Group and Telstra Entity in future
reporting periods are detailed below. Apart from these standards, we have considered other
accounting standards that will be applicable in future periods, however they have been considered
insignificant to Telstra.
F-8
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
1. Basis of preparation (continued)
1.6 Recently issued accounting standards to be applied in Australia in future reporting
periods (continued)
Lease arrangements
UIG 4: Determining Whether an Arrangement Contains a Lease (UIG 4) is applicable to annual
reporting periods beginning on or after 1 January 2006. We will apply this interpretation in our
financial report for the half-year ended 31 December 2006. A related omnibus standard AASB 2005-5:
Amendments to Australian Accounting Standards will also be adopted for the half-year ended 31
December 2006.
UIG 4 requires entities to assess whether the arrangements they enter into contain leases. An
arrangement contains a lease if fulfilment of the arrangement is dependent on the use of specific
assets and it conveys a right to use those assets to the customer. The lease component of the
arrangement is then separated and accounted for as either a finance or operating lease depending on
the nature of the arrangement. Under our current accounting policy we do not separately account
for leases that are embedded within our service agreements.
UIG 4 will align our accounting under A-IFRS to our policy adopted under USGAAP (refer to note
37(p)). However, our USGAAP policy is only applied to arrangements that were entered into or
modified after 1 July 2003. UIG 4 is applicable to all arrangements in existence as of the
transition date.
Financial guarantees
AASB 2005-9: Amendments to Australian Accounting Standards is applicable to annual reporting
periods beginning on or after 1 January 2006. We will apply this interpretation in our financial
report for the half-year ended 31 December 2006.
These amendments require that liabilities arising from the issue of financial guarantee contracts
be recognised on the balance sheet. Management has not yet determined the effect the adoption of
these amendments will have on our balance sheet, income statement or statement of cashflows.
1.7 Rounding
All dollar amounts in this financial report (except where indicated) have been rounded to the
nearest million dollars ($m) for presentation. This has been done in accordance with Australian
Securities and Investments Commission (ASIC) Class Order 98/100, dated 10 July 1998, issued under
section 341(1) of the Corporations Act 2001.
F-9
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies
2.1 Change in accounting policies
The following accounting policy changes occurred during fiscal 2006:
The transition to Australian equivalents to International Financial Reporting Standards (A-IFRS)
resulted in changes to a number of our accounting policies. The accounting policies set out below
have been applied in preparing the financial report for the year ended 30 June 2006, the
comparative information presented in these financial statements and in the preparation of the
opening A-IFRS balance sheet as at 1 July 2004, except for the accounting policies in respect of
financial instruments.
Reconciliations and descriptions of the impact of the transition to A-IFRS on the Telstra Group and
Telstra Entitys income statement, balance sheet and statement of cash flow are provided in note
36.
There were no accounting policy changes during fiscal 2005.
Accounting policies
2.2 Principles of consolidation
The consolidated financial report includes the assets and liabilities of the Telstra Entity and
its controlled entities as a whole as at the end of the year and the consolidated results and cash
flows for the year. The effect of all intergroup transactions and balances are eliminated in full
from our consolidated financial statements.
Where we do not control an entity for the entire year, results and cash flows for those entities
are only included from the date on which control commences, or up until the date on which there is
a loss of control.
Our consolidated retained profits include retained profits/ accumulated losses of controlled
entities from the time they became a controlled entity until control ceases. Minority interests in
the results and equity of controlled entities are shown separately in our consolidated income
statement and consolidated balance sheet.
The financial statements of controlled entities are prepared for the same reporting period as the
Telstra Entity, using consistent accounting policies. Adjustments are made to bring into line any
dissimilar accounting policies.
An entity is considered to be a controlled entity where we are able to dominate decision making,
directly or indirectly, relating to the financial and operating policies of that entity so as to
obtain benefits from its activities.
We account for the acquisition of our controlled entities using the purchase method of accounting.
This involves recognising the acquirees identifiable assets, liabilities and contingent
liabilities at their fair value at the date of acquisition. Any excess of the cost of acquisition
over our interest in the fair value of the acquirees identifiable assets, liabilities and
contingent liabilities is recognised as goodwill.
2.3 Foreign currency translation
(a) Transactions and balances
Foreign currency transactions are converted into the relevant functional currency at market
exchange rates applicable at the date of the transactions. Amounts payable or receivable in
foreign currencies at balance date are converted into the relevant functional currency at market
exchange rates at balance date. Any
currency translation gains and losses that arise are included in our profit or loss for the year.
Where we enter into a hedge for a specific expenditure commitment or for the construction of an
asset, hedging gains and losses are accumulated in equity over the period of the hedge and are
transferred to the carrying value of the asset upon completion, or included in the income statement
at the same time as the discharge of the expenditure commitment.
(b) Translation of financial reports of foreign operations that have a functional currency that is
not Australian dollars.
The consolidated financial statements are presented in Australian dollars, which is the functional
and presentation currency of Telstra Corporation Limited.
Our operations include subsidiaries, associates, and jointly controlled entities, the activities
and operations of which are in an economic environment where the functional currency is not
Australian 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
balance date; |
|
|
|
equity at the date of investment is translated into Australian dollars at the exchange rate
current at that date. Movements post-acquisition (other than retained profits/ accumulated losses)
are translated at the exchange rates current at the dates of those movements; |
|
|
|
income statements are translated into Australian dollars at average exchange rates for the year,
unless there are significant identifiable transactions, which are translated at the exchange rate
that existed on the date of the transaction; and |
|
|
|
currency translation gains and losses are recorded in the foreign currency translation reserve. |
F-10
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.3 Foreign currency translation (continued)
Exchange differences relating to foreign currency monetary items forming part of the net
investment in our entities operating in an economic environment where the functional currency is
not Australian dollars, together with related tax effects, are eliminated against the foreign
currency translation reserve in our consolidated financial statements.
Where we hedge our investment in entities which are in an economic environment where the functional
currency is not Australian dollars, the gains or losses on the hedging instrument are recognised in
the foreign currency translation reserve until we dispose of the operation, at which time the
cumulative gains and losses are transferred to the income statement.
Upon disposal or partial disposal of a foreign operation, the balance of the foreign currency
translation reserve relating to the entity, or the part disposed of, is transferred to the income
statement and becomes part of the gain or loss on sale.
2.4 Cash and cash equivalents
Cash includes cash at bank and on hand, bank deposits, bills of exchange and commercial paper
with an original maturity date not greater than three months.
Bank deposits are recorded at amounts to be received.
Bills of exchange and commercial paper are classified as available-for-sale financial assets and
are therefore held at fair value. The carrying amount of these assets approximates their fair
value due to the short term to maturity.
The statement of cash flow discloses cash net of outstanding bank overdrafts where applicable.
2.5 Trade and other receivables
Telstra has elected to apply the option available under AASB 1: First-time Adoption of
Australian Equivalents to International Financial Reporting Standards (AASB 1) of adopting AASB
132: Financial Instruments: Disclosure and Presentation (AASB 132) and AASB 139: Financial
Instruments: Recognition and Measurement (AASB 139) from 1 July 2005. Outlined below are the
relevant accounting policies for trade and other receivables applicable for the years ending 30
June 2006 and 30 June 2005.
Trade debtors and other receivables are initially recorded at the fair value of the amounts to be
received and are subsequently measured at amortised cost.
An allowance for doubtful debts is raised based on a review of outstanding amounts at balance date.
Bad debts specifically provided for in previous years are eliminated against the allowance for
doubtful debts. In all other cases, bad debts are written off as an expense directly in the income
statement.
2.6 Inventories
Our finished goods include goods available for sale, and material and spare parts to be used in
constructing and maintaining the telecommunications network. We value inventories at the lower of
cost and net realisable value.
We allocate cost to the majority of inventory items on hand at balance date using the weighted
average cost basis. For the remaining quantities on hand, actual cost is used where the item was
purchased for use in a
particular asset or project, and the first in first out basis is used for materials purchased for
production of directories.
Net realisable value of items expected to be sold is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the estimated costs incurred in
marketing, selling and distribution. It approximates fair value less costs to sell.
Net realisable value of items expected to be consumed, for example used in the construction of
another asset, is the net value expected to be earned through future use.
2.7 Construction contracts
(a) Valuation
We record construction contracts in progress at cost (including any profits recognised) less
progress billings and any provision for foreseeable losses.
Cost includes:
|
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both variable and fixed costs directly related to specific contracts; |
|
|
|
amounts which can be allocated to contract activity in general and which can be allocated to
specific contracts on a reasonable basis; and |
|
|
|
costs expected to be incurred under penalty clauses, warranty provisions and other variances. |
Where a significant loss is estimated to be made on completion, a provision for foreseeable losses
is brought to account and recorded against the gross amount of construction work in progress.
F-11
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.7 Construction contracts (continued)
(b) Recognition of profit
Profit is recognised on an individual project basis using the percentage of completion method. The
percentage of completion is calculated based on estimated costs of completion, refer to note
2.18(d) for further details.
Profits are recognised when:
|
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the stage of contract completion can be reliably determined; |
|
|
|
costs to date can be clearly identified; and |
|
|
|
total contract revenues to be received and costs to complete can be reliably estimated. |
(c) Disclosure
The construction work in progress balance is recorded in current inventories after deducting
progress billings. Where progress billings exceed the balance of construction work in progress,
the net amount is shown as a current liability within trade and other payables.
2.8 Assets classified as held for sale
Non current assets are classified as held for sale if the carrying amount is to be recovered
principally through a sale transaction, rather than through continuing use. We only classify an
asset as held for sale if it is available for immediate sale in its present condition subject to
only usual and customary terms, and its sale is highly probable.
We record held for sale assets at the lower of the carrying amount and fair value less costs to
sell. An impairment loss is recognised for any initial or subsequent write down of the assets to
fair value less costs to sell. We do not depreciate or amortise these assets while they are
classified as held for sale.
2.9 Investments
(a) Controlled entities
Investments in controlled entities are recorded at cost less impairment of the investment value.
Where we hedge the value of our investment in an overseas controlled entity, the hedge is accounted
for in accordance with note 2.26.
(b) Jointly controlled and associated entities
(i) Jointly controlled entities
A jointly controlled entity is a contractual arrangement (in the form of an entity) whereby two or
more parties take on an economic activity which is governed by joint control. Joint control
involves the contractually agreed sharing of control over an entity where two or more parties must
consent to all major decisions. Our interests in jointly controlled entities, including
partnerships, are accounted for using the equity method of accounting in the Telstra Group
financial statements and the cost method in the Telstra Entity financial statements.
Under the equity method of accounting, we adjust the initial recorded amount of the investment for
our share of:
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profits or losses for the year after tax since the date of investment; |
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|
|
reserve movements since the date of investment; |
|
|
|
unrealised profits or losses; |
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|
|
dividends or distributions received; and |
|
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|
deferred profit brought to account. |
Our share of all of these items, apart from dividends or distributions received and reserves, is
recorded in the income statement.
Where the equity accounted amount of our investment in an entity falls below zero, we suspend the
equity method of accounting and record the investment at zero. When this occurs, the equity method
of accounting does not recommence until our share of profits and reserves exceeds the cumulative
prior years share of losses and reserve reductions.
Where we have long term assets that in substance form part of our investment in equity accounted
interests and the equity accounted amount of investment falls below zero, we reduce the value of
the assets in proportion with our cumulative losses.
(ii) Associated entities
Where we hold an interest in the equity of an entity, generally of between 20% and 50%, and are
able to apply significant influence to the decisions of the entity, that entity is an associated
entity. Associated entities are accounted for using the equity method of accounting in the Telstra
Group financial statements and the cost method in the Telstra Entity financial statements.
F-12
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.9 Investments (continued)
(c) Jointly controlled assets
A jointly controlled asset involves the joint control of one or more assets acquired and dedicated
for the purpose of a joint venture. The assets are used to obtain benefits for the venturers.
Where the asset is significant we record our share of the asset. We record expenses based on our
percentage ownership interest of the jointly controlled asset.
(d) Listed securities and investments in other corporations
We have elected to apply the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1
July 2005. Accordingly, we have applied previous AGAAP in the comparative information on financial
instruments within the scope of AASB 132 and AASB 139.
Our investments in listed securities and in other corporations are classified as
available-for-sale financial assets and as such are measured at fair value at each reporting
date.
Net fair values of our investments are calculated on the following bases:
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for listed securities traded in an organised financial market, we use the current quoted market
bid price at balance date; and |
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|
for investments in unlisted entities whose securities are not
traded in an organised financial market, we establish fair value by using valuation techniques,
including reference to discounted cash flows and fair values of recent arms length transactions
involving the same instruments or other instruments that are substantially the same. |
We remeasure the fair value of our investments in listed securities and other corporations at each
reporting date. Any gains or losses are recognised in equity until we dispose of the investment,
or we determine it to be impaired, at which time we transfer all cumulative gains and losses to the
income statement.
2.10 Impairment
(a) Non-financial assets
Our tangible and intangible assets (excluding inventories, assets arising from construction
contracts, deferred tax assets, defined benefit assets and financial assets) are measured using the
cost basis and are written down to recoverable amount where their carrying value exceeds
recoverable amount.
Assets with an indefinite useful life are not subject to amortisation and are tested on an annual
basis for impairment, or where an indication of impairment exists. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable.
The recoverable amount of an asset is the higher of its fair value less costs to sell or its value
in use. Value in use represents the present value of the future amount expected to be recovered
through the cash inflows and outflows arising from the assets continued use and subsequent
disposal. We recognise any decrement in the carrying value as an expense in the income statement
in the reporting period in which the impairment loss occurs.
In determining value in use, we apply management judgement in establishing forecasts of future
operating performance, as well as the selection of growth rates, terminal rates and discount rates.
These judgements are applied based on our understanding of historical information and expectations
of future performance.
The expected net cash flows included in determining recoverable amounts of our assets are
discounted to present values using a market determined, risk adjusted, discount rate. When
determining an appropriate discount rate, we use the weighted average cost of capital (WACC) as an
initial point of reference, adjusted for specific risks associated with each different category of
assets assessed.
For assets that do not generate largely independent cash inflows, the recoverable amount is
determined for the cash generating unit to which that asset belongs. Our cash generating units
(CGUs) are determined according to the lowest level of aggregation for which an active market
exists and the assets involved create largely independent cash inflows.
We apply management judgement to establish our CGUs. We have determined that assets which form
part of our ubiquitous telecommunications network work together to generate net cash flows. No one
item of telecommunications equipment is of any value without the other assets to which it is
connected in order to achieve the delivery of products and services. As a result, we have
determined that the ubiquitous telecommunications network is a single CGU. We have referred to
this CGU as the Telstra Entity CGU in our financial report.
The Telstra Entity CGU excludes the hybrid fibre coaxial (HFC) cable network, which we consider not
to be integrated with the rest of our telecommunications network.
F-13
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.10 Impairment (continued)
(b) Financial assets
The group has elected to apply the option available under AASB 1 of adopting AASB 132 and AASB 139
from 1 July 2005. Outlined below are the relevant accounting policies applicable for the years
ending 30 June 2005 and 30 June 2006.
At each reporting date we assess whether there is objective evidence to suggest that any of our
financial assets are impaired.
For financial assets held at fair value, we consider the financial asset to be impaired when there
has been an extended period in which the fair value of the financial asset has been below the
acquisition cost and the decline in fair value is not expected to be recovered. At this time, all
revaluation losses in relation to the impaired financial asset that have been accumulated within
equity are recognised in the income statement.
For financial assets held at cost or amortised cost, we consider the financial asset to be impaired
when there is a difference between the carrying value and the present value of estimated discounted
future cash flows. Any impairment losses are recognised immediately in the income statement.
Impairment losses recognised in the income statement are not reversed in relation to investment
securities.
2.11 Property, plant and equipment
(a) Acquisition
Items of property, plant and equipment are recorded at cost and depreciated as described in note
2.11(b). The cost of our constructed property, plant and equipment includes:
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the cost of material and direct labour; |
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|
an appropriate proportion of direct and indirect overheads; and |
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where we have an obligation for removal of the asset or restoration of the site, an estimate of
the cost of restoration or removal if that cost can be reliably estimated. |
Where settlement of any part of the cash consideration is deferred, the amounts payable in the
future are discounted to their present value as at the date of acquisition. The unwinding of this
discount is recorded within finance costs.
(b) Depreciation
Items of property, plant and equipment, including buildings and leasehold property, but excluding
freehold land, are depreciated on a straight line basis to the income statement over their
estimated service lives. We start depreciating assets when they are installed and ready for use.
The service lives of our significant items of property, plant and equipment are as follows:
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Telstra Group |
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As at 30 June |
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2006 |
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2005 |
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Service life |
|
Service life |
Property, plant and equipment |
|
(years) |
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(years) |
Buildings building shell |
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55 |
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55 |
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general purpose |
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8 - 40 |
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8 - 40 |
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fitout |
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10 - 20 |
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10 - 20 |
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Communication assets |
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|
Buildings building shell |
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55 |
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|
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55 |
|
network |
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8 - 40 |
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|
8 - 40 |
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fitout |
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10 - 20 |
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10 - 20 |
|
Customer premises equipment |
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3 - 8 |
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|
3 - 8 |
|
Transmission equipment |
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2 - 25 |
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|
3 - 25 |
|
Switching equipment |
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4 - 12 |
|
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|
1 - 10 |
|
Mobile equipment |
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|
2 - 10 |
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|
3 - 10 |
|
Cables |
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5 - 25 |
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8 - 25 |
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Ducts and pipes main cables |
|
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40 |
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40 |
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distribution |
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30 |
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30 |
|
Other communications plant |
|
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1 - 30 |
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3 - 16 |
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|
Other assets |
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Leasehold plant and equipment |
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3 - 15 |
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|
3 - 15 |
|
Other plant, equipment and motor
vehicles |
|
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3 - 15 |
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3 - 15 |
|
The service lives and residual value of our assets are
reviewed each year. We apply management judgment in
determining the service lives of our assets. This
assessment includes a comparison with international
trends for telecommunication companies, and in relation
to communication assets, includes a determination of
when the asset may be superseded technologically or made
obsolete.
F-14
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.11 Property, plant and equipment (continued)
We account for our assets individually where it is practical and feasible and in line with
commercial practice. Where it is not practical and feasible, we account for assets in groups.
Group assets are automatically removed from our financial statements on reaching the group life.
Therefore, any individual asset may be physically retired before or after the group life is
attained. This is the case for certain communication assets as we assess our technologies to be
replaced by a certain date.
As part of our review, service lives of our assets are reassessed. Any reassessment in a
particular year will affect the depreciation expense (either increasing or decreasing) through to
the end of the reassessed useful life for both that current year and future years. The net effect
of the reassessment for fiscal 2006 was an increase in our depreciation expense of $66 million
(2005: $60 million decrease) for both the Telstra Group and Telstra Entity. This reassessment
includes the adjustment arising from our transformation resulting from the strategic review
undertaken, refer to note 7(b) for further information.
Our major repairs and maintenance expenses relate to maintaining our exchange equipment and the
customer access network. We charge the cost of repairs and maintenance, including the cost of
replacing minor items, which are not substantial improvements, to operating expenses.
2.12 Leased plant and equipment
We account for leases in accordance with AASB 117: Leases. We distinguish between finance
leases, which effectively transfer substantially all the risks and benefits incidental to ownership
of the leased asset from the lessor to the lessee, from operating leases under which the lessor
effectively retains all such risks and benefits.
Where we acquire non current assets via a finance lease, the lower of the fair value of the asset
and the present value of future minimum lease payments is capitalised as equipment under finance
lease at the beginning of the lease term. Capitalised lease assets are depreciated on a straight
line basis over the shorter of the lease term or the expected useful life of the assets. A
corresponding liability is also established and each lease payment is allocated between the
liability and finance charges.
Operating lease payments are charged to the income statement on a straight line basis over the term
of the lease.
Where we lease properties, costs of improvements to these properties are capitalised as leasehold
improvements and amortised over the shorter of the useful life of the improvements or the term of
the lease.
2.13 Intangible assets
Intangible assets are assets that have value, but do not have physical substance. In order to
be recognised, an intangible asset must be either separable or arise from contractual or other
legal rights.
(a) Goodwill
On the acquisition of investments in controlled entities, jointly controlled and associated
entities, when we pay an amount greater than the fair value of the net identifiable assets of the
entity, this excess is recognised as goodwill in the Telstra Group balance sheet. We calculate the
amount of goodwill as at the date of purchasing our ownership interest in the entity.
When we purchase an entity that we will control, the amount of goodwill is recorded in intangible
assets. When we acquire a jointly controlled or associated entity, the goodwill amount is included
as part of the cost of the investment.
Goodwill is not amortised but is tested for impairment in accordance with note 2.10 on an annual
basis and when an indication of impairment exists.
(b) Internally generated intangible assets
Research costs are recorded as an expense as incurred. Development costs are capitalised if the
project is technically and commercially feasible and we have sufficient resources to complete the
development.
Software assets
We record direct costs associated with the development of business software for internal use as
software assets if the development costs satisfy the criteria for capitalisation described above.
Costs included in software assets developed for internal use are:
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external direct costs of materials and services consumed; and |
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payroll and direct payroll-related costs for employees (including contractors) directly
associated with the project. |
Software assets developed for internal use have a finite life and are amortised on a straight line
basis over their useful lives to us. Amortisation commences once the software is ready for use.
F-15
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.13 Intangible assets (continued)
(c) Acquired intangible assets
We acquire other intangible assets either as part of a
business combination or through separate acquisition.
Intangible assets acquired in a business combination are
recorded at their fair value at the date of acquisition
and recognised separately from goodwill. On initial
acquisition, we apply management judgement to determine
the appropriate allocation of purchase consideration to
the assets being acquired, including goodwill and
identifiable intangible assets.
Intangible assets that are considered to have a finite
life are amortised on a straight line basis over the
period of expected benefit. Intangible assets that are
considered to have an indefinite life are not amortised
but tested for impairment in accordance with note 2.10 on
an annual basis, or where an indication of impairment
exists.
Our acquired intangible assets include
mastheads, patents, trademarks, licences,
brandnames and customer bases.
(d) Deferred expenditure
Deferred expenditure mainly includes costs incurred for
basic access installations and connections fees for in
place and new services, and direct incremental costs of
establishing a customer contract.
Significant items of expenditure are deferred to the
extent that they are recoverable from future revenue and
will contribute to our future earning capacity. Any costs
in excess of future revenue are recognised immediately in
the income statement.
We amortise deferred expenditure over the average
period in which the related benefits are expected to be
realised.
Handset subsidies are expensed as incurred. On transition
to A-IFRS we elected to expense handset subsidies, which
was a change from the previous policy whereby the cost of
the subsidy was deferred and written off over the average
contract term.
(e) Amortisation
The average amortisation periods of our identifiable
intangible assets are as follows:
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|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
As at 30 June |
|
|
2006 |
|
2005 |
|
|
Expected |
|
Expected |
|
|
benefit |
|
benefit |
Identifiable intangible assets |
|
(years) |
|
(years) |
|
Software assets |
|
|
6 |
|
|
|
6 |
|
Patent and trademarks |
|
|
19 |
|
|
|
19 |
|
Licences |
|
|
12 |
|
|
|
11 |
|
Brandnames |
|
|
19 |
|
|
|
20 |
|
Customer bases |
|
|
11 |
|
|
|
13 |
|
Deferred expenditure |
|
|
4 |
|
|
|
4 |
|
The service lives of our identifiable intangible assets
are reviewed each year. Any reassessment of service
lives in a particular year will affect the amortisation
expense (either increasing or decreasing) through to the
end of the reassessed useful life for both that current
year and future years. The net effect of the
reassessment for fiscal 2006 was an increase in our
amortisation expense of $160 million (2005: $nil) for
the Telstra Group and $145 million (2005: $nil) for the
Telstra Entity. This reassessment includes the
adjustment arising from our transformation resulting
from the strategic review undertaken, refer to note 7(b)
for further information.
In relation to acquired intangible assets, we apply
management judgement to determine the amortisation period
based on the expected useful lives of the respective
assets. In some cases, the useful lives of certain
acquired intangible assets are supported by external
valuation advice on acquisition. In addition, we apply
management judgement to assess annually, the indefinite
useful life assumption applied to certain acquired
intangible assets.
2.14 Trade and other payables
Trade and other payables, including accruals, are
recorded when we are required to make future payments as
a result of a purchase of assets or services.
F-16
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.15 Borrowings
Our borrowings fall into two categories:
(a) Borrowings in a designated hedging relationship
Our offshore borrowings which are designated as hedged
items are subject to either fair value or cash flow
hedges. The method by which they are hedged determines
their accounting treatment.
Borrowings subject to fair value hedges are recognised
initially at fair value. The carrying amount of our
borrowings in fair value hedges (to hedge against changes
in value due to interest rate or currency movements) is
adjusted for fair value movements attributable to the
hedged risk. Fair value is calculated using valuation
techniques which utilise data from observable markets.
Assumptions are based on market conditions existing at
each balance date. The fair value is calculated as the
present value of the estimated future cash flows using an
appropriate market based yield curve which is
independently derived and representative of Telstras
cost of borrowing. These borrowings are remeasured each
reporting period and the gains or losses are recognised
in the income statement along with the associated gains
or losses on the hedging instrument.
Borrowings subject to cash flow hedges (to hedge against
currency movements) are recognised initially at fair
value based on the applicable spot price plus any
transaction costs that are directly attributable to the
issue of the borrowing. These borrowings are
subsequently carried at amortised cost, translated at
the applicable spot exchange rate at reporting date. Any
difference between the final amount paid to discharge
the borrowing and the initial borrowing proceeds is
recognised in the income statement over the borrowing
period using the effective interest method. The
effective interest method is a method of calculating the
amortised cost of a financial liability and of
allocating the interest expense over the relevant
period. The effective interest rate is the rate that
exactly discounts estimated future cash payments through
the expected life of the financial liability, or, where
appropriate, a shorter period.
Currency gains or losses on the borrowings are recognised
in the income statement, along with the associated gains
or losses on the hedging instrument, which have been
transferred from the cash flow hedging reserve to the
income statement.
(b) Borrowings not in a designated hedging relationship
Borrowings not in a designated hedging relationship
include commercial paper borrowings, Telstra Bonds,
loans from associates, unsecured promissory notes and
other borrowings.
All such instruments are initially recognised at fair
value plus any transaction costs that are directly
attributable to the issue of the instrument and are
subsequently measured at amortised cost. Any difference
between the final amount paid to discharge the borrowing
and the initial borrowing proceeds (including transaction
costs) is recognised in the income statement over the
borrowing period using the effective interest method.
Borrowings are included as non current liabilities except
for those with maturities less than twelve months from
the balance sheet date, which are classified as current
liabilities.
2.16 Provisions
Provisions are recognised when the group has:
|
|
a present legal or constructive obligation to make a future sacrifice of economic benefits as a result of past transactions
or events; |
|
|
it is probable that a future sacrifice of economic benefits will arise; and |
|
|
a reliable estimate can be made of the amount of the obligation. |
The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at reporting date, taking into
account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash
flows estimated to settle the present obligation, its
carrying amount is the present value of those cash
flows.
(a) Employee benefits
We accrue liabilities for employee benefits to wages and
salaries, annual leave and other current employee
benefits at their nominal amounts. These are calculated
based on remuneration rates expected to be current at the
date of settlement and include related on costs.
Certain employees who have been employed by Telstra for
at least ten years are entitled to long service leave of
three months (or more depending on the actual length of
employment), which is included in our employee benefits
provision.
We accrue liabilities for other employee benefits not
expected to be paid or settled within 12 months of
balance date, including long service leave, at the
present values of future amounts expected to be paid.
This is based on projected increases in wage and salary
rates over an average of 10 years, experience of
employee departures and periods of service.
F-17
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.16 Provisions (continued)
We calculate present values using rates based
on government guaranteed securities with similar
due dates to our liabilities.
We apply management judgment in estimating the following
key assumptions used in the calculation of our long
service leave provision at reporting date:
|
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weighted average projected increases in salaries; |
|
|
weighted average discount rate; and |
Refer to note 19 for further details on the key
management judgements used in the calculation of our long
service leave provision.
(b) Workers compensation
We self insure our workers compensation liabilities. We
take up a provision for the present value of these
estimated liabilities, based on an actuarial review of
the liability. This review includes assessing actual
accidents and estimating claims incurred but not
reported. Present values are calculated using appropriate
rates based on the risks specific to the liability with
similar due dates.
Certain controlled entities do not self insure, but
pay annual premiums to third party insurance
companies for their workers compensation
liabilities.
(c) Restoration costs
We provide for costs of restoration or removal in
relation to our fixed assets when we have a legal or
constructive obligation. These costs include our
obligations relating to the dismantling, removal,
remediation, restoration and other expenditure
associated with our fixed assets or site fitouts.
Restoration provisions are initially recorded when a
reliable estimate of the costs to be incurred can be
determined, discounted to present value. Our estimates
are based upon a review of lease contracts, legal
requirements, historical information and expected future
costs. Any changes to these estimates are adjusted on a
progressive basis as required.
Where restoration costs are incurred due to the
acquisition, construction or development of a non current
asset, the provision is raised and recorded at that time
as part of the cost of the asset where the cost is
reliably measurable.
(d) Redundancy and restructuring costs
We recognise a provision for redundancy costs when a
detailed formal plan for the redundancies has been
developed and a valid expectation has been created that
the redundancies will be carried out with those employees
likely to be affected.
We recognise a provision for restructuring when a
detailed formal plan has been approved and we have
raised a valid expectation in those affected by the
restructuring that the restructuring will be carried
out.
2.17 Share capital
Issued and paid up capital is recognised at the
fair value of the consideration received by the
Company.
Any transaction costs arising on the issue of ordinary
shares are recognised directly in equity, net of tax,
as a reduction of the share proceeds received.
Where we undertake a share buy-back, contributed equity
is reduced in accordance with the structure of the
buy-back arrangement. Costs associated with the buy-back,
net of tax, are also deducted from contributed equity. We
also record the purchase of Telstra Entity shares by our
employee share plan trusts as a reduction in share
capital.
Share based remuneration associated with our employee
share plans is recognised as additional share capital.
Non-recourse loans provided to employees to participate
in these employee share plans are recorded as a reduction
in share capital.
Refer to note 2.25 for further details regarding our
accounting for employee share plans.
2.18 Revenue recognition
The underlying accounting principles of revenue
recognition are generally the same for both A-IFRS and
the United States Generally Accepted Accounting
Principles (USGAAP). As such we have applied the more
detailed guidance under USGAAP to the timing of revenue
recognition for both A-IFRS and USGAAP financial
statements where there is no conflict between the two.
Sales revenue
Our categories of sales revenue are recorded after
deducting sales returns, trade allowances, duties and
taxes.
(a) Rendering of services
Revenue from the provision of our telecommunications
services includes telephone calls and other services
and facilities provided, such as internet and data.
F-18
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.18 Revenue (continued)
We record revenue earned from:
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telephone calls on completion of the call; and |
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other services generally at completion, or on a straight
line basis over the period of service provided, unless
another method better represents the stage of
completion. |
Installation and connection fee revenues are deferred and
recognised over the average estimated customer life.
Incremental costs directly related to these revenues are
also deferred and amortised over the customer contract
life. Also refer to note 2.13(d).
In relation to basic access installation and connection
revenue, we apply our management judgement to determine
the estimated customer contract life. Based on our
reviews of historical information and customer trends, we
have determined that our average estimated customer life
is 5 years (2005: 5 years). As a result, basic access
installation and connection revenue is recognised over
this period.
(b) Sale of goods
Our revenue from the sale of goods includes revenue from
the sale of customer equipment and similar goods. This
revenue is recorded on delivery of the goods sold.
Generally we record the full gross amount of sales
proceeds as revenue, however if we are acting as an agent
under a sales arrangement, we record the revenue on a net
basis, being the gross amount billed less the amount paid
to the supplier. We review the facts and circumstances of
each sales arrangement to determine if we are an agent or
principal under the sale arrangement.
(c) Rent of network facilities
We earn rent mainly from access to retail and wholesale
fixed and mobile networks and from the rent of dedicated
lines, customer equipment, property, plant and equipment
and other facilities. The revenue of providing access to
the network is recorded on an accrual basis over the
rental period.
(d) Construction contracts
We record construction revenue on a percentage of
contract completion basis. The percentage of
completion of contracts is calculated based on
estimated costs to complete the contract.
Our construction contracts are classified according to
their type. There are three types of construction
contracts, these being material intensive, labour
intensive and short duration. Revenue is recognised on a
percentage of completion basis using the appropriate
measures as follows:
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(actual costs / planned costs) x planned revenue for material intensive projects; |
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(actual labour hours / planned labour hours) x planned revenue for labour intensive projects; and |
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short duration projects are those that are expected to be completed within a month and revenues and costs are recognised
on completion. |
(e) Advertising and directory services
Classified advertisements and display advertisements are
published on a daily, weekly and monthly basis for which
revenues are recognised at the time the advertisement is
published.
All of our Yellow Pages and White Pages directory
revenues are recognised on delivery of the published
directories using the delivery method. We consider our
directories delivered when they have been published and
delivered to customers premises. Revenue from online
directories is recognised over the life of service
agreements, which is on average one year. Voice directory
revenues are recognised at the time of providing the
service to customers.
(f) Royalties
Royalty revenue is recognised on an accrual basis in
accordance with the substance of the relevant agreements.
(g) Interest revenue
We record interest revenue on an accruals basis. For
financial assets, interest revenue is determined by the
effective yield on the instrument (total return).
Revenue arrangements with multiple deliverables
Where two or more revenue-generating activities or
deliverables are sold under a single arrangement, each
deliverable that is considered to be a separate unit of
accounting is accounted for separately. When the
deliverables in a multiple deliverable arrangement are
not considered to be separate units of accounting, the
arrangement is accounted for as a single unit.
F-19
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.18 Revenue (continued)
We allocate the consideration from the revenue
arrangement to its separate units based on the relative
fair values of each unit. If the fair value of the
delivered item is not available, then revenue is
allocated based on the difference between the total
arrangement consideration and the fair value of the
undelivered item. The revenue allocated to each unit is
then recognised in accordance with our revenue
recognition policies previously described above.
2.19 Advertising expenses
Costs for advertising products and services or
promoting our corporate image are expensed as incurred.
These costs are included in promotion and advertising
expenses within our other expenses category.
2.20 Borrowing costs
Borrowing costs are recognised as an expense
in our income statement when incurred.
2.21 Taxation
(a) Income taxes
Our income tax expense represents the sum of current tax
and deferred tax. Current tax is calculated on
accounting profit after allowing for non-taxable and
non-deductible items based on the amount expected to be
paid to taxation authorities on taxable profit for the
period. Deferred tax is calculated at the tax rates that
are expected to apply to the period when our asset is
realised or the liability is settled. Both our current
tax and deferred tax are calculated using tax rates that
have been enacted or substantively enacted at reporting
date.
We apply the balance sheet liability method for
calculating our deferred tax. Deferred tax is the
expected tax payable or recoverable on all taxable and
deductible temporary differences determined through
reference to the tax bases of assets and liabilities and
their carrying amount for financial reporting purposes as
at the reporting date.
We generally recognise deferred tax liabilities for
all taxable temporary differences, except to the
extent that the deferred tax liability arises from:
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the initial recognition of goodwill; or |
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the initial recognition of an asset or liability in a transaction that
is not a business combination and affects neither our accounting
profit or taxable income at the time of the transaction. |
In respect of our investments in subsidiaries, associates
and jointly controlled entities, we recognise deferred
tax liabilities for all taxable temporary differences,
except where we are able to control the timing of our
temporary difference reversal and it is probable that the
temporary difference will not reverse in the foreseeable
future.
Subject to the exceptions described above, we generally
recognise deferred tax assets for all deductible
temporary differences and for the carry forward of unused
tax losses and tax credits. These tax assets are
recognised to the extent that it is probable that taxable
profit will be available against which the deductible
temporary differences, and the carry forward of unused
tax losses and tax credits can be utilised.
In respect of our investments in subsidiaries, associates
and jointly controlled entities, we recognise deferred
tax assets for all deductible temporary differences
provided it is probable that our temporary differences
will reverse in the future and taxable profit will be
available against which our temporary differences can be
utilised.
The carrying amount of our deferred tax assets is
reviewed at each reporting date. We reduce the carrying
amount to the extent that it is no longer probable that
sufficient taxable profit will be available to allow the
benefit of part or the entire deferred tax asset to be
utilised. At each reporting date, we subsequently
reassess our unrecognised deferred tax assets to
determine whether it has become probable that future
taxable profit will allow this deferred tax asset to be
recovered.
Our current and deferred tax is recognised as an expense
or revenue in the income statement, except when it
relates to items directly debited or credited to equity,
in which case our current and deferred tax is also
recognised directly in equity.
The Telstra Entity and its Australian resident wholly
owned entities elected to form a tax consolidated group
from 1 July 2002. The Telstra Entity, as the head entity
in the tax consolidated group, recognises in addition to
its transactions, the current tax liabilities and the
deferred tax assets arising from unused tax losses and
tax credits for all entities in the group. The Telstra
Entity and the entities in the tax consolidated group
account for their own current tax expense and deferred
tax amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a
separate taxpayer within the group.
F-20
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.21 Taxation (continued)
Under our tax funding arrangements, amounts
receivable recognised by the Telstra Entity for the
current tax payable assumed of our wholly owned entities
are booked as a current receivable. Amounts payable
recognised by the Telstra Entity for the current tax
receivable of our wholly owned entities are booked as a
current payable. Amounts relating to unused tax losses
and tax credits of the wholly owned entities and assumed
by the Telstra Entity are recorded as dividend revenue.
During fiscal 2005, no tax funding arrangement was in
place and as a result, these funding amounts were
recorded as equity contributions to or distributions from
our controlled entities.
We offset deferred tax assets and deferred tax
liabilities in the balance sheet where they relate to
income taxes levied by the same taxation authority and to
the extent that we intend to settle our current tax
assets and liabilities on a net basis. Our deferred tax
assets and deferred tax liabilities are netted within the
tax consolidation group, as these deferred tax balances
relate to the same taxation authority. We do not net
deferred tax balances between controlled entities, apart
from those within the tax consolidation group.
(b) Goods and Services Tax (GST) (including other value added taxes)
We record our revenue, expenses and assets net of any
applicable goods and services tax (GST), except where
the amount of GST incurred is not recoverable from the
Australian Taxation Office (ATO). In these circumstances
the GST is recognised as part of the cost of acquisition
of the asset or as part of the expense item.
Receivables and payables balances include GST where we
have either included GST in our price charged to
customers or a supplier has included GST in their price
charged to us. The net amount of GST due, but not paid,
to the ATO is included under payables.
2.22 Earnings per share
(a) Basic earnings per share
Basic earnings per share (EPS) is determined by dividing
profit for the year after income tax attributable to
members of the company, excluding any costs of servicing
equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the
period.
(b) Diluted earnings per share
Diluted earnings per share is calculated by dividing the
profit attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding
during the period (adjusted for the effects of the
instruments in the Telstra Growthshare Trust and the
Telstra Employee Share Ownership Plans).
2.23 Insurance
We specifically carry the following types of insurance:
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travel/personal accident; |
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directors and officers liability; |
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company reimbursement; and |
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other insurance from time to time. |
For risks not covered by insurance, any losses are
charged to the income statement in the year in which
the loss is reported.
The Telstra Entity and certain controlled entities are
self insured for workers compensation.
2.24 Post-employment benefits
(a) Defined contribution plans
Our commitment to defined contribution plans is limited
to making contributions in accordance with our minimum
statutory requirements. We do not have any legal or
constructive obligation to pay further contributions if
the fund does not hold sufficient assets to pay all
employee benefits relating to current and past employee
services.
Contributions to defined contribution plans are recorded
as an expense in the income statement as the
contributions become payable. We recognise a liability
when we are required to make future payments as a result
of employee services provided.
(b) Defined benefit plans
We currently sponsor a number of post-employment benefit
plans. As these plans have elements of both defined
contribution and defined benefit, these hybrid plans are
treated as defined benefit plans in accordance with AASB
119: Employee Benefits. We recognise an
asset/(liability) for the net surplus/(deficit) recorded
in each of our post-employment defined benefit plans.
At reporting date, where the fair value of the plan
assets exceeds the present value of the defined benefit
obligations, the net surplus is recognised as an asset.
We recognise the asset as we have the ability to control
this surplus to generate future funds that are available
to us in the form of reductions in future contributions
or as a cash refund.
At reporting date, where the fair value of the plan
assets is less than the present value of the defined
benefit obligations, the net deficit would be recognised
as a liability.
F-21
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.24 Post-employment benefits (continued)
We use fair value to determine the value of the plan
assets at reporting date. Fair value is calculated by
reference to the net market values of the plan assets.
Defined benefit obligations are based on the expected
future payments required to settle the obligations
arising from our current and past employee services.
This obligation is influenced by many factors, including
final salaries and employee turnover. We employ
qualified actuaries to calculate the present value of
the defined benefit obligations. These obligations are
measured net of tax.
The actuaries use the projected unit credit method to
determine the present value of the defined benefit
obligations of each plan. This method determines each
year of service as giving rise to an additional unit of
benefit entitlement. Each unit is measured separately to
calculate the final obligation. The present value is
determined by discounting the estimated future cash
outflows using rates based on government guaranteed
securities with similar due dates to these expected cash
flows.
We recognise all our defined benefit costs in the income
statement with the exception of actuarial gains and
losses that are recognised directly in retained profits.
Components of defined benefit costs include current and
past service cost, interest cost and expected return on
assets. Current and past service cost represents the
increase in the present value of the defined benefit
obligation resulting from our employees service in the
current and prior periods respectively. Interest cost
represents the increase in the present value of the
defined benefit obligation resulting from the employee
benefits being one period closer to settlement. Expected
return on assets represents movement in market value
interest, dividends and other revenue items that is
expected to be derived from plan assets.
Actuarial gains and losses are based on an actuarial
valuation of each defined benefit plan at reporting date.
Actuarial gains and losses represent the differences
between previous actuarial assumptions of future outcomes
and the actual outcome, in addition to the effect of
changes in actuarial assumptions.
The actuaries apply judgment in estimating the
following key assumptions used in the calculation of
our defined benefit assets at reporting date:
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salary inflation rate; and |
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expected return on plan assets. |
The estimates applied in our calculation have a
significant impact on the reported amount of our defined
benefit plan assets of $1,029 million (2005: $247
million). If the estimates prove to be incorrect, the
carrying value of our defined benefit assets may be
materially impacted in the next reporting period.
Additional volatility may also potentially be recorded in
retained profits to reflect differences between actuarial
assumptions of future outcomes applied at the current
reporting date and the actual outcome in the next annual
reporting period.
Refer to note 28 for details on the key estimates used in
the calculation of our defined benefit assets.
2.25 Employee share plans
We own 100% of the equity of Telstra ESOP Trustee
Pty Ltd, the corporate trustee for the Telstra Employee
Share Ownership Plan Trust (TESOP97) and Telstra
Employee Share Ownership Plan Trust II (TESOP99). We
consolidate the results, position and cash flows of
TESOP97 and TESOP99.
The Telstra Growthshare Trust (Growthshare) was
established to allocate equity based instruments as
required. Current equity based instruments include
options, restricted shares, performance rights, deferred
shares, incentive shares, directshares and ownshares.
Options, performance rights, and restricted shares are
subject to performance hurdles. Deferred shares and
incentive shares are subject to a specified period of
service.
We own 100% of the equity of Telstra Growthshare Pty
Ltd, the corporate trustee for Growthshare. We also
include the results, position and cash flows of
Growthshare.
We recognise an expense for all share-based remuneration
determined with reference to the fair value at grant date
of the equity instruments issued. The fair value of our
equity instruments is calculated using a valuation
technique consistent with the Black Scholes methodology
which utilises Monte Carlo simulations, to estimate the
price of those equity instruments in an arms length
transaction between knowledgeable, willing parties. The
fair value is charged against profit over the relevant
vesting periods, adjusted to reflect actual and expected
levels of vesting.
Under the transitional exemptions of AASB 1, we have
elected not to apply the requirements of AASB 2:
Share-Based Payment (AASB 2) to equity instruments
granted prior to 7 November 2002.
Directshare enables non-executive directors to acquire a
minimum of 20% of their fees in Telstra shares. Ownshare
enables eligible employees to be provided part of their
remuneration in Telstra shares. Telstra purchases shares
on market to meet the requirements of directshare and
ownshare and expenses these costs as part of the
participants remuneration.
F-22
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.26 Derivative financial instruments
We use derivative financial instruments such as
forward exchange contracts, cross currency swaps and
interest rate swaps to hedge risks associated with
foreign currency and interest rate fluctuations.
The use of hedging instruments is governed by the
guidelines set by our Board of Directors.
(a) From 1 July 2004 to 30 June 2005
We have elected to apply the exemption available under
AASB 1 to apply AASB 132 and AASB 139 from 1 July 2005.
Accordingly, we have applied previous AGAAP in the
comparative information on financial instruments within
the scope of AASB 132 and AASB 139. For further
information on previous AGAAP refer to the annual report
for the year ended 30 June 2005.
(b) Adjustments on transition date: 1 July 2005
Under AASB 132/139, our accounting policy has changed to
recognise our financial instruments in the balance sheet
and to record all derivatives at fair value. At the date
of transition, changes in the carrying amounts of
derivatives are taken to retained profits or reserves,
depending on the hedge type. For further information
concerning the adjustments on transition date reference
should be made to note 36.
(c) From 1 July 2005
Derivatives are initially recognised at fair value on the
date a derivative contract is entered into and are
subsequently remeasured to fair value. The method of
recognising the resulting remeasurement gain or loss
depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item
being hedged. Where we hold derivative financial
instruments that are not designated as hedges, they are
categorised as held for trading financial instruments.
All of our derivative financial instruments are stated at
fair value.
The carrying value of our cross currency and interest
rate swaps refers to the fair value of our receivable or
payable under the swap contract, recorded as a hedge
receivable or hedge payable in our balance sheet. We do
not offset the hedge receivable or hedge payable with the
underlying financial asset or financial liability being
hedged, as the transactions are generally with different
counterparties and are not generally settled on a net
basis.
Where we have a legally recognised right to set off the
financial asset and the financial liability, and we
intend to settle on a net basis or simultaneously, we
record this position on a net basis in our balance sheet.
Where we enter into master netting arrangements relating
to a number of financial instruments, have a legal right
of set off, and intend to do so, we also include this
position on a net basis in our balance sheet.
Our derivative instruments that are held to hedge
exposures can be classified into three different types,
depending on the reason we are holding them fair value
hedges, cash flow hedges and hedges of net investment in
foreign operations.
Hedge accounting can only be utilised where
effectiveness tests are met on both a prospective and
retrospective basis. Ineffectiveness may result in
significant volatility in the income statement.
In order for a derivative instrument to qualify for hedge
accounting it must be formally designated and documented
as a hedge of a particular item or transaction, it must
be expected to be highly effective in offsetting changes
in cash flows or fair value of the hedged item, and for
cash flow hedges of forecast transactions, the forecast
transaction must be highly probable.
We document at the inception of a transaction the
relationship between hedging instruments and hedged
items, as well as our risk management objective and
strategy for undertaking various hedge transactions. We
also document our assessment, both at hedge inception and
on an ongoing basis, of whether the hedging instruments
that are used in hedging transactions have been, and will
continue to be, highly effective in offsetting changes in
fair values or cash flows of hedged items.
(i) Fair value hedges
We use fair value hedges to mitigate the risk of
changes in the fair value of our foreign currency
borrowings from foreign currency and interest rate
fluctuations over the hedging period.
Where a fair value hedge qualifies for hedge accounting,
gains or losses from remeasuring the fair value of the
hedge instrument are recognised in the income statement,
together with gains and losses in relation to the hedged
item where those gains or losses relate to the risks
intended to be hedged. This will increase volatility of
reported profits due to the inclusion of some
ineffectiveness arising from the application of hedge
accounting.
F-23
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.26 Derivative financial instruments (continued)
(ii) Cash flow hedges
We use cash flow hedges to mitigate the risk of
variability of future cash flows attributable to foreign
currency fluctuations over the hedging period. Cash flow
hedges are used for our foreign currency borrowings, and
our ongoing business activities, predominantly where we
have highly probable purchase or settlement commitments
in foreign currencies.
Where a cash flow hedge qualifies for hedge accounting,
the effective portion of gains or losses on remeasuring
the fair value of the hedge instrument are recognised
directly in equity in the cash flow hedging reserve until
such time as the hedged item affects profit or loss, then
the gains or losses are transferred to the income
statement. However, in our hedges of forecast
transactions, when the forecast transaction that is
hedged results in the recognition of a non-financial
asset (for example, inventory or fixed asset), the gains
and losses previously deferred in equity are transferred
from equity and included in the measurement of the
initial cost or carrying amount of the asset. Gains or
losses on any portion of the hedge determined to be
ineffective are recognised immediately in the income
statement. The application of hedge accounting will
create some volatility in equity reserve balances.
When a hedging instrument expires or is sold or
terminated, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is
recognised when the hedged item is ultimately recognised
in the income statement.
If a forecast hedged transaction is no longer expected
to occur, the cumulative gains or losses on the hedging
instrument that were reported in equity are transferred
immediately to the income statement.
(iii) Hedges of a net investment in a foreign operation
Our investments in foreign operations are exposed to
foreign currency risk, which arises when we translate the
net assets of our foreign investments from their
functional currency to Australian dollars. We hedge our
net investments to mitigate exposure to this risk by
using forward foreign currency contracts, cross currency
swaps and/or commercial paper in the relevant currency of
the investment.
Gains and losses on remeasurement of our derivative
instruments designated as hedges of foreign investments
are recognised in the foreign currency translation
reserve in equity to the extent they are considered to
be effective.
The cumulative amount of the recognised gains or losses
included in equity are transferred to the income
statement when the foreign operation is sold.
For all of our hedging instruments (fair value, cash
flow or net investment), any gains or losses on
remeasuring to fair value any portion of the
instrument not considered to be effective are
recognised directly in the income statement in the
period in which they occur.
(iv) Derivatives that are not in a designated hedging relationship
For any held for trading derivative instruments, i.e.
those which are not in a designated hedging
relationship, any gains or losses on remeasuring the
instruments to fair value are recognised directly in the
income statement in the period in which they occur.
(v) Embedded derivatives
Derivatives embedded in other financial instruments or
other host contracts are treated as separate derivatives
when their risks and characteristics are not closely
related to those of the host contracts and the host
contracts are not measured at fair value through profit
or loss.
F-24
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2. Summary of accounting policies (continued)
2.27 Fair value estimation
The fair value of our derivatives and some
financial assets and financial liabilities must be
estimated for recognition and measurement or for
disclosure purposes.
Valuation techniques include where applicable, reference
to prices quoted in active markets, discounted cash flow
analysis, fair value of recent arms length transactions
involving the same instruments or other instruments that
are substantially the same, and option pricing models.
We calculate the fair value of our forward exchange
contracts by reference to forward exchange market rates
for contracts with similar maturity profiles at the time
of valuation.
The net fair values of our cross currency and interest
rate swaps and other financial assets and financial
liabilities that are measured at fair value (apart from
our listed investments) are determined using valuation
techniques which utilise data from observable markets.
Assumptions are based on market conditions existing at
each balance date. The fair value is calculated as the
present value of the estimated future cash flows using an
appropriate market based yield curve, which is
independently derived and representative of Telstras
cost of borrowing. The net fair values of our listed
investments are determined by reference to prices quoted
on the relevant stock exchanges where the securities are
traded.
Unless there is evidence to suggest otherwise, the
nominal value of financial assets and financial
liabilities less any adjustments for impairment with a
short term to maturity are considered to approximate
net fair value.
2.28 Financial assets
From 1 July 2004 to 30 June 2005
We have elected to apply the exemption available under
AASB 1 to apply AASB 132 and AASB 139 from 1 July 2005.
Accordingly, we have applied previous AGAAP in the
comparative information on financial instruments within
the scope of AASB 132 and AASB 139. For further
information on previous AGAAP refer to the annual report
for the year ended 30 June 2005.
(a) Adjustments on transition date: 1 July 2005
The nature of the main adjustments to ensure this
information complies with AASB 132 and AASB 139 are that,
with the exception of held-to-maturity investments and
loans and receivables which are measured at amortised
cost (refer below), fair value is the measurement basis.
Fair value is inclusive of transaction costs. At the date
of transition, adjustments to carrying amounts are taken
to retained profits or reserves. With the exception of
those financial assets which are designated in hedge
relationships (refer to note 2.26), at the date of
transition to AASB 132 and AASB 139 there were no
significant adjustments to carrying amounts. For further
information concerning the adjustments on transition
date, reference should be made to note 36.
(b) From 1 July 2005
We classify our financial assets in the following
categories. These are financial assets at fair value
through profit or loss, loans and receivables,
held-to-maturity investments, and available-for-sale
financial assets. The classification depends on the
purpose for which the investments were acquired. We
determine the classification at initial recognition and
re-evaluate this designation at each reporting date.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets
held for trading, and those designated at fair value
through profit or loss. Derivatives are categorised as
held for trading unless they are designated as hedges.
Assets in this category are classified as current assets
if they are either held for trading or are expected to be
realised within twelve months of the balance date.
(ii) Loans and receivables
Loans and receivables are non derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They arise when we provide money,
goods or services directly to a debtor with no intention
of selling the receivable. They are included in current
assets, except for those with maturities greater than
twelve months after the balance sheet date, which are
classified as non current assets. Loans and receivables
are included in receivables in the balance sheet.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative
financial assets with fixed or determinable payments and
fixed maturities where we have the positive intention
and ability to hold to maturity.
F-25
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
2.Summary of accounting policies (continued)
2.28 Financial assets (continued)
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising
principally marketable equity securities, are
non-derivatives that are either designated in this
category or not classified in any of the other
categories. They are included in non current assets
unless management intends to dispose of the investment
within twelve months of the balance sheet date.
Available-for-sale financial assets and financial assets
at fair value through profit and loss are subsequently
carried at fair value. Loans and receivables and
held-to-maturity investments are subsequently carried at
amortised cost using the effective interest method less
impairment. The effective interest method is a method of
calculating the amortised cost of a financial asset and
of allocating the interest expense over the relevant
period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through
the expected life of the financial asset, or, where
appropriate, a shorter period.
In the event that we have financial assets at fair value
through the profit or loss realised and unrealised gains
and losses arising from changes in the fair value are
included in the income statement in the period in which
they arise. Unrealised gains and losses arising from
changes in the fair value of financial assets classified
as available-for-sale are recognised in equity in the
available-for-sale investments reserve. When financial
assets classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments,
previously recognised in equity, are included in the
income statement.
Purchases and sales of financial assets are recognised
on settlement date the date on which we receive or
deliver an asset. Financial assets are initially
recognised at fair value plus, in the case of a
financial asset not at fair value through profit and
loss, transaction costs. Financial assets are
derecognised when the rights to receive cash flows from
the financial assets have expired or have been
transferred and we have transferred substantially all
the risks and rewards of ownership.
2.29 Financial instrument transaction costs
We have elected to apply the exemption available
under AASB 1 to apply AASB 132 and AASB 139 from 1 July
2005. Accordingly, we have applied previous AGAAP in the
comparative information on financial instruments within
the scope of AASB 132 and AASB 139. Under previous AGAAP,
transaction costs were excluded from the carrying value
of our financial assets and financial liabilities
disclosed in the financial report. Under A-IFRS such
costs are included in the carrying amounts. At the date
of transition to AASB 132 and AASB 139 the adjustment to
carrying amounts was immaterial.
F-26
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
3. Earnings per share
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
¢ |
|
|
¢ |
|
|
Basic earnings per share |
|
|
25.7 |
|
|
|
34.7 |
|
|
|
|
Diluted earnings per share |
|
|
25.7 |
|
|
|
34.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$m |
|
|
$m |
|
Earnings used in the calculation of basic and diluted earnings per share |
|
|
|
|
|
|
|
|
Profit for the year |
|
|
3,181 |
|
|
|
4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares |
|
|
|
(millions) |
|
Weighted average number of ordinary shares (a) |
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares used in the calculation of basic earnings per share (b) |
|
|
12,366 |
|
|
|
12,430 |
|
Effect of dilutive employee share instruments (c) |
|
|
35 |
|
|
|
37 |
|
|
|
|
Weighted average number of ordinary shares used in the calculation of diluted earnings per share |
|
|
12,401 |
|
|
|
12,467 |
|
|
|
|
(a) In order to underpin the equity instruments issued
under the Growthshare plan, Growthshare purchase shares
on market. These shares are not considered to be
outstanding for the purposes of computing basic and
diluted earnings per share.
(b) During fiscal 2005, we completed an off-market share
buy-back of 185,284,669 ordinary shares as part of our
capital management program. The ordinary shares were
bought back at $4.05 per share, comprising a fully
franked dividend component of $2.55 per share and a
capital component of $1.50 per share. The Commonwealth of
Australia did not participate in the share buy-back.
Refer to note 21 for full details on our movement in
issued ordinary shares, including further discussion on
our prior year share buy-back.
(c) In fiscal 2006 and fiscal 2005, the following equity
instruments are considered dilutive to earnings per
share:
|
|
deferred share instruments issued under Telstra Growthshare Trust (Growthshare); |
|
|
incentive shares granted under the Growthshare short term incentive scheme; and |
|
|
share options issued under Telstra Employee Share Ownership Plan I (TESOP97). |
In fiscal 2006 and fiscal 2005, the following equity
instruments are not considered dilutive to earnings per
share:
|
|
performance rights, restricted shares and options issued under Growthshare; and |
|
|
share options issued under Telstra Employee Share Ownership Plan II (TESOP99). |
Refer to note 31 for details regarding equity instruments
issued under the Growthshare and TESOP share plans.
F-27
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
4. Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous year final dividend paid |
|
|
1,739 |
|
|
|
1,639 |
|
|
|
1,739 |
|
|
|
1,639 |
|
Previous year special dividend paid with the final dividend |
|
|
746 |
|
|
|
|
|
|
|
746 |
|
|
|
|
|
Interim dividend paid |
|
|
1,739 |
|
|
|
1,739 |
|
|
|
1,739 |
|
|
|
1,739 |
|
Special dividend paid with the interim dividend |
|
|
746 |
|
|
|
746 |
|
|
|
746 |
|
|
|
746 |
|
|
|
|
|
|
Total dividends paid |
|
|
4,970 |
|
|
|
4,124 |
|
|
|
4,970 |
|
|
|
4,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per ordinary share paid |
|
|
¢ |
|
|
|
¢ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous year final dividend paid |
|
|
14.0 |
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
Previous year special dividend paid with the final dividend |
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim dividend paid |
|
|
14.0 |
|
|
|
14.0 |
|
|
|
|
|
|
|
|
|
Special dividend paid with the interim dividend |
|
|
6.0 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends paid |
|
|
40.0 |
|
|
|
33.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our dividends paid are fully franked at a tax rate of 30%
Dividends per ordinary share declared
Our dividends declared per share in respect of fiscal
year as disclosed on the face of our income statement is
detailed below:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
¢ |
|
|
¢ |
|
|
Dividends declared per ordinary share |
|
|
|
|
|
|
|
|
Interim dividend |
|
|
14.0 |
|
|
|
14.0 |
|
Special dividend paid with the interim dividend |
|
|
6.0 |
|
|
|
6.0 |
|
Final dividend (a) |
|
|
14.0 |
|
|
|
14.0 |
|
Special dividend paid with the final dividend |
|
|
|
|
|
|
6.0 |
|
|
|
|
Total |
|
|
34.0 |
|
|
|
40.0 |
|
|
|
|
(a) As our final dividend for fiscal 2006 was not
declared, determined or publicly recommended by the
Board as at 30 June 2006, no provision for dividend was
raised prior to, or as at, that date in the balance
sheet. Our final dividend has been reported as an event
subsequent to balance date and the provision for
dividend has been raised at the declaration date. Refer
to note 34 for further details.
F-28
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
4. Dividends (continued)
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
The combined amount of exempting and franking credits available to us for the
next fiscal year are: |
|
|
|
|
|
|
|
|
Combined exempting and franking account balance (a) |
|
|
6 |
|
|
|
285 |
|
Franking credits that will arise from the payment
of income tax payable as at 30 June (b) |
|
|
400 |
|
|
|
519 |
|
Franking credits and exempting credits that we may be
prevented from distributing in the next fiscal year |
|
|
(24 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
382 |
|
|
|
780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Franking debits that will arise on the payment of dividends declared after 30
June (c) |
|
|
|
|
|
|
|
|
Final dividend |
|
|
745 |
|
|
|
745 |
|
Special dividend paid with the final dividend |
|
|
|
|
|
|
320 |
|
|
|
|
|
|
|
745 |
|
|
|
1,065 |
|
|
|
|
(a) Previously, the Telstra Entity and its Australian
resident wholly owned entities elected to form a tax
consolidated group. As part of the election to enter tax
consolidation, the tax consolidated group is treated as a
single entity for income tax purposes. On entry into tax
consolidation, the franking credits held in the franking
accounts and exempting accounts of the subsidiary members
was transferred to the Telstra Entity. As a result, one
franking account and one exempting account is maintained
by the Telstra Entity for the tax consolidated group.
As at 30 June 2006, the Telstra Entity had a combined
exempting and franking account balance of $6 million
(2005: $285 million). This total combines the deficit in
our franking account of $18 million (2005: surplus of
$261 million) and a surplus of $24 million (2005: $24
million) in our exempting account.
The franking account balance represents the amount of tax
paid by the entity that is available for distribution to
shareholders. As at 30 June 2006, our franking account
balance was in deficit. As a result, we are required to
pay franking deficit tax of $18 million in July 2006,
which will eliminate the deficit in the franking account
balance and be fully offset against our fiscal 2006
income tax assessment. In relation to our exempting
account, there are statutory restrictions placed on the
distribution of credits from this account.
Additional franking credits will arise when the Telstra
Entity pays tax instalments during fiscal 2007, relating
to the fiscal 2006 and 2007 income tax years. Franking
credits will be used when the Telstra Entity pays its
2006 final ordinary dividend during fiscal 2007.
(b) Franking credits that will arise from the payment of
income tax are expressed at the 30% tax rate on a tax
paid basis. This balance represents the current tax
liabilities as at 30 June 2006 for the tax consolidated
group.
(c) The franking debits that will arise when we pay our
final ordinary dividend are expressed as the amount of
franking credits that will be attached to a fully
franked distribution.
We believe our current balance of franking credits
combined with the franking credits that will arise on tax
instalments expected to be paid during fiscal 2007, will
be sufficient to cover the franking debits arising from
our final dividend. Refer to note 34 for further details
in relation to our dividends declared subsequent to year
end.
F-29
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information
We report our segment information on the basis of
business segments as our risks and returns are affected
predominantly by differences in the products and services
we provide through those segments.
Our internal management reporting structure drives how our
Company is organised and managed. This internal structure
provides the initial basis for determining our business
segments.
Our business segments are predominantly distinguishable
by the different type of customers we deliver our key
products and services to. Our customer facing business
segments service different customer types. Other
reportable business segments are also aligned with our
specific customer or business needs. These segments
provide operational support services or product support
services to our customer facing business segments, or
service other telecommunication carriers. Our Other
segment consists of various business units that do not
qualify as business segments in their own right and which
service a variety of customer or business needs.
The main adjustments from our internal management
reporting structure to our reported business segments
are in relation to certain offshore operations. For
internal management reporting purposes, our TelstraClear
group (TelstraClear) is included with Telstra Enterprise
and Government, our CSL New World Mobility group (CSL
New World) is a business unit in its own right, and the
International Head Office group is included as part of
Strategic Marketing. These offshore operations are
reported as part of a segment we have called Telstra
International for segment reporting purposes.
For the purposes of the applicable accounting standard,
we consider that the risks and returns of these offshore
operations differ from those of our local operations and
as a result we have grouped these operations into the
Telstra International business segment.
Business segments
During fiscal 2006, we created the following new business segments:
|
|
Telstra Operations; and |
The Telstra Business group has been drawn from the
Telstra Consumer Marketing and Channels group (formerly
known as Telstra Consumer and Marketing), Telstra Country
Wide and the Telstra Enterprise and Government (formerly
known as Telstra Business and Government) business units.
The Strategic Marketing group was drawn from various
business units across Telstra comprising mainly Telstra
Consumer Marketing and Channels.
The Telstra Operations group combined Telstra Services
(formerly known as Infrastructure Services), Telstra
Technology, Innovation and Products, and Operations
Support, which moved from being reported within our
corporate areas.
Those business segments not impacted by the above
restructures are substantially consistent with their
structure in the prior year. We have restated all our
comparative information to reflect our current reporting
position as if all our new business segments and segment
accounting policies existed in fiscal 2005.
For segment reporting purposes, the Telstra Group is
organised into the following business segments:
Telstra Consumer Marketing and Channels (TC&C) is responsible for:
|
|
the provision of the full range of
telecommunication products, services and
communication solutions to consumers; and |
|
|
leading the mass market channels including inbound
and outbound call centres, Telstra Shops and
Telstra Dealers. |
Telstra Business (TB) is responsible for:
|
|
the provision of the full range of
telecommunication products and services,
communication solutions, and information and
communication technology services to small to
medium enterprises. |
Telstra Enterprise and Government (TE&G) is responsible for:
|
|
the provision of the full range of telecommunication products and services, communication solutions, and
information and communication technology services to corporate and government customers; and |
|
|
the provision of global communication solutions to multi-national corporations through our interests in
the United Kingdom, Asia and North America. |
Telstra Wholesale (TW) is responsible for:
|
|
the provision of a wide range of telecommunication products and services delivered over our networks and
associated support systems to: |
|
|
|
non-Telstra branded carriers, carriage service providers, Internet service providers, system integrators
and application service providers; and |
|
|
|
|
infrastructure owners and managers who acquire infrastructure services. |
F-30
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
Sensis is responsible for:
|
|
the management and growth of the information, advertising
and directories business, including printed publications,
directory assistance, and online products and services. |
Telstra International (TInt.) consists of the following
offshore business operations:
|
|
CSL New World is responsible for our operations in Hong Kong that mainly generate revenues from the
mobiles market; |
|
|
International Head Office Group is responsible for our Asia-Pacific investments; and |
|
|
TelstraClear is our New Zealand subsidiary that provides integrated telecommunications services to the
New Zealand market. |
Telstra Operations (TO) is responsible for:
|
|
co-ordination and execution for our companys multi-year business improvement and transformation program; |
|
|
leading the identification, analysis, validation, development and implementation of product, technology
and information technology strategies for both the network infrastructure and customer solutions of our
Company; |
|
|
overall planning, design, specification of standards, commissioning and decommissioning of our
communication networks; |
|
|
construction of infrastructure for our Companys fixed, mobile, Internet protocol (IP) and data networks; |
|
|
operation and maintenance, including activation and restoration of these networks; |
|
|
supply and delivery of information technology solutions to support our products, services and customer
support function; |
|
|
the development and lifecycle management of products and services over the networks, as well as
application platforms and the online environment; and |
|
|
operational support functions for our Company, including procurement, billing, credit management and
property management. |
Telstra Country Wide (TCW) is responsible for:
|
|
the management and control of providing telecommunication products and services to consumer, small
business, enterprise and some government customers outside the mainland state capital cities, in outer
metropolitan areas, and in Tasmania and the Northern Territory. |
Telstra BigPond is responsible for:
|
|
the management and control of our retail Internet products, services and content, contact centres,
customer relations and associated functions, for broadband and narrowband delivery. |
Telstra Media is responsible for:
|
|
the management of our investment interest in the FOXTEL partnership; |
|
|
the development and management of the hybrid fibre coaxial (HFC) cable network; and |
|
|
investigation and development of an interactive PayTV (IPTV) service. |
Strategic Marketing is responsible for:
|
|
the co-ordination and delivery of marketing activities across our Company and market segments. |
Corporate areas include:
|
|
Legal Services provides legal services across the Company; |
|
|
Public Policy and Communications responsible for
managing our relationships and positioning with key
groups such as our customers, the media,
governments, community groups and staff. It also has
responsibility for regulatory positioning and
negotiation; |
|
|
Finance and Administration encompasses the
functions of business and finance services,
treasury, risk management and assurance,
investor relations and the office of the company
secretary. It also includes the financial
management of the majority of the Telstra Entity
fixed assets (including network assets) through
the Asset Accounting Group; and |
|
|
Human Resources encompasses talent management,
organisational development, human resource
operations, health, safety and environment, as well
as workplace relations and remuneration. |
In our segment financial results, the Other segment
consists of various business units that do not qualify
as reportable segments in their own right. These
include:
|
|
Strategic Marketing; and |
F-31
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
Segment financial results
For segment reporting purposes, we have reallocated
certain items between the respective business segments
pursuant to the definitions of segment revenues, segment
expenses, segment assets and segment liabilities
contained in the applicable accounting standard, where a
reasonable allocation basis exists.
Where no reasonable allocation basis exists, we have not
reallocated individual items to alternative segments. For
segment reporting purposes, these items are reported
within the same business segment as for internal
management reporting. As a result, our segment revenues,
segment expenses, segment assets and segment liabilities
do not reflect actual operating results achieved for our
business segments in certain circumstances.
The following narrative further explains our segment
results for those individual items where it is considered
that no reasonable allocation basis exists:
|
|
Sales revenue associated with mobile handsets for TC&C, TB and TE&G are allocated totally to the TC&C segment, with the
exception of some products sold in relation to small to medium enterprises which are allocated to TB. Ongoing prepaid and
postpaid mobile revenues derived from our mobile usage is recorded in TC&C, TB and TE&G depending on the type of customer
serviced. In addition, the majority of goods and services purchased associated with our mobile revenues are allocated to
the TC&C segment. As a result, the TC&C segment also holds segment assets and segment liabilities related to those revenues
and expenses recorded in TC&C; |
|
|
trade debtors in relation to the mobile repayment option on mobile handsets sold by our dealers are allocated totally to
TC&C; and |
|
|
revenue received in advance in relation to installation and connection fees is allocated totally to TC&C. |
These allocations reflect managements accountability
framework and internal reporting system and accordingly
no reasonable basis for reallocation to the respective
business segments exist.
In addition, revenue derived from our BigPond Internet
products and its related segment assets are recorded in
the customer facing business segments of TC&C, TB and
TE&G. Certain distribution costs in relation to these
products are recognised in these three business segments.
Telstra Operations recognise certain expenses in relation
to the installation and running of the broadband cable
network. The related segment assets are managed by the
Asset Accounting Group. In accordance with our
application of the business segment definition in
relation to customer type, we have not reallocated these
items to the Telstra Bigpond business segment.
Change in segment accounting policies
The following segment accounting policy changes
occurred during fiscal 2006:
Interconnection revenue
In previous financial years, our segment accounting
policy was to recognise our revenue relating to
interconnection entirely in our TW business segment. In
fiscal 2006, some parts of the revenue earned from
interconnection were allocated to the TC&C, TB and TE&G
business segments to match the revenue recognised with
the associated expense. As a result, revenue in TW
decreased by $633 million and revenue increased in TC&C
by $500 million, TB by $52 million and TE&G by $81
million in fiscal 2005 to reflect this change in policy.
Segment assets and liabilities
Segment assets and segment liabilities form part of the
operating activities of a segment and can be allocated
directly to that segment.
The Asset Accounting Group performs a company wide
function in relation to the financial management of
certain assets. These assets are accounted for at the
corporate level (aggregated in the Other segment) and
not allocated across segments.
The Other segment also includes balances that do not
meet the definition of segment assets and segment
liabilities for our reportable business segments. As a
result, borrowings and income tax assets and liabilities
were recorded as reconciling items within the Other
segment.
Inter-segment transfers
We account for all transactions of entities within the
Telstra Group, including international transactions
between Australian and non-Australian businesses, at
market value. For segment reporting purposes, transfer
pricing is not used within the Company. As such the
inter-segment revenue line purely relates to intercompany
revenue.
The Asset Accounting Group does not allocate
depreciation expense related to the use of assets owned
at the corporate level to other business segments.
F-32
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TC&C |
|
|
TB |
|
|
TE&G |
|
|
TW |
|
|
Sensis |
|
|
TInt. |
|
|
TO |
|
|
Other |
|
|
Elimina- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
|
tions |
|
|
Total |
|
Year ended 30 June 2006 |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Revenue from external customers |
|
|
8,897 |
|
|
|
3,053 |
|
|
|
4,607 |
|
|
|
2,607 |
|
|
|
1,826 |
|
|
|
1,450 |
|
|
|
226 |
|
|
|
106 |
|
|
|
|
|
|
|
22,772 |
|
Add inter-segment revenue |
|
|
|
|
|
|
|
|
|
|
57 |
|
|
|
292 |
|
|
|
10 |
|
|
|
31 |
|
|
|
83 |
|
|
|
7 |
|
|
|
(480 |
) |
|
|
|
|
|
|
|
Total segment revenue |
|
|
8,897 |
|
|
|
3,053 |
|
|
|
4,664 |
|
|
|
2,899 |
|
|
|
1,836 |
|
|
|
1,481 |
|
|
|
309 |
|
|
|
113 |
|
|
|
(480 |
) |
|
|
22,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result under A-IFRS |
|
|
5,721 |
|
|
|
2,412 |
|
|
|
2,702 |
|
|
|
2,693 |
|
|
|
865 |
|
|
|
86 |
|
|
|
(4,175 |
) |
|
|
(4,903 |
) |
|
|
29 |
|
|
|
5,430 |
|
Share of equity accounted net
(losses)/profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
12 |
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
5 |
|
Less net gain on sale of investments |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
Earnings before interest and income
tax expense (EBIT) segment result
under USGAAP |
|
|
5,721 |
|
|
|
2,412 |
|
|
|
2,706 |
|
|
|
2,693 |
|
|
|
864 |
|
|
|
156 |
|
|
|
(4,175 |
) |
|
|
(4,909 |
) |
|
|
29 |
|
|
|
5,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings has been calculated after
charging/(crediting) the following
non cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment losses |
|
|
140 |
|
|
|
10 |
|
|
|
8 |
|
|
|
|
|
|
|
13 |
|
|
|
11 |
|
|
|
143 |
|
|
|
26 |
|
|
|
|
|
|
|
351 |
|
Reversal of impairment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(22 |
) |
Depreciation and amortisation |
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
91 |
|
|
|
298 |
|
|
|
48 |
|
|
|
3,587 |
|
|
|
|
|
|
|
4,087 |
|
Other significant non cash expenses |
|
|
26 |
|
|
|
4 |
|
|
|
20 |
|
|
|
5 |
|
|
|
1 |
|
|
|
3 |
|
|
|
144 |
|
|
|
7 |
|
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current segment assets acquired
(excluding acquisition of
investments) |
|
|
11 |
|
|
|
|
|
|
|
89 |
|
|
|
23 |
|
|
|
96 |
|
|
|
224 |
|
|
|
4,032 |
|
|
|
5 |
|
|
|
|
|
|
|
4,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
1,437 |
|
|
|
370 |
|
|
|
1,767 |
|
|
|
453 |
|
|
|
1,886 |
|
|
|
3,817 |
|
|
|
3,308 |
|
|
|
23,316 |
|
|
|
(179 |
) |
|
|
36,175 |
|
|
|
|
Segment assets include: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in jointly controlled
entities |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Investment in associated entities |
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
|
1,260 |
|
|
|
165 |
|
|
|
618 |
|
|
|
241 |
|
|
|
673 |
|
|
|
615 |
|
|
|
2,534 |
|
|
|
17,414 |
|
|
|
(177 |
) |
|
|
23,343 |
|
|
|
|
(a) Revenue for the other segment relates primarily to
our revenue earned by Telstra Media from our share of
FOXTEL cable subscriber revenue and for services provided
to FOXTEL. The Asset Accounting Group is the main
contributor to the segment result for this segment, which
is primarily depreciation and amortisation charges.
Segment assets for the Other segment includes the
Telstra Entity fixed assets (including network assets)
managed through the centralised Asset Accounting Group.
Segment liabilities includes income tax liabilities and
borrowings, which have been reallocated from the
reportable business segment in accordance with the
applicable accounting standard.
F-33
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TC&C |
|
|
TB |
|
|
TE&G |
|
|
TW |
|
|
Sensis |
|
|
TInt. |
|
|
TO |
|
|
Other |
|
|
Elimina- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
|
tions |
|
|
Total |
|
Year ended 30 June 2005 |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Revenue from external customers |
|
|
8,931 |
|
|
|
3,099 |
|
|
|
4,570 |
|
|
|
2,267 |
|
|
|
1,708 |
|
|
|
1,360 |
|
|
|
161 |
|
|
|
85 |
|
|
|
|
|
|
|
22,181 |
|
Add inter-segment revenue |
|
|
|
|
|
|
|
|
|
|
52 |
|
|
|
284 |
|
|
|
11 |
|
|
|
38 |
|
|
|
77 |
|
|
|
2 |
|
|
|
(464 |
) |
|
|
|
|
|
|
|
Total segment revenue |
|
|
8,931 |
|
|
|
3,099 |
|
|
|
4,622 |
|
|
|
2,551 |
|
|
|
1,719 |
|
|
|
1,398 |
|
|
|
238 |
|
|
|
87 |
|
|
|
(464 |
) |
|
|
22,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result under A-IFRS |
|
|
6,179 |
|
|
|
2,488 |
|
|
|
2,807 |
|
|
|
2,283 |
|
|
|
812 |
|
|
|
94 |
|
|
|
(3,371 |
) |
|
|
(4,345 |
) |
|
|
3 |
|
|
|
6,950 |
|
Share of equity accounted net
(losses)/profits |
|
|
3 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
(96 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(94 |
) |
Less net gain on sale of investments |
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
|
Earnings before interest and income
tax expense (EBIT) segment result
under USGAAP |
|
|
6,248 |
|
|
|
2,488 |
|
|
|
2,812 |
|
|
|
2,283 |
|
|
|
812 |
|
|
|
11 |
|
|
|
(3,371 |
) |
|
|
(4,351 |
) |
|
|
3 |
|
|
|
6,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings has been calculated after
charging/(crediting) the following
non cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment losses |
|
|
115 |
|
|
|
18 |
|
|
|
12 |
|
|
|
|
|
|
|
17 |
|
|
|
7 |
|
|
|
20 |
|
|
|
30 |
|
|
|
(29 |
) |
|
|
190 |
|
Depreciation and amortisation |
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
64 |
|
|
|
266 |
|
|
|
1 |
|
|
|
3,152 |
|
|
|
|
|
|
|
3,529 |
|
Other significant non cash expenses |
|
|
25 |
|
|
|
3 |
|
|
|
22 |
|
|
|
6 |
|
|
|
4 |
|
|
|
3 |
|
|
|
139 |
|
|
|
24 |
|
|
|
|
|
|
|
226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current segment assets acquired
(excluding acquisition of
investments) |
|
|
16 |
|
|
|
|
|
|
|
45 |
|
|
|
503 |
|
|
|
74 |
|
|
|
246 |
|
|
|
3,052 |
|
|
|
110 |
|
|
|
|
|
|
|
4,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
1,448 |
|
|
|
343 |
|
|
|
1,635 |
|
|
|
356 |
|
|
|
1,836 |
|
|
|
3,641 |
|
|
|
2,750 |
|
|
|
23,702 |
|
|
|
(500 |
) |
|
|
35,211 |
|
|
|
|
Segment assets include: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in jointly controlled
entities |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
Investment in associated entities |
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
|
1,021 |
|
|
|
119 |
|
|
|
639 |
|
|
|
148 |
|
|
|
665 |
|
|
|
547 |
|
|
|
2,024 |
|
|
|
16,887 |
|
|
|
(497 |
) |
|
|
21,553 |
|
|
|
|
(a) Revenue for the other segment relates primarily to
our revenue earned by Telstra Media from our share of
FOXTEL cable subscriber revenue and for services provided
to FOXTEL. The Asset Accounting Group is the main
contributor to the segment result for this segment, which
is primarily depreciation and amortisation charges.
Segment assets for the other segment includes the Telstra
Entity fixed assets (including network assets) managed
through the centralised Asset Accounting Group. Segment
liabilities excludes income tax liabilities and
borrowings, which are included as part of the other
segment.
F-34
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
Reconciliation of segment results to Telstra Group position: |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
5,497 |
|
|
|
6,935 |
|
Finance income |
|
|
|
|
|
|
66 |
|
|
|
83 |
|
Finance costs |
|
|
|
|
|
|
(1,002 |
) |
|
|
(963 |
) |
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
4,561 |
|
|
|
6,055 |
|
Income tax expense |
|
|
|
|
|
|
(1,380 |
) |
|
|
(1,746 |
) |
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information about sales revenue from our products and services: |
|
|
|
|
|
|
|
|
|
|
|
|
PSTN products |
|
|
|
|
|
|
|
|
|
|
|
|
Basic access |
|
|
|
|
|
|
3,318 |
|
|
|
3,362 |
|
Local calls |
|
|
|
|
|
|
1,023 |
|
|
|
1,284 |
|
PSTN value added services |
|
|
|
|
|
|
246 |
|
|
|
250 |
|
National long distance calls |
|
|
|
|
|
|
913 |
|
|
|
1,013 |
|
Fixed to mobile |
|
|
|
|
|
|
1,491 |
|
|
|
1,566 |
|
International direct |
|
|
|
|
|
|
201 |
|
|
|
234 |
|
Fixed interconnection |
|
|
|
|
|
|
286 |
|
|
|
309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,478 |
|
|
|
8,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobiles |
|
|
|
|
|
|
|
|
|
|
|
|
Mobile services |
|
|
|
|
|
|
4,505 |
|
|
|
4,307 |
|
Mobile handsets |
|
|
|
|
|
|
467 |
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,972 |
|
|
|
4,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data and internet services |
|
|
|
|
|
|
|
|
|
|
|
|
Internet and IP solutions |
|
|
|
|
|
|
1,907 |
|
|
|
1,377 |
|
ISDN products |
|
|
|
|
|
|
807 |
|
|
|
890 |
|
Specialised data |
|
|
|
|
|
|
884 |
|
|
|
966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,598 |
|
|
|
3,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products and services |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and directories |
|
|
|
|
|
|
1,711 |
|
|
|
1,585 |
|
Customer premises equipment |
|
|
|
|
|
|
274 |
|
|
|
231 |
|
Payphones |
|
|
|
|
|
|
104 |
|
|
|
121 |
|
Intercarrier services |
|
|
|
|
|
|
351 |
|
|
|
290 |
|
Inbound calling products |
|
|
|
|
|
|
449 |
|
|
|
449 |
|
Solutions management |
|
|
|
|
|
|
989 |
|
|
|
931 |
|
Offshore controlled entities (a) |
|
|
|
|
|
|
1,745 |
|
|
|
1,611 |
|
Pay TV bundling |
|
|
|
|
|
|
320 |
|
|
|
263 |
|
Other sales and service |
|
|
|
|
|
|
759 |
|
|
|
741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,702 |
|
|
|
6,222 |
|
|
|
|
|
|
|
|
Sales revenue |
|
|
|
|
|
|
22,750 |
|
|
|
22,161 |
|
|
|
|
|
|
|
|
Other revenue (excluding finance income) |
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
|
|
|
|
|
Total revenue (excluding finance income) |
|
|
6 |
|
|
|
22,772 |
|
|
|
22,181 |
|
|
|
|
|
|
|
|
F-35
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
5. Segment information (continued)
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Information about revenue from our products and services (continued): |
|
|
|
|
|
|
|
|
(a) Sales revenue from our offshore controlled entities is split between the following |
|
|
|
|
|
|
|
|
products and
services: |
|
|
|
|
|
|
|
|
International PSTN products |
|
|
446 |
|
|
|
484 |
|
International Mobiles |
|
|
849 |
|
|
|
751 |
|
International Data and internet services |
|
|
287 |
|
|
|
264 |
|
International Intercarrier services |
|
|
20 |
|
|
|
24 |
|
International Other |
|
|
143 |
|
|
|
88 |
|
|
|
|
|
|
|
1,745 |
|
|
|
1,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Information about our geographic operations (i) |
|
|
|
|
|
|
|
|
Segment revenue from external customers |
|
|
|
|
|
|
|
|
Australian customers |
|
|
21,014 |
|
|
|
20,556 |
|
International customers |
|
|
1,758 |
|
|
|
1,625 |
|
|
|
|
|
|
|
22,772 |
|
|
|
22,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of segment assets |
|
|
|
|
|
|
|
|
Australian customers |
|
|
31,966 |
|
|
|
31,245 |
|
International customers |
|
|
4,209 |
|
|
|
3,966 |
|
|
|
|
|
|
|
36,175 |
|
|
|
35,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current segment assets acquired (excluding acquisition of investments) |
|
|
|
|
|
|
|
|
Located in Australia |
|
|
4,256 |
|
|
|
3,800 |
|
Located in international countries |
|
|
224 |
|
|
|
246 |
|
|
|
|
|
|
|
4,480 |
|
|
|
4,046 |
|
|
|
|
(i) Our geographical operations are split between our
Australian and international operations. Our
international operations include the business of our
international business segment (primarily businesses in
Hong Kong and New Zealand) and our international
business that serves multi-national customers in the
TE&G segment. No individual geographical area forms a
significant part of our operations apart from our
Australian operations.
F-36
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
6. Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Sales revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rendering of services |
|
|
|
|
|
|
12,427 |
|
|
|
12,522 |
|
|
|
10,427 |
|
|
|
10,783 |
|
Sale of goods |
|
|
|
|
|
|
808 |
|
|
|
691 |
|
|
|
536 |
|
|
|
430 |
|
Rent of network facilities |
|
|
|
|
|
|
7,653 |
|
|
|
7,233 |
|
|
|
7,655 |
|
|
|
7,233 |
|
Construction contracts |
|
|
|
|
|
|
151 |
|
|
|
130 |
|
|
|
174 |
|
|
|
136 |
|
Advertising and directory services |
|
|
|
|
|
|
1,711 |
|
|
|
1,585 |
|
|
|
464 |
|
|
|
377 |
|
Procurement (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
647 |
|
|
|
628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,750 |
|
|
|
22,161 |
|
|
|
19,903 |
|
|
|
19,587 |
|
|
|
|
|
|
|
|
|
|
Other revenue (excluding finance income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
560 |
|
|
|
223 |
|
- jointly controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560 |
|
|
|
224 |
|
Rent from property and motor vehicles |
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
22 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
582 |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
Total revenue (excluding finance income) |
|
|
|
|
|
|
22,772 |
|
|
|
22,181 |
|
|
|
20,485 |
|
|
|
19,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on disposal of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- property, plant and equipment |
|
|
|
|
|
|
23 |
|
|
|
9 |
|
|
|
20 |
|
|
|
10 |
|
- investments in controlled entities |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- investments in jointly controlled and associated entities |
|
|
|
|
|
|
58 |
|
|
|
16 |
|
|
|
59 |
|
|
|
26 |
|
- investments in listed securities and other investments |
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85 |
|
|
|
88 |
|
|
|
79 |
|
|
|
95 |
|
Other miscellaneous income (b) |
|
|
|
|
|
|
243 |
|
|
|
173 |
|
|
|
84 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
328 |
|
|
|
261 |
|
|
|
163 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
Total income (excluding finance income) |
|
|
|
|
|
|
23,100 |
|
|
|
22,442 |
|
|
|
20,648 |
|
|
|
19,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- interest on cash and cash equivalents |
|
|
|
|
|
|
66 |
|
|
|
83 |
|
|
|
60 |
|
|
|
78 |
|
- other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
83 |
|
|
|
63 |
|
|
|
101 |
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
|
|
|
|
23,166 |
|
|
|
22,525 |
|
|
|
20,711 |
|
|
|
20,065 |
|
|
|
|
|
|
|
|
|
|
F-37
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
6. Income (continued)
(a) The Telstra Entity receives procurement revenue
from its controlled entity Sensis Pty Ltd for the use of
Yellow Pages® and White Pages® trademarks. Refer to note
33 for further details on transactions involving our
related parties.
(b) Other miscellaneous income includes revenue
recognised from subsidies received on the Higher
Bandwidth Incentive Scheme (HiBIS) and Broadband Connect
Incentive Scheme.
HiBiS, which has now concluded, and its replacement
program, Broadband Connect, were established by the
Commonwealth to allow service providers to provide high
bandwidth services to eligible customers in the regional,
rural and remote areas of Australia at prices broadly
comparable to those prices charged to customers in
metropolitan areas.
As a service provider, we are able to claim a rebate from
the Commonwealth for each registered HiBIS or Broadband
Connect service we provide to an eligible customer. The
purpose of the incentive payment is to cover the short
fall of providing these services to eligible customers in
the regional, rural and remote areas of Australia at
metropolitan prices. We recognise these incentive
payments as other income.
We have no significant unfulfilled conditions and other
contingencies relating to our obligations under the HiBIS
and Broadband Connect programs.
F-38
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
(a) Profit before income tax expense (including items
disclosed in note 7(b)) has been calculated after
charging/(crediting) the following items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in our labour expenses are the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee redundancy (b) |
|
|
|
|
|
|
534 |
|
|
|
91 |
|
|
|
516 |
|
|
|
85 |
|
Share based payments |
|
|
21 |
|
|
|
15 |
|
|
|
10 |
|
|
|
15 |
|
|
|
10 |
|
Defined benefit plan expense |
|
|
28 |
|
|
|
185 |
|
|
|
203 |
|
|
|
182 |
|
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods and services purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in our goods and services purchased are the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
1,421 |
|
|
|
1,150 |
|
|
|
1,087 |
|
|
|
882 |
|
Rental expense on managed services |
|
|
|
|
|
|
69 |
|
|
|
67 |
|
|
|
64 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- impairment in value of inventories (b) |
|
|
|
|
|
|
53 |
|
|
|
11 |
|
|
|
53 |
|
|
|
11 |
|
- impairment in value of trade and other receivables (b) |
|
|
|
|
|
|
161 |
|
|
|
150 |
|
|
|
138 |
|
|
|
131 |
|
- impairment in value of investments (b) (i) |
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
245 |
|
|
|
27 |
|
- impairment in amounts owed by controlled entities (b) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
382 |
|
|
|
475 |
|
- impairment in amounts owed by jointly controlled entities |
|
|
33 |
|
|
|
2 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
- impairment in value of intangibles (b) (ii) |
|
|
|
|
|
|
66 |
|
|
|
1 |
|
|
|
64 |
|
|
|
|
|
- impairment in value of property, plant and equipment (b) (ii) |
|
|
|
|
|
|
69 |
|
|
|
17 |
|
|
|
69 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351 |
|
|
|
190 |
|
|
|
951 |
|
|
|
661 |
|
|
|
|
|
|
|
|
|
|
Reversal of impairment losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- reversal of impairment in value of trade and other receivables |
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
(22 |
) |
|
|
|
|
- reversal of impairment in value of investments (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
(334 |
) |
- reversal of impairment in amounts owed by controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
(37 |
) |
|
|
(349 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental expense on operating leases |
|
|
|
|
|
|
667 |
|
|
|
675 |
|
|
|
496 |
|
|
|
502 |
|
Net foreign currency translation losses/(gains) |
|
|
|
|
|
|
2 |
|
|
|
(40 |
) |
|
|
(50 |
) |
|
|
(5 |
) |
Remuneration of auditors |
|
|
8 |
|
|
|
8 |
|
|
|
7 |
|
|
|
6 |
|
|
|
6 |
|
Service contracts and other agreements |
|
|
|
|
|
|
1,836 |
|
|
|
1,556 |
|
|
|
1,796 |
|
|
|
1,521 |
|
Promotion and advertising |
|
|
|
|
|
|
356 |
|
|
|
330 |
|
|
|
285 |
|
|
|
253 |
|
General and administration |
|
|
|
|
|
|
723 |
|
|
|
739 |
|
|
|
542 |
|
|
|
564 |
|
Other operating expenses (b) |
|
|
|
|
|
|
506 |
|
|
|
358 |
|
|
|
573 |
|
|
|
325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,427 |
|
|
|
3,815 |
|
|
|
4,562 |
|
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
(i) We have recognised impairment losses relating to the
value of our investments in controlled entities, jointly
controlled and associated entities, and other entities
based on the value in use calculation. The impairment
loss in the value of investment in controlled entities
was eliminated on consolidation of the Telstra Group.
(ii) We have recognised impairment losses relating to
project costs that were capitalised within capitalised
software forming part of intangible assets and property,
plant and equipment. These projects have subsequently
been cancelled and the costs recognised in the income
statement as an impairment loss. In fiscal 2006,
additional impairment losses were recognised reflecting
additional write offs due to our transformation, refer
note 7(b) for details.
F-39
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
(a) Profit before income tax expense (including items
disclosed in note 7(b)) has been calculated after
charging/(crediting) the following items (continued): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- general purpose buildings including leasehold improvements |
|
|
14 |
|
|
|
62 |
|
|
|
54 |
|
|
|
54 |
|
|
|
47 |
|
- communication assets including leasehold improvements |
|
|
14 |
|
|
|
2,953 |
|
|
|
2,615 |
|
|
|
2,786 |
|
|
|
2,508 |
|
- communication assets under finance lease |
|
|
14 |
|
|
|
67 |
|
|
|
75 |
|
|
|
67 |
|
|
|
75 |
|
- equipment under finance lease |
|
|
14 |
|
|
|
8 |
|
|
|
9 |
|
|
|
6 |
|
|
|
7 |
|
- other plant, equipment and motor vehicles |
|
|
14 |
|
|
|
93 |
|
|
|
123 |
|
|
|
45 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,183 |
|
|
|
2,876 |
|
|
|
2,958 |
|
|
|
2,687 |
|
|
|
|
|
|
|
|
|
|
Amortisation of intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- patents and trademarks |
|
|
15 |
|
|
|
2 |
|
|
|
2 |
|
|
|
4 |
|
|
|
4 |
|
- licences |
|
|
15 |
|
|
|
58 |
|
|
|
37 |
|
|
|
18 |
|
|
|
18 |
|
- brandnames |
|
|
15 |
|
|
|
11 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
- customer bases |
|
|
15 |
|
|
|
98 |
|
|
|
86 |
|
|
|
13 |
|
|
|
15 |
|
- deferred expenditure |
|
|
|
|
|
|
9 |
|
|
|
8 |
|
|
|
35 |
|
|
|
10 |
|
- software assets (b) |
|
|
15 |
|
|
|
726 |
|
|
|
510 |
|
|
|
629 |
|
|
|
472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
904 |
|
|
|
653 |
|
|
|
699 |
|
|
|
519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,087 |
|
|
|
3,529 |
|
|
|
3,657 |
|
|
|
3,206 |
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- interest on bills of exchange and commercial paper |
|
|
|
|
|
|
65 |
|
|
|
35 |
|
|
|
65 |
|
|
|
35 |
|
- interest on Telstra bonds |
|
|
|
|
|
|
486 |
|
|
|
223 |
|
|
|
486 |
|
|
|
223 |
|
- interest on other loans |
|
|
|
|
|
|
242 |
|
|
|
497 |
|
|
|
242 |
|
|
|
497 |
|
- interest on derivative instruments |
|
|
|
|
|
|
169 |
|
|
|
164 |
|
|
|
169 |
|
|
|
164 |
|
- interest on finance leases |
|
|
|
|
|
|
6 |
|
|
|
7 |
|
|
|
2 |
|
|
|
3 |
|
- unwinding of discount on liabilities recognised at present value |
|
|
|
|
|
|
40 |
|
|
|
35 |
|
|
|
9 |
|
|
|
2 |
|
- gain in fair value hedge instruments |
|
|
|
|
|
|
(26 |
) |
|
|
|
|
|
|
(26 |
) |
|
|
|
|
- other |
|
|
|
|
|
|
20 |
|
|
|
2 |
|
|
|
38 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,002 |
|
|
|
963 |
|
|
|
985 |
|
|
|
943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
|
|
|
|
|
23 |
|
|
|
29 |
|
|
|
23 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
F-40
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations (continued)
(b) Income statement items requiring specific disclosure
The separate disclosure of the following material items is relevant
in explaining our financial performance.
Our profit for the year has been calculated after charging
specific expense items from our continuing operations as detailed
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Redundancy and restructuring related costs (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- redundancy expense |
|
|
|
|
|
|
356 |
|
|
|
|
|
|
|
352 |
|
|
|
|
|
- restructuring expense |
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406 |
|
|
|
|
|
|
|
402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods and services purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- restructuring expense |
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- restructuring expense |
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
105 |
|
|
|
|
|
- impairment in value of inventories |
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
- impairment in value of trade and other receivables |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
14 |
|
|
|
|
|
- impairment in value of intangibles |
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
61 |
|
|
|
|
|
- impairment in value of property, plant and equipment |
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244 |
|
|
|
|
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- accelerated amortisation of intangibles |
|
|
|
|
|
|
160 |
|
|
|
|
|
|
|
145 |
|
|
|
|
|
- accelerated depreciation of property, plant and equipment |
|
|
|
|
|
|
262 |
|
|
|
|
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
422 |
|
|
|
|
|
|
|
407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,126 |
|
|
|
|
|
|
|
1,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- impairment in value of controlled entities (ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205 |
|
|
|
|
|
- reversal of impairment in value of controlled entities (ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(334 |
) |
- impairment in amounts owed by controlled entities (iii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
382 |
|
|
|
475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
587 |
|
|
|
141 |
|
Total expense items |
|
|
|
|
|
|
1,126 |
|
|
|
|
|
|
|
1,694 |
|
|
|
141 |
|
Income tax benefit attributable to those items requiring specific disclosure |
|
|
|
|
|
|
(338 |
) |
|
|
|
|
|
|
(332 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net items after income tax benefit |
|
|
|
|
|
|
788 |
|
|
|
|
|
|
|
1,362 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
(i) On 15 November 2005, we announced the results from the
strategic review that was initiated on 1 July 2005. We unveiled a
strategy for improving our business by:
|
|
introducing a company wide market based management system; |
|
|
|
the adoption of a one factory approach to managing operations;
and |
|
|
|
delivering integrated services to our customers. |
We also announced several key decisions and commitments regarding
our systems, processes and products which will impact the future
performance of the Company.
F-41
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
7. Profit from continuing operations (continued)
For the year ended 30 June 2006, we have recorded a number of
restructuring related expenses associated with the implementation
of the strategic review initiatives. The redundancy and
restructuring costs include the following:
|
|
redundancy costs associated with the reduction in our workforce,
including those redundancies that have been provided for (refer to
note 19); |
|
|
|
the provision for restructuring costs associated with shutting
down certain networks, platforms and applications, property
rationalisation, onerous lease costs and replacing customer
equipment (refer to note 19); |
|
|
|
the impairment of certain assets due to the decision to shut down
certain networks and platforms that are no longer considered
recoverable. This also includes the decision to cancel certain
projects relating to the development of software and the
construction of property, plant and equipment; and |
|
|
|
the accelerated recognition of depreciation and amortisation of
certain assets that, while currently in use, will be decommissioned
as part of our decision to shut down certain networks, platforms
and applications. |
A total provision of $427 million has been raised for redundancy
and restructuring for the Telstra Group as at 30 June 2006. This
includes $395 million recorded in current and non current
provisions, $18 million recorded as a reduction in inventory and
$14 million recorded as an allowance for other receivables.
(ii)
In fiscal 2006, the profit before income tax expense of the
Telstra Entity included an expense of $205 million in relation to
the impairment of the value of three controlled entities. In
fiscal 2005, the profit before income tax expense of the Telstra
Entity included a $334 million net gain in relation to the reversal
of an impairment of the value of four controlled entities. These
balances are eliminated on consolidation for Telstra Group
reporting purposes.
Each fiscal year, we review the value of our investment in
controlled entities. As a result, we have incurred an impairment
loss (or a reversal of an impairment loss) by assessing the
carrying value of our controlled entity with its recoverable
amount. We review our recoverable amount by reference to its value
in use. Refer to note 25 for further details regarding impairment.
(iii)
The profit before income tax expense of the Telstra Entity
included an impairment loss of $382 million (2005: $475 million)
relating to a movement in allowance for amounts owed by a
controlled entity. This balance was eliminated on consolidation
for Telstra Group purposes. Refer to note 25 for further details
regarding impairment.
F-42
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
8. Remuneration of auditors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Audit fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Australian National Audit Office has charged the following amounts for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auditing and reviewing the financial reports (i) |
|
|
|
|
|
|
4.981 |
|
|
|
5.038 |
|
|
|
4.431 |
|
|
|
4.404 |
|
Ernst and Young has charged the following amounts for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auditing and reviewing the financial reports (ii) |
|
|
|
|
|
|
2.900 |
|
|
|
2.290 |
|
|
|
1.601 |
|
|
|
1.391 |
|
|
|
|
|
|
|
|
|
|
Total audit fees |
|
|
7 |
(a) |
|
|
7.881 |
|
|
|
7.328 |
|
|
|
6.032 |
|
|
|
5.795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to auditing and reviewing the financial reports, other services were
provided by Ernst and Young in their own right as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit related (iii) |
|
|
|
|
|
|
0.829 |
|
|
|
0.571 |
|
|
|
|
|
|
|
|
|
Tax (iv) |
|
|
|
|
|
|
0.118 |
|
|
|
0.423 |
|
|
|
|
|
|
|
|
|
Other services (v) |
|
|
|
|
|
|
0.331 |
|
|
|
0.703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other services |
|
|
|
|
|
|
1.278 |
|
|
|
1.697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit fees
(i) Our Australian statutory auditor is the Australian National
Audit Office (ANAO). The audit provided by the ANAO has been
subcontracted to Ernst and Young (EY) since fiscal 2000.
(ii) Audit fees charged by EY relate to audit services provided in
completing our statutory and regulatory filings other than those
subcontracted directly from the ANAO. These services include the
audit and review of our offshore controlled entities, the
regulatory audits and our USGAAP audit. In addition, this category
includes the audit of our other statutory filings such as the
filing we are required to make under Japanese law, and the annual
report on Form 20-F to meet our United States listing requirements.
Other services
We have processes in place to maintain the independence of the
external auditor, including the level of expenditure on non
audit services. Fees earned by EY for non audit work are capped
at a maximum of 1.0 times the total audit and audit related
fees.
Non audit services are pre-approved by the Audit Committee provided
they fall within a defined list of services specified by the Audit
Committee. Those non-audit services that are not listed have to be
specifically approved by the Audit Committee prior to the
commencement of any engagement. In addition, all non-audit
services with a value over $100,000 must be separately approved by
the Audit Committee, even if the service is listed as a
pre-approved service.
The provision of non-audit services by EY is monitored by the Audit
Committee via bi-annual reports to the Audit Committee. In
addition, where engagements involve services from the defined list
of services, these are reported to the Audit Committee at the
following meeting.
EY has specific internal processes in place to ensure auditor
independence.
(iii) Audit related fees charged by EY relate to services that are
reasonably related to the performance of the audit or review of our
financial statements, and other assurance engagements. These
services include our privacy audit, various accounting advice
provided and additional audit work arising on the acquisition of
our newly acquired controlled entities.
(iv) Tax fees charged by EY mainly relates to licence fee and
technical services including training and support services in
relation to our tax return software.
(v)
Other services relate to all additional services performed by
EY, other than those disclosed as auditing and reviewing the
financial report, audit related and tax. These services include
performance of system and security reviews, and various other
reviews and non assurance services across the Company.
F-43
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
9. Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Major components of income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expense |
|
|
1,730 |
|
|
|
1,740 |
|
|
|
1,860 |
|
|
|
1,907 |
|
Deferred tax resulting from the origination and reversal of temporary differences |
|
|
(386 |
) |
|
|
4 |
|
|
|
(411 |
) |
|
|
(28 |
) |
Under provision of tax in prior years |
|
|
36 |
|
|
|
2 |
|
|
|
33 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
1,380 |
|
|
|
1,746 |
|
|
|
1,482 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional income tax expense on profit differs from
actual income tax expense recorded as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
4,561 |
|
|
|
6,055 |
|
|
|
4,719 |
|
|
|
6,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional income tax expense on profit calculated at 30% (a): |
|
|
1,368 |
|
|
|
1,817 |
|
|
|
1,416 |
|
|
|
1,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Which is adjusted by the tax effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of different rates of tax on overseas income |
|
|
(19 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
Non assessable and non deductible items |
|
|
(5 |
) |
|
|
(62 |
) |
|
|
33 |
|
|
|
(40 |
) |
Under provision of tax in prior years |
|
|
36 |
|
|
|
2 |
|
|
|
33 |
|
|
|
3 |
|
|
|
|
|
|
Income tax expense on profit |
|
|
1,380 |
|
|
|
1,746 |
|
|
|
1,482 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognised directly in equity during the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax debited/(credited) directly in equity during the year |
|
|
291 |
|
|
|
(24 |
) |
|
|
289 |
|
|
|
(24 |
) |
|
|
|
|
|
(a) The Commonwealth statutory income tax rate for fiscal 2006 and
fiscal 2005 was 30%. This tax rate is the income tax rate applied
to Australian resident companies pursuant to the Income Tax Rates
Act.
F-44
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
9. Income taxes (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Deferred tax asset/(deferred tax liability) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax items recognised in income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
(1,872 |
) |
|
|
(1,918 |
) |
|
|
(1,911 |
) |
|
|
(2,019 |
) |
Intangible assets |
|
|
(356 |
) |
|
|
(474 |
) |
|
|
(175 |
) |
|
|
(280 |
) |
Provision for employee entitlements |
|
|
268 |
|
|
|
281 |
|
|
|
246 |
|
|
|
263 |
|
Revenue received in advance |
|
|
116 |
|
|
|
130 |
|
|
|
|
|
|
|
5 |
|
Provision for workers compensation |
|
|
65 |
|
|
|
64 |
|
|
|
62 |
|
|
|
62 |
|
Allowance for doubtful debts |
|
|
42 |
|
|
|
46 |
|
|
|
33 |
|
|
|
37 |
|
Defined benefit assets |
|
|
(45 |
) |
|
|
(98 |
) |
|
|
(43 |
) |
|
|
(97 |
) |
Trade and other payables |
|
|
57 |
|
|
|
38 |
|
|
|
54 |
|
|
|
36 |
|
Provision for redundancy |
|
|
56 |
|
|
|
|
|
|
|
55 |
|
|
|
|
|
Other provisions |
|
|
91 |
|
|
|
10 |
|
|
|
85 |
|
|
|
1 |
|
Income tax losses (a) |
|
|
106 |
|
|
|
69 |
|
|
|
|
|
|
|
4 |
|
Other |
|
|
36 |
|
|
|
26 |
|
|
|
27 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
(1,436 |
) |
|
|
(1,826 |
) |
|
|
(1,567 |
) |
|
|
(1,985 |
) |
|
|
|
|
|
Deferred tax items recognised in equity (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit assets |
|
|
(260 |
) |
|
|
24 |
|
|
|
(258 |
) |
|
|
24 |
|
Derivative financial instruments |
|
|
(7 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(267 |
) |
|
|
24 |
|
|
|
(265 |
) |
|
|
24 |
|
|
|
|
|
|
Net deferred tax liability |
|
|
(1,703 |
) |
|
|
(1,802 |
) |
|
|
(1,832 |
) |
|
|
(1,961 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our net deferred tax liability is split as follows (c): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets recognised in the balance sheet |
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Deferred tax liabilities recognised in the balance sheet |
|
|
(1,704 |
) |
|
|
(1,804 |
) |
|
|
(1,832 |
) |
|
|
(1,961 |
) |
|
|
|
|
|
|
|
|
(1,703 |
) |
|
|
(1,802 |
) |
|
|
(1,832 |
) |
|
|
(1,961 |
) |
|
|
|
|
|
(a) We have recognised a deferred tax asset for the unused tax
losses of our offshore controlled entities to the extent that it is
probable that future taxable profit will be available against which
the unused tax losses can be utilised. We have prepared management
budgets and forecasts in line with our current knowledge of future
events to support our view of sufficient future taxable profits
being available to offset our unused tax losses.
(b) When the underlying transactions to which our deferred tax
relates is recognised directly to equity in accordance with
applicable accounting standards, the temporary differences
associated with these adjustments are also recognised directly in
equity.
(c) We are able to offset deferred tax assets and deferred tax
liabilities in the balance sheet when they relate to income taxes
levied by the same taxation authority and to the extent we intend
to settle our current tax assets and liabilities on a net basis.
Our deferred tax assets and deferred tax liabilities are netted
within the tax consolidation group, as these deferred tax balances
relate to income taxes levied by the Australian Taxation Office. We
do not net deferred tax balances between controlled entities, apart
from those within the tax consolidation group.
F-45
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
9. Income taxes (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Deferred tax assets not recognised in the balance sheet (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax losses |
|
|
185 |
|
|
|
161 |
|
|
|
|
|
|
|
|
|
Capital tax losses |
|
|
196 |
|
|
|
198 |
|
|
|
160 |
|
|
|
161 |
|
Deductible temporary differences |
|
|
353 |
|
|
|
334 |
|
|
|
192 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
734 |
|
|
|
693 |
|
|
|
352 |
|
|
|
260 |
|
|
|
|
|
|
(a) Our deferred tax assets not recognised in the balance sheet may
be used in future years if the following criteria are met:
|
|
our controlled entities have sufficient future taxable profit to
enable the income tax losses and temporary differences to be offset
against that taxable profit; |
|
|
|
the Telstra Entity and our controlled entities have sufficient
future capital gains to be offset against those capital losses; |
|
|
|
we continue to satisfy the conditions required by tax legislation
to be able to use the tax losses; and |
|
|
|
there are no future changes in tax legislation that will
adversely affect us in using the benefit of the tax losses. |
As at 30 June 2006, the deferred tax assets not recognised in our
balance sheet are able to be carried forward indefinitely for both
our domestic and offshore operations, except in relation to one
offshore controlled entity that has income tax losses of $9 million
(fiscal 2005: $13 million) that will expire in fiscal 2027.
In the event of the further privatisation of our Company, certain
income tax losses and capital tax losses, not currently recognised
as a deferred tax asset, may not be able to be utilised in the
future to offset income tax and capital tax gains for some offshore
controlled entities and the tax consolidated group. The ability to
utilise income and capital losses in the future will depend on
various factors, including the number of shares the Commonwealth
continues to hold, either directly or indirectly.
Tax consolidation
The Telstra Entity and its Australian resident wholly owned
entities previously elected to form a tax consolidated group. As
part of the election to enter tax consolidation, the tax
consolidated group is treated as a single entity for income tax
purposes.
The Telstra Entity, as the head entity in the tax consolidated
group, recognises, in addition to its own transactions, the current
tax liabilities and the deferred tax assets arising from unused tax
losses and tax credits for all entities in the group. However, the
Telstra Entity and its resident wholly owned entities account for
their own current tax expense and deferred tax amounts.
Upon tax consolidation, the entities within the tax consolidated
group entered into a tax sharing agreement. The terms of this
agreement specified the methods of allocating any tax liability in
the event of default by the Telstra Entity on its group payment
obligations and the treatment where a subsidiary member exits the
group. The tax liability of the group otherwise remains with the
Telstra Entity for tax purposes.
During fiscal 2006, the entities within the tax consolidated
group entered into a tax funding arrangement under which:
|
|
the Telstra Entity compensates its wholly owned controlled
entities for any current tax receivable assumed; |
|
|
|
the Telstra Entity compensates its wholly owned controlled
entities for any deferred tax assets relating to unused tax losses
and tax credits; and |
|
|
|
wholly owned entities compensate the Telstra Entity for any current tax payable assumed. |
The funding amounts are based on the amounts recorded in the
financial statements of the wholly owned entities.
Amounts receivable of $40 million to the Telstra Entity and amounts
payable from the Telstra Entity of $194 million under the tax
funding arrangements are due in the next financial year upon final
settlement of the current tax payable for the tax consolidated
group. During fiscal 2005, no tax funding arrangement was in place
and as a result these funding amounts were recorded as equity
contributions to or distributions from our controlled entities.
F-46
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
10. Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and on hand |
|
|
238 |
|
|
|
225 |
|
|
|
87 |
|
|
|
83 |
|
Bank deposits, bills of exchange and commercial paper (a) |
|
|
451 |
|
|
|
1,323 |
|
|
|
387 |
|
|
|
1,285 |
|
|
|
|
|
|
|
|
|
689 |
|
|
|
1,548 |
|
|
|
474 |
|
|
|
1,368 |
|
|
|
|
|
|
(a) Bank deposits are held in the short term money market. The
carrying amount of bank deposits, bills of exchange and commercial
paper approximates net fair value due to their short term to
maturity.
F-47
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
11. Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade debtors (a) |
|
|
|
|
|
|
2,565 |
|
|
|
2,434 |
|
|
|
1,881 |
|
|
|
1,774 |
|
Allowance for doubtful debts |
|
|
|
|
|
|
(144 |
) |
|
|
(159 |
) |
|
|
(110 |
) |
|
|
(125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,421 |
|
|
|
2,275 |
|
|
|
1,771 |
|
|
|
1,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by controlled entities (other than trade debtors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
2,267 |
|
|
|
2,194 |
|
Allowance for amounts owed by controlled entities (other than trade debtors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
(1,851 |
) |
|
|
(1,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416 |
|
|
|
725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued revenue |
|
|
|
|
|
|
1,027 |
|
|
|
976 |
|
|
|
971 |
|
|
|
929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables (b) |
|
|
|
|
|
|
262 |
|
|
|
298 |
|
|
|
195 |
|
|
|
235 |
|
Allowance for doubtful debts (b) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,280 |
|
|
|
1,274 |
|
|
|
1,157 |
|
|
|
1,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,701 |
|
|
|
3,549 |
|
|
|
3,344 |
|
|
|
3,538 |
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by controlled entities (other than trade debtors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by jointly controlled and associated entities (c) |
|
|
33 |
|
|
|
229 |
|
|
|
242 |
|
|
|
210 |
|
|
|
204 |
|
Allowance for amounts owed by jointly controlled and associated entities (c) |
|
|
33 |
|
|
|
(215 |
) |
|
|
(210 |
) |
|
|
(210 |
) |
|
|
(204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables (b) |
|
|
|
|
|
|
78 |
|
|
|
65 |
|
|
|
72 |
|
|
|
59 |
|
Allowance for doubtful debts (b) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73 |
|
|
|
65 |
|
|
|
67 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
97 |
|
|
|
127 |
|
|
|
115 |
|
|
|
|
|
|
|
|
|
|
(a) Our policy requires trade debtors to pay us in accordance with
agreed payment terms. Depending on the customer segment, our
settlement terms are generally 14 to 30 days from date of invoice.
All credit and recovery risk associated with trade debtors has been
provided for in the balance sheet.
(b) Our other receivables relates mainly to customer deferred
debt. Our customer deferred debt allows eligible post paid
customers the opportunity to repay the cost of their mobile
handset and approved accessories monthly over 12, 18 or 24 months.
The loan is provided interest free to our mobile postpaid
customers.
(c) In fiscal 2006, amounts owed by jointly controlled and
associated entities relates mainly to loans provided to Reach Ltd
(Reach) of $210 million (2005: $204 million) and the 3GIS
Partnership (3GIS) of $14 million (2005: $32 million). An
allowance for the total loan provided to Reach has been recognised.
Refer to note 33 for further details.
F-48
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
12. Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finished goods recorded at net realisable value |
|
|
79 |
|
|
|
4 |
|
|
|
67 |
|
|
|
|
|
Finished goods recorded at cost |
|
|
123 |
|
|
|
197 |
|
|
|
91 |
|
|
|
167 |
|
|
|
|
|
|
Total finished goods |
|
|
202 |
|
|
|
201 |
|
|
|
158 |
|
|
|
167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials and stores recorded at cost |
|
|
15 |
|
|
|
16 |
|
|
|
10 |
|
|
|
12 |
|
Construction contracts (a) |
|
|
7 |
|
|
|
15 |
|
|
|
7 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
224 |
|
|
|
232 |
|
|
|
175 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finished goods recorded at net realisable value |
|
|
15 |
|
|
|
|
|
|
|
15 |
|
|
|
|
|
Finished goods recorded at cost |
|
|
5 |
|
|
|
15 |
|
|
|
5 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
20 |
|
|
|
15 |
|
|
|
20 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Construction contract disclosures are shown as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract costs incurred and recognised profits |
|
|
108 |
|
|
|
69 |
|
|
|
108 |
|
|
|
69 |
|
Progress billings |
|
|
(101 |
) |
|
|
(54 |
) |
|
|
(101 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
|
|
7 |
|
|
|
15 |
|
|
|
7 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances received for construction work in progress (included in trade and other
payables) |
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
F-49
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
13. Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Investments accounted for using the equity method |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in jointly controlled entities |
|
|
|
|
|
|
4 |
|
|
|
40 |
|
|
|
2 |
|
|
|
83 |
|
Allowance for impairment in value |
|
|
|
|
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
Carrying amount of investments in jointly controlled entities |
|
|
30 |
|
|
|
2 |
|
|
|
36 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in associated entities |
|
|
|
|
|
|
45 |
|
|
|
36 |
|
|
|
18 |
|
|
|
33 |
|
Allowance for impairment in value |
|
|
|
|
|
|
(24 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
Carrying amount of investments in associated entities |
|
|
30 |
|
|
|
21 |
|
|
|
12 |
|
|
|
18 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
|
48 |
|
|
|
18 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in controlled entities |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
13,062 |
|
|
|
12,975 |
|
Allowance for impairment in value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,109 |
) |
|
|
(6,839 |
) |
|
|
|
|
|
|
|
|
|
Total investments in controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,953 |
|
|
|
6,136 |
|
|
|
|
|
|
|
|
|
|
F-50
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Land and site improvements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
35 |
|
|
|
40 |
|
|
|
32 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings (including leasehold improvements) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
822 |
|
|
|
822 |
|
|
|
706 |
|
|
|
722 |
|
Accumulated depreciation/impairment |
|
|
(392 |
) |
|
|
(392 |
) |
|
|
(352 |
) |
|
|
(356 |
) |
|
|
|
|
|
|
|
|
430 |
|
|
|
430 |
|
|
|
354 |
|
|
|
366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication assets (including leasehold improvements) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
45,848 |
|
|
|
43,217 |
|
|
|
43,222 |
|
|
|
41,127 |
|
Accumulated depreciation/impairment |
|
|
(23,398 |
) |
|
|
(21,541 |
) |
|
|
(22,393 |
) |
|
|
(20,946 |
) |
|
|
|
|
|
|
|
|
22,450 |
|
|
|
21,676 |
|
|
|
20,829 |
|
|
|
20,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication assets under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
Accumulated depreciation/impairment |
|
|
(501 |
) |
|
|
(434 |
) |
|
|
(501 |
) |
|
|
(434 |
) |
|
|
|
|
|
|
|
|
357 |
|
|
|
424 |
|
|
|
357 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other plant, equipment and motor vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
1,068 |
|
|
|
1,011 |
|
|
|
692 |
|
|
|
753 |
|
Accumulated depreciation/impairment |
|
|
(740 |
) |
|
|
(710 |
) |
|
|
(519 |
) |
|
|
(554 |
) |
|
|
|
|
|
|
|
|
328 |
|
|
|
301 |
|
|
|
173 |
|
|
|
199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
60 |
|
|
|
52 |
|
|
|
33 |
|
|
|
26 |
|
Accumulated depreciation/impairment |
|
|
(38 |
) |
|
|
(32 |
) |
|
|
(13 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
20 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
48,691 |
|
|
|
46,000 |
|
|
|
45,543 |
|
|
|
43,523 |
|
Accumulated depreciation |
|
|
(25,069 |
) |
|
|
(23,109 |
) |
|
|
(23,778 |
) |
|
|
(22,300 |
) |
|
|
|
|
|
|
|
|
23,622 |
|
|
|
22,891 |
|
|
|
21,765 |
|
|
|
21,223 |
|
|
|
|
|
|
F-51
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Land and site improvements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
40 |
|
|
|
43 |
|
|
|
37 |
|
|
|
42 |
|
- additions |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
3 |
|
- disposals |
|
|
|
|
|
|
(5 |
) |
|
|
(8 |
) |
|
|
(5 |
) |
|
|
(8 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
35 |
|
|
|
40 |
|
|
|
32 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings (including leasehold improvements) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
430 |
|
|
|
393 |
|
|
|
366 |
|
|
|
376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
822 |
|
|
|
733 |
|
|
|
722 |
|
|
|
689 |
|
- additions |
|
|
|
|
|
|
72 |
|
|
|
47 |
|
|
|
60 |
|
|
|
43 |
|
- disposals |
|
|
|
|
|
|
(104 |
) |
|
|
(16 |
) |
|
|
(98 |
) |
|
|
(15 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
10 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(4 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
26 |
|
|
|
9 |
|
|
|
22 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
822 |
|
|
|
822 |
|
|
|
706 |
|
|
|
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(392 |
) |
|
|
(340 |
) |
|
|
(356 |
) |
|
|
(313 |
) |
- disposals |
|
|
|
|
|
|
74 |
|
|
|
4 |
|
|
|
70 |
|
|
|
3 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(62 |
) |
|
|
(54 |
) |
|
|
(54 |
) |
|
|
(47 |
) |
- impairment losses |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(8 |
) |
|
|
(5 |
) |
|
|
(6 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(392 |
) |
|
|
(392 |
) |
|
|
(352 |
) |
|
|
(356 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
430 |
|
|
|
430 |
|
|
|
354 |
|
|
|
366 |
|
|
|
|
|
|
|
|
|
|
F-52
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Communication assets (including leasehold improvements) (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
21,676 |
|
|
|
21,093 |
|
|
|
20,181 |
|
|
|
20,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
43,217 |
|
|
|
40,575 |
|
|
|
41,127 |
|
|
|
39,093 |
|
- additions |
|
|
|
|
|
|
3,681 |
|
|
|
3,378 |
|
|
|
3,501 |
|
|
|
2,732 |
|
- disposals |
|
|
|
|
|
|
(1,416 |
) |
|
|
(740 |
) |
|
|
(1,432 |
) |
|
|
(740 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(105 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
50 |
|
|
|
41 |
|
|
|
26 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
45,848 |
|
|
|
43,217 |
|
|
|
43,222 |
|
|
|
41,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(21,541 |
) |
|
|
(19,482 |
) |
|
|
(20,946 |
) |
|
|
(18,998 |
) |
- disposals |
|
|
|
|
|
|
1,376 |
|
|
|
584 |
|
|
|
1,393 |
|
|
|
588 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
(265 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(2,953 |
) |
|
|
(2,615 |
) |
|
|
(2,786 |
) |
|
|
(2,508 |
) |
- impairment losses |
|
|
|
|
|
|
(37 |
) |
|
|
(14 |
) |
|
|
(37 |
) |
|
|
(14 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
41 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(19 |
) |
|
|
(22 |
) |
|
|
(17 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(23,398 |
) |
|
|
(21,541 |
) |
|
|
(22,393 |
) |
|
|
(20,946 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
22,450 |
|
|
|
21,676 |
|
|
|
20,829 |
|
|
|
20,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communication assets under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
424 |
|
|
|
499 |
|
|
|
424 |
|
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening and closing cost (b) |
|
|
|
|
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
|
|
858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(434 |
) |
|
|
(359 |
) |
|
|
(434 |
) |
|
|
(359 |
) |
- depreciation expense |
|
|
7 |
|
|
|
(67 |
) |
|
|
(75 |
) |
|
|
(67 |
) |
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(501 |
) |
|
|
(434 |
) |
|
|
(501 |
) |
|
|
(434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
357 |
|
|
|
424 |
|
|
|
357 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
(a) Includes certain network land and buildings which are essential
to the operation of our communication assets.
(b) During fiscal 2006 and fiscal 2005, there were no additions or
disposals to this class of asset. As a result, our opening and
closing cost has remained unchanged.
F-53
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Other plant, equipment and motor vehicles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
301 |
|
|
|
380 |
|
|
|
199 |
|
|
|
211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
1,011 |
|
|
|
1,335 |
|
|
|
753 |
|
|
|
1,004 |
|
- additions |
|
|
|
|
|
|
124 |
|
|
|
114 |
|
|
|
34 |
|
|
|
52 |
|
- disposals |
|
|
|
|
|
|
(111 |
) |
|
|
(301 |
) |
|
|
(96 |
) |
|
|
(295 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
48 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(8 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
4 |
|
|
|
(138 |
) |
|
|
1 |
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
1,068 |
|
|
|
1,011 |
|
|
|
692 |
|
|
|
753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(710 |
) |
|
|
(955 |
) |
|
|
(554 |
) |
|
|
(793 |
) |
- disposals |
|
|
|
|
|
|
98 |
|
|
|
287 |
|
|
|
85 |
|
|
|
281 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(93 |
) |
|
|
(123 |
) |
|
|
(45 |
) |
|
|
(50 |
) |
- impairment losses |
|
|
|
|
|
|
(26 |
) |
|
|
(3 |
) |
|
|
(26 |
) |
|
|
(3 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
6 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
22 |
|
|
|
75 |
|
|
|
21 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(740 |
) |
|
|
(710 |
) |
|
|
(519 |
) |
|
|
(554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
328 |
|
|
|
301 |
|
|
|
173 |
|
|
|
199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment under finance lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
20 |
|
|
|
11 |
|
|
|
16 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
52 |
|
|
|
48 |
|
|
|
26 |
|
|
|
20 |
|
- additions |
|
|
|
|
|
|
9 |
|
|
|
13 |
|
|
|
9 |
|
|
|
11 |
|
- disposals |
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
(5 |
) |
- acquisitions through business combinations |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
60 |
|
|
|
52 |
|
|
|
33 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated depreciation/impairment |
|
|
|
|
|
|
(32 |
) |
|
|
(37 |
) |
|
|
(10 |
) |
|
|
(10 |
) |
- disposals |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
- depreciation expense |
|
|
7 |
|
|
|
(8 |
) |
|
|
(9 |
) |
|
|
(6 |
) |
|
|
(7 |
) |
- other |
|
|
|
|
|
|
2 |
|
|
|
11 |
|
|
|
3 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
Closing accumulated depreciation/impairment |
|
|
|
|
|
|
(38 |
) |
|
|
(32 |
) |
|
|
(13 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
22 |
|
|
|
20 |
|
|
|
20 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
F-54
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
14. Property, plant and equipment (continued)
Work in progress
In fiscal 2006, the Telstra Group has property, plant and equipment
under construction amounting to $1,695 million (2005: $1,040
million). In fiscal 2006, the Telstra Entity has property, plant
and equipment under construction amounting to $1,596 million (2005:
$945 million). As these assets are not installed and ready for
use, there is no depreciation being charged on these amounts.
Other
Details of our expenditure and lease commitments in relation to
property, plant and equipment are shown in note 26 to these
financial statements.
In fiscal 2006, the Telstra Group has property, plant and equipment
that was fully depreciated and still in use with a cost of $1,767
million (2005: $2,224 million). In fiscal 2006, the Telstra Entity
has property, plant and equipment that was fully depreciated and
still in use with a cost of $1,412 million (2005: $1,905 million).
F-55
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Goodwill |
|
|
2,073 |
|
|
|
2,037 |
|
|
|
16 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally generated intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software assets developed for internal use |
|
|
3,188 |
|
|
|
3,622 |
|
|
|
2,651 |
|
|
|
3,173 |
|
Accumulated amortisation |
|
|
(1,406 |
) |
|
|
(1,652 |
) |
|
|
(1,171 |
) |
|
|
(1,499 |
) |
|
|
|
|
|
|
|
|
1,782 |
|
|
|
1,970 |
|
|
|
1,480 |
|
|
|
1,674 |
|
|
|
|
|
|
Acquired intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mastheads |
|
|
447 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and trademarks |
|
|
34 |
|
|
|
34 |
|
|
|
20 |
|
|
|
20 |
|
Accumulated amortisation |
|
|
(8 |
) |
|
|
(6 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
26 |
|
|
|
28 |
|
|
|
9 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licences |
|
|
833 |
|
|
|
793 |
|
|
|
267 |
|
|
|
267 |
|
Accumulated amortisation |
|
|
(241 |
) |
|
|
(183 |
) |
|
|
(132 |
) |
|
|
(116 |
) |
|
|
|
|
|
|
|
|
592 |
|
|
|
610 |
|
|
|
135 |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brandnames |
|
|
235 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
Accumulated amortisation |
|
|
(53 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182 |
|
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer bases |
|
|
846 |
|
|
|
749 |
|
|
|
70 |
|
|
|
70 |
|
Accumulated amortisation |
|
|
(407 |
) |
|
|
(305 |
) |
|
|
(64 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
|
|
439 |
|
|
|
444 |
|
|
|
6 |
|
|
|
19 |
|
|
|
|
|
|
Total acquired intangible assets |
|
|
1,686 |
|
|
|
1,702 |
|
|
|
150 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred expenditure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred expenditure |
|
|
1,589 |
|
|
|
1,272 |
|
|
|
1,841 |
|
|
|
1,533 |
|
Accumulated amortisation |
|
|
(1,007 |
) |
|
|
(652 |
) |
|
|
(1,022 |
) |
|
|
(655 |
) |
|
|
|
|
|
|
|
|
582 |
|
|
|
620 |
|
|
|
819 |
|
|
|
878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At cost |
|
|
9,245 |
|
|
|
9,169 |
|
|
|
4,865 |
|
|
|
5,079 |
|
Accumulated amortisation |
|
|
(3,122 |
) |
|
|
(2,840 |
) |
|
|
(2,400 |
) |
|
|
(2,328 |
) |
|
|
|
|
|
|
|
|
6,123 |
|
|
|
6,329 |
|
|
|
2,465 |
|
|
|
2,751 |
|
|
|
|
|
|
F-56
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening value |
|
|
|
|
|
|
2,037 |
|
|
|
1,790 |
|
|
|
16 |
|
|
|
16 |
|
- acquisitions through business combinations |
|
|
24 |
|
|
|
324 |
|
|
|
385 |
|
|
|
|
|
|
|
|
|
- disposals |
|
|
|
|
|
|
(312 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
27 |
|
|
|
(138 |
) |
|
|
|
|
|
|
|
|
- impairment losses |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing value (a) |
|
|
|
|
|
|
2,073 |
|
|
|
2,037 |
|
|
|
16 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles internally generated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software assets developed for internal use (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
1,970 |
|
|
|
1,882 |
|
|
|
1,674 |
|
|
|
1,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
3,622 |
|
|
|
3,249 |
|
|
|
3,173 |
|
|
|
3,005 |
|
- additions |
|
|
|
|
|
|
602 |
|
|
|
552 |
|
|
|
498 |
|
|
|
470 |
|
- acquisitions through business combinations |
|
|
|
|
|
|
1 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
- disposals |
|
|
|
|
|
|
(969 |
) |
|
|
(310 |
) |
|
|
(965 |
) |
|
|
(302 |
) |
- impairment losses (f) |
|
|
|
|
|
|
(65 |
) |
|
|
|
|
|
|
(64 |
) |
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
7 |
|
|
|
116 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
3,188 |
|
|
|
3,622 |
|
|
|
2,651 |
|
|
|
3,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(1,652 |
) |
|
|
(1,367 |
) |
|
|
(1,499 |
) |
|
|
(1,307 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(726 |
) |
|
|
(510 |
) |
|
|
(629 |
) |
|
|
(472 |
) |
- disposals |
|
|
|
|
|
|
969 |
|
|
|
310 |
|
|
|
965 |
|
|
|
302 |
|
- foreign currency exchange differences |
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(4 |
) |
|
|
(85 |
) |
|
|
(8 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(1,406 |
) |
|
|
(1,652 |
) |
|
|
(1,171 |
) |
|
|
(1,499 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
1,782 |
|
|
|
1,970 |
|
|
|
1,480 |
|
|
|
1,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mastheads |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
447 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
447 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
- impairment losses |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
447 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value (c) |
|
|
|
|
|
|
447 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Patents and trademarks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
28 |
|
|
|
3 |
|
|
|
13 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
34 |
|
|
|
7 |
|
|
|
20 |
|
|
|
20 |
|
- additions |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
34 |
|
|
|
34 |
|
|
|
20 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(6 |
) |
|
|
(4 |
) |
|
|
(7 |
) |
|
|
(3 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(8 |
) |
|
|
(6 |
) |
|
|
(11 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
26 |
|
|
|
28 |
|
|
|
9 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
610 |
|
|
|
651 |
|
|
|
151 |
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
793 |
|
|
|
801 |
|
|
|
267 |
|
|
|
267 |
|
- additions |
|
|
|
|
|
|
16 |
|
|
|
5 |
|
|
|
2 |
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
23 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
833 |
|
|
|
793 |
|
|
|
267 |
|
|
|
267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(183 |
) |
|
|
(150 |
) |
|
|
(116 |
) |
|
|
(98 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(58 |
) |
|
|
(37 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
- other |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(241 |
) |
|
|
(183 |
) |
|
|
(132 |
) |
|
|
(116 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
592 |
|
|
|
610 |
|
|
|
135 |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
F-58
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Brandnames |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
173 |
|
|
|
180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
215 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
21 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(1 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
235 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(42 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
- amortisation expense (e) |
|
|
7 |
|
|
|
(11 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(53 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
182 |
|
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer bases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
|
|
|
|
444 |
|
|
|
353 |
|
|
|
19 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
|
|
|
|
749 |
|
|
|
593 |
|
|
|
70 |
|
|
|
70 |
|
- additions |
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- acquisitions through business combinations |
|
|
|
|
|
|
76 |
|
|
|
191 |
|
|
|
|
|
|
|
|
|
- foreign currency exchange differences |
|
|
|
|
|
|
(9 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
|
|
|
|
846 |
|
|
|
749 |
|
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
|
|
|
|
(305 |
) |
|
|
(240 |
) |
|
|
(51 |
) |
|
|
(36 |
) |
- amortisation expense (e) |
|
|
7 |
|
|
|
(98 |
) |
|
|
(86 |
) |
|
|
(13 |
) |
|
|
(15 |
) |
- foreign currency exchange differences |
|
|
|
|
|
|
(4 |
) |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing accumulated amortisation |
|
|
|
|
|
|
(407 |
) |
|
|
(305 |
) |
|
|
(64 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
|
|
|
|
439 |
|
|
|
444 |
|
|
|
6 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
F-59
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
15. Intangible assets (continued)
Movements in intangible assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Deferred expenditure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book value |
|
|
620 |
|
|
|
636 |
|
|
|
878 |
|
|
|
593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening cost |
|
|
1,272 |
|
|
|
1,031 |
|
|
|
1,533 |
|
|
|
988 |
|
- additions (d) |
|
|
317 |
|
|
|
241 |
|
|
|
315 |
|
|
|
545 |
|
- other |
|
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
Closing cost |
|
|
1,589 |
|
|
|
1,272 |
|
|
|
1,841 |
|
|
|
1,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortisation |
|
|
(652 |
) |
|
|
(395 |
) |
|
|
(655 |
) |
|
|
(395 |
) |
- amortisation expense (e) |
|
|
(355 |
) |
|
|
(257 |
) |
|
|
(367 |
) |
|
|
(260 |
) |
|
|
|
|
|
Closing accumulated amortisation |
|
|
(1,007 |
) |
|
|
(652 |
) |
|
|
(1,022 |
) |
|
|
(655 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing net book value |
|
|
582 |
|
|
|
620 |
|
|
|
819 |
|
|
|
878 |
|
|
|
|
|
|
Details of our expenditure commitments in relation to our
intangible assets are shown in note 26 to our financial statements.
(a) We allocate goodwill to our relevant cash generating units
(CGUs) for the purposes of impairment testing. Refer to note 25
for further details.
(b) In fiscal 2006, the Telstra Group had software assets under
development amounting to $352 million (2005: $362 million). In
fiscal 2006, the Telstra Entity had software assets under
development amounting to $296 million (2005: $301 million). As
these assets were not installed and ready for use there is no
amortisation being charged on the amounts.
(c) We do not currently amortise the cost of our mastheads as they
have been assessed to have an indefinite useful life. We do not
expect there to be a foreseeable limit to the period over which the
mastheads are expected to generate net cash inflows and, based on
industry experience and current information, it is extremely rare
for leading mastheads to become commercially or technically
obsolete. We believe we could dispose of the mastheads in the
foreseeable future for an amount not less than the current carrying
value and that the acquirer could retain the strong market position
that the mastheads currently represent.
(d) During fiscal 2005, we entered into an arrangement with our
jointly controlled entity, Reach Ltd (Reach), and our
co-shareholder PCCW, whereby Reachs international cable capacity
was allocated between us and PCCW under an indefeasible right of
use (IRU) agreement, including committed capital expenditure for
the period until 2022.
The IRU is amortised over the contract periods for the capacity on
the various international cable systems, which range from 5 to 22
years. The Telstra Entity has recorded the IRU within deferred
expenditure. For the Telstra Group, the IRU was deemed to be an
extension of our investment in Reach. The IRU has a carrying value
of $nil in the consolidated financial statements due to the
recognition of equity accounted losses in Reach.
(e) Amortisation expense is included in depreciation and
amortisation expense in the income statement, with the exception of
items of deferred expenditure which are expensed to the relevant
line of the income statement. The majority of the deferred
expenditure relates to the deferral of basic access installation
costs, which are amortised to goods and services purchased in the
income statement.
(f) We have recognised impairment losses relating to project costs
that were included in our capitalised software and relate to our
software work-in-progress. These projects have subsequently been
cancelled and the costs recognised in the income statement as an
impairment loss.
F-60
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
16. Derivative financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge receivable |
|
|
20 |
|
|
|
4 |
|
|
|
20 |
|
|
|
4 |
|
Forward contract asset |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
4 |
|
|
|
21 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge receivable |
|
|
222 |
|
|
|
|
|
|
|
222 |
|
|
|
|
|
Interest rate swap asset |
|
|
169 |
|
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
391 |
|
|
|
|
|
|
|
391 |
|
|
|
|
|
|
|
|
|
|
Refer to note 35 for details on the financial risk management of
our derivative financial instruments.
The transitional rules for first time adoption of A-IFRS required
that we restate our comparative financial report using A-IFRS,
except for AASB 132: Financial Instruments: Disclosure and
Presentation and AASB 139: Financial Instruments: Recognition and
Measurement, where comparative information was not required to be
restated. Accordingly, we have applied previous AGAAP in the
comparative information.
F-61
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
17. Trade and other payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade creditors (a) |
|
|
|
|
|
|
738 |
|
|
|
649 |
|
|
|
586 |
|
|
|
480 |
|
Accrued expenses |
|
|
|
|
|
|
1,338 |
|
|
|
1,044 |
|
|
|
1,081 |
|
|
|
815 |
|
Accrued capital expenditure |
|
|
|
|
|
|
844 |
|
|
|
289 |
|
|
|
772 |
|
|
|
210 |
|
Accrued interest |
|
|
|
|
|
|
258 |
|
|
|
227 |
|
|
|
258 |
|
|
|
227 |
|
Deferred cash settlement for acquisitions (b) |
|
|
|
|
|
|
123 |
|
|
|
316 |
|
|
|
|
|
|
|
|
|
Other creditors (a) |
|
|
|
|
|
|
269 |
|
|
|
282 |
|
|
|
171 |
|
|
|
219 |
|
Amounts owed to controlled entities (other than trade creditors) |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,570 |
|
|
|
2,807 |
|
|
|
3,065 |
|
|
|
1,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred cash settlement for acquisitions (b) |
|
|
|
|
|
|
127 |
|
|
|
187 |
|
|
|
|
|
|
|
|
|
Other creditors |
|
|
|
|
|
|
70 |
|
|
|
63 |
|
|
|
65 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
250 |
|
|
|
65 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
(a) Trade creditors and other creditors are non interest bearing
liabilities. We generally process trade creditor payments once
they have reached 30 days from the date of invoice for electronic
funds transfer payments, or 30 days from the end of the month of
invoice for other payments.
(b) Included in our deferred cash settlement for acquisitions are
our remaining obligations for the purchase of the third generation
radio access network assets from Hutchison 3G Australia Pty Ltd.
During fiscal 2005, we purchased these assets for an amount of
$450 million, payable over two years. We recognised this payable
at its present value in our balance sheet of $403 million and are
releasing the associated financing cost over the period of the
payablein the income statement. For fiscal 2006, this release of
finance costs amounted to $19 million (2005: $28 million).
F-62
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
18. Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft (a) |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Bank loans |
|
|
|
|
|
|
111 |
|
|
|
|
|
|
|
110 |
|
|
|
|
|
Bills of exchange and commercial paper (b) |
|
|
|
|
|
|
1,457 |
|
|
|
449 |
|
|
|
1,457 |
|
|
|
449 |
|
Loans from wholly owned controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,568 |
|
|
|
463 |
|
|
|
2,975 |
|
|
|
2,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds (c) |
|
|
|
|
|
|
|
|
|
|
516 |
|
|
|
|
|
|
|
516 |
|
Other loans (d) |
|
|
|
|
|
|
394 |
|
|
|
523 |
|
|
|
394 |
|
|
|
523 |
|
Finance leases |
|
|
26 |
|
|
|
7 |
|
|
|
5 |
|
|
|
5 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401 |
|
|
|
1,044 |
|
|
|
399 |
|
|
|
1,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,969 |
|
|
|
1,507 |
|
|
|
3,374 |
|
|
|
3,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds (c) |
|
|
|
|
|
|
2,613 |
|
|
|
2,605 |
|
|
|
2,613 |
|
|
|
2,605 |
|
Other loans (d) |
|
|
|
|
|
|
8,748 |
|
|
|
8,289 |
|
|
|
8,748 |
|
|
|
8,289 |
|
Finance leases |
|
|
26 |
|
|
|
48 |
|
|
|
47 |
|
|
|
15 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,409 |
|
|
|
10,941 |
|
|
|
11,376 |
|
|
|
10,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft (a) |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Bank loans |
|
|
|
|
|
|
111 |
|
|
|
|
|
|
|
110 |
|
|
|
|
|
Bills of exchange and commercial paper (b) |
|
|
|
|
|
|
1,457 |
|
|
|
449 |
|
|
|
1,457 |
|
|
|
449 |
|
Loans from wholly owned controlled entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,568 |
|
|
|
463 |
|
|
|
2,975 |
|
|
|
2,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt (including current portion) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds (c) |
|
|
|
|
|
|
2,613 |
|
|
|
3,121 |
|
|
|
2,613 |
|
|
|
3,121 |
|
Other loans (d) |
|
|
|
|
|
|
9,142 |
|
|
|
8,812 |
|
|
|
9,142 |
|
|
|
8,812 |
|
Finance leases |
|
|
26 |
|
|
|
55 |
|
|
|
52 |
|
|
|
20 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,810 |
|
|
|
11,985 |
|
|
|
11,775 |
|
|
|
11,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,378 |
|
|
|
12,448 |
|
|
|
14,750 |
|
|
|
14,799 |
|
|
|
|
|
|
|
|
|
|
F-63
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
18. Borrowings (continued)
Our long term debt is repayable over years ending 30 June as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
Due in the year ending 30 June |
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
after 2011 |
|
|
Total |
|
Telstra bonds |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Coupon interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
up to 6.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
35 |
|
up to 8.0% |
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
500 |
|
|
|
|
|
|
|
1,510 |
|
|
|
2,510 |
|
up to 10.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
|
28 |
|
up to 12.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
44 |
|
up to 16.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
500 |
|
|
|
|
|
|
|
1,649 |
|
|
|
2,649 |
|
|
|
|
|
|
|
|
Unamortised discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans (d) |
|
|
394 |
|
|
|
1,373 |
|
|
|
81 |
|
|
|
815 |
|
|
|
2,642 |
|
|
|
3,837 |
|
|
|
9,142 |
|
|
|
|
|
|
|
|
Unamortised discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
13 |
|
|
|
12 |
|
|
|
10 |
|
|
|
8 |
|
|
|
5 |
|
|
|
52 |
|
|
|
100 |
|
|
|
|
|
|
|
|
Future finance charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long term debt payable |
|
|
407 |
|
|
|
1,385 |
|
|
|
591 |
|
|
|
1,323 |
|
|
|
2,647 |
|
|
|
5,538 |
|
|
|
11,891 |
|
|
|
|
|
|
|
|
Unamortised discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets pledged as security
Our 50% owned pay television joint venture FOXTEL previously
entered into a $550 million bank facility arrangement to fund its
full digital conversion and launch of new digital services. The
use of this facility is subject to certain conditions being met and
full repayment is due on 30 September 2008.
As part of this arrangement, our controlled entity Telstra Media
Pty Ltd as a FOXTEL partner, and FOXTEL itself, have pledged their
respective assets as collateral in favour of the banks. The
carrying value of the assets pledged in Telstra Media Pty Ltd as at
30 June 2006 was $nil (2005: $nil). Refer to note 27 for details
of an equity contribution deed entered as part of this agreement.
On 31 July 2006, FOXTEL entered into a $600 million syndicated
secured term loan facility to fund the refinancing of the above
facility. Refer to note 34 for further details.
Our borrowings are unsecured, except for finance leases which are
secured, as the rights to the leased asset transfer to the lessor
in the event of a default by us.
(a) Bank overdraft
As at 30 June 2006, we had a bank overdraft of $nil (2005: $14
million). Our bank overdraft in fiscal 2005 related to a controlled
entity. This bank overdraft was unsecured, with interest being
charged daily, net of the controlled entitys offsetting position
of cash in bank and any outstanding loans.
(b) Bills of exchange and commercial paper
We have issued bills of exchange and commercial paper of $1,457
million (2005: $449 million) to financial institutions with an
original maturity of less than 180 days. At 30 June 2006, all
$1,457 million (2005: $449 million) of the commercial paper
matures in less than three months.
(c) Telstra bonds
Telstra bonds currently on issue relate to wholesale investors and
mature up until the year 2020. During fiscal 2006, $508 million
(2005: $273 million) of Telstra bonds matured.
F-64
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
18. Borrowings (continued)
(d) Other loans
Details of our other loans, including currency of borrowing,
interest rates and maturity dates, are presented in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group - Other loans details |
|
A$ amount |
|
|
Interest rates |
|
|
Maturity dates |
|
|
|
As at 30 June |
|
|
Year ended 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
2005 |
|
|
A$m |
|
|
A$m |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
Australian dollar loans |
|
|
245 |
|
|
|
247 |
|
|
|
5.93 |
|
|
|
5.93 |
|
|
November 2007 |
|
November 2007 |
US dollar loans |
|
|
1,028 |
|
|
|
1,306 |
|
|
|
5.22 to 6.47 |
|
|
|
3.49 to 6.50 |
|
|
between April 2008 |
|
between Nov 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Dec 2015 |
|
and April 2012 |
Euro eurobond loan |
|
|
6,336 |
|
|
|
5,893 |
|
|
|
3.14 to 6.49 |
|
|
|
3.00 to 6.38 |
|
|
between Dec 2006 |
|
between Dec 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and July 2015 |
|
and July 2015 |
Swiss franc eurobond loan |
|
|
326 |
|
|
|
304 |
|
|
|
2.61 |
|
|
|
2.50 |
|
|
April 2013 |
|
April 2013 |
Japanese yen loans |
|
|
472 |
|
|
|
333 |
|
|
|
0.44 to 2.51 |
|
|
|
0.31 to 1.89 |
|
|
between July 2007 |
|
between July 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and June 2016 |
|
and Nov 2014 |
Singapore dollar loans |
|
|
84 |
|
|
|
78 |
|
|
|
3.80 |
|
|
|
3.80 |
|
|
March 2008 |
|
March 2008 |
New Zealand dollar loans |
|
|
164 |
|
|
|
183 |
|
|
|
7.03 to 7.19 |
|
|
|
6.99 to 7.15 |
|
|
between Nov 2011 |
|
between Nov 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Nov 2014 |
|
and Nov 2014 |
British pound sterling loans |
|
|
487 |
|
|
|
468 |
|
|
|
6.23 |
|
|
|
6.13 |
|
|
August 2014 |
|
August 2014 |
|
|
|
Total other loans including current portion |
|
|
9,142 |
|
|
|
8,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) Financing arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
We have access to the following lines of credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit standby arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured committed cash standby facilities which are subject to annual review |
|
|
902 |
|
|
|
892 |
|
|
|
894 |
|
|
|
887 |
|
Amount of credit unused |
|
|
900 |
|
|
|
891 |
|
|
|
894 |
|
|
|
887 |
|
|
|
|
|
|
We have commercial paper facilities in place with financial
institutions under which we may issue up to $14,651 million (2005:
$13,842 million). As at 30 June 2006, we had drawn down $1,457
million (2005: $449 million) of these commercial paper facilities.
These facilities are not committed or underwritten and we have no
guaranteed access to the funds.
Generally, our facilities are available unless we default on any
terms applicable under the relevant agreements or become insolvent.
F-65
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
19. Provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee benefits (a) |
|
|
319 |
|
|
|
336 |
|
|
|
272 |
|
|
|
288 |
|
Workers compensation |
|
|
32 |
|
|
|
32 |
|
|
|
31 |
|
|
|
31 |
|
Provision for restructuring |
|
|
81 |
|
|
|
|
|
|
|
81 |
|
|
|
|
|
Provision for redundancies (a) |
|
|
158 |
|
|
|
|
|
|
|
155 |
|
|
|
|
|
Other provisions |
|
|
147 |
|
|
|
53 |
|
|
|
140 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
737 |
|
|
|
421 |
|
|
|
679 |
|
|
|
356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee benefits (a) |
|
|
573 |
|
|
|
610 |
|
|
|
548 |
|
|
|
588 |
|
Workers compensation |
|
|
184 |
|
|
|
182 |
|
|
|
177 |
|
|
|
175 |
|
Provision for restructuring |
|
|
128 |
|
|
|
|
|
|
|
128 |
|
|
|
|
|
Provision for redundancies (a) |
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
Other provisions |
|
|
61 |
|
|
|
102 |
|
|
|
43 |
|
|
|
74 |
|
|
|
|
|
|
|
|
|
974 |
|
|
|
894 |
|
|
|
924 |
|
|
|
837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Aggregate employee benefits and related on-costs liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current provision for employee benefits |
|
|
319 |
|
|
|
336 |
|
|
|
272 |
|
|
|
288 |
|
Non current provision for employee benefits |
|
|
573 |
|
|
|
610 |
|
|
|
548 |
|
|
|
588 |
|
Current provision for redundancies |
|
|
158 |
|
|
|
|
|
|
|
155 |
|
|
|
|
|
Non current provision for redundancies |
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
Accrued labour and on-costs (i) |
|
|
317 |
|
|
|
237 |
|
|
|
303 |
|
|
|
225 |
|
|
|
|
|
|
|
|
|
1,395 |
|
|
|
1,183 |
|
|
|
1,306 |
|
|
|
1,101 |
|
|
|
|
|
|
(i) Accrued labour and related on-costs are included within our
current trade and other payables (refer to note 17).
Provision for employee benefits consist of amounts for annual leave
and long service leave accrued by employees.
Non current employee benefits for long service leave are measured
at their present value. The following assumptions were adopted in
measuring this amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
Weighted average projected increase in salaries, wages and associated on-costs |
|
|
4.2 |
% |
|
|
4.0 |
% |
|
|
4.3 |
% |
|
|
4.0 |
% |
Weighted average discount rates |
|
|
5.4 |
% |
|
|
5.4 |
% |
|
|
5.4 |
% |
|
|
5.4 |
% |
Leave taking rates |
|
|
13.2 |
% |
|
|
13.3 |
% |
|
|
13.3 |
% |
|
|
13.3 |
% |
F-66
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
19. Provisions (continued)
(b) Information about our provisions, other than provision for
employee benefits
Workers compensation
We self insure for our workers compensation liabilities. We
provide for our obligations through an assessment of accidents and
estimated claims incurred. The provision is based on a semi-annual
actuarial review of our workers compensation liability. Actual
compensation paid may vary where accidents and claims incurred vary
from those estimated. The timing of these payments may vary,
however the average time payments are expected for is 11 years
(2005: 12 years).
Certain controlled entities do not self insure, but pay annual
premiums to third party insurance companies for their workers
compensation.
Provision for redundancy and restructuring
The provision for redundancy and restructuring relates to our
transformation project that was announced on 15 November 2005. A
provision has only been raised for those redundancy and
restructuring costs where a detailed formal plan has been approved
and we have raised a valid expectation in those affected that the
plan will be carried out. Only those costs that are not associated
with the ongoing activities of the Company have been included. The
costs included in the redundancy and restructuring provision are
based on current estimates of the likely amounts to be incurred and
include:
|
|
an estimate of the termination benefits that affected employees will be entitled to; |
|
|
|
costs associated with shutting down certain networks, platforms and applications; |
|
|
|
property rationalisation and other onerous lease costs; and |
|
|
|
costs of replacing customer equipment in order to meet our current service obligations. |
A total provision of $427 million has been raised for redundancy
and restructuring for the Telstra Group as at 30 June 2006. This
includes $18 million for the additional impairment of inventory and
a $14 million allowance for other receivables. Refer to note 7(b)
for further details.
The execution of these detailed formal plans, for which a
restructuring and redundancy provision has been raised, is expected
to be completed by fiscal 2011 for the restructuring provision, and
fiscal 2008 for the redundancy provision.
Other
Other provisions include provision for Reach Ltds committed
capital expenditure, provision for restoration costs, and other
general provisions.
F-67
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
19. Provisions (continued)
(c) Movement in provisions, other than employee benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Workers compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
214 |
|
|
|
216 |
|
|
|
206 |
|
|
|
207 |
|
- additional provisions |
|
|
24 |
|
|
|
22 |
|
|
|
23 |
|
|
|
22 |
|
- amount used |
|
|
(32 |
) |
|
|
(32 |
) |
|
|
(31 |
) |
|
|
(31 |
) |
- unwinding of discount on liabilities recognised at present value |
|
|
11 |
|
|
|
11 |
|
|
|
11 |
|
|
|
11 |
|
- effect of any change in the discount rate |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
|
|
|
Closing balance |
|
|
216 |
|
|
|
214 |
|
|
|
208 |
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
- additional provisions |
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
- reversal of amounts unused |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
Closing balance |
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redundancy provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- additional provisions |
|
|
186 |
|
|
|
|
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
186 |
|
|
|
|
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
155 |
|
|
|
46 |
|
|
|
111 |
|
|
|
24 |
|
- additional provisions |
|
|
113 |
|
|
|
125 |
|
|
|
113 |
|
|
|
93 |
|
- amount used |
|
|
(51 |
) |
|
|
(12 |
) |
|
|
(38 |
) |
|
|
(5 |
) |
- reversal of amounts unused |
|
|
(17 |
) |
|
|
(10 |
) |
|
|
(16 |
) |
|
|
(3 |
) |
- unwinding of discount on liabilities recognised at present value |
|
|
9 |
|
|
|
2 |
|
|
|
9 |
|
|
|
2 |
|
- foreign currency exchange differences |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- other |
|
|
1 |
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
208 |
|
|
|
155 |
|
|
|
183 |
|
|
|
111 |
|
|
|
|
|
|
F-68
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
20. Derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge payable |
|
|
6 |
|
|
|
11 |
|
|
|
6 |
|
|
|
11 |
|
Forward contract liability |
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
11 |
|
|
|
12 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap hedge payable |
|
|
612 |
|
|
|
864 |
|
|
|
612 |
|
|
|
864 |
|
Interest rate swap payable |
|
|
156 |
|
|
|
|
|
|
|
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
768 |
|
|
|
864 |
|
|
|
768 |
|
|
|
864 |
|
|
|
|
|
|
Refer to note 35 for details on the financial risk
management of our derivative financial instruments.
The transitional rules for first time adoption of A-IFRS
required that we restate our comparative financial report
using A-IFRS, except for AASB 132: Financial Instruments:
Disclosure and Presentation and AASB 139: Financial
Instruments: Recognition and Measurement, where comparative
information was not required to be restated.
Accordingly, we have applied previous AGAAP in the
comparative information.
F-69
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
21. Share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Contributed equity |
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
Share loan to employees |
|
|
(130 |
) |
|
|
(154 |
) |
|
|
(130 |
) |
|
|
(154 |
) |
Shares held by employee share plan trusts |
|
|
(99 |
) |
|
|
(113 |
) |
|
|
(99 |
) |
|
|
(113 |
) |
Net services received under employee share plans |
|
|
5 |
|
|
|
10 |
|
|
|
5 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
|
|
|
Contributed equity
Our contributed equity represents our authorised fully paid
ordinary shares. Each of our fully paid ordinary shares
carries the right to one vote at a meeting of the company.
Holders of our shares also have the right to receive
dividends as declared, and to participate in the proceeds
from sale of all surplus assets in proportion to the total
shares issued in the event of the company winding up.
The movement in the number of our authorised fully paid
ordinary shares is:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Year ended 30 June |
|
|
2006 |
|
2005 |
|
|
Number of |
|
Number of |
|
|
shares |
|
shares |
|
Opening balance |
|
|
12,443,074,357 |
|
|
|
12,628,359,026 |
|
Shares bought back (i) |
|
|
|
|
|
|
(185,284,669 |
) |
|
|
|
Closing balance |
|
|
12,443,074,357 |
|
|
|
12,443,074,357 |
|
|
|
|
|
|
|
(i) |
|
On 15 November 2004, we completed an off-market share
buy-back of 185,284,669 ordinary shares as part of our
capital management program. The ordinary shares were bought
back at $4.05 per share, comprising a fully
franked dividend component of $2.55 per share and a capital
component of $1.50 per share. The Commonwealth of Australia
did not participate in the share buy-back. |
The shares bought back were subsequently cancelled, reducing
the number of fully paid ordinary shares on issue. In total,
1.47% of our total issued ordinary shares, or 3.0% of our
non Commonwealth owned ordinary shares, were bought back.
The cost of the share buy-back comprised a purchase
consideration of $750 million and associated transaction
costs of $6 million.
In accordance with the substance of the buy-back,
shareholders equity decreased as follows:
|
|
|
|
|
|
|
Year ended |
|
|
|
30 June |
|
|
|
2005 |
|
|
|
$m |
|
|
Contributed equity |
|
|
280 |
|
Retained profits |
|
|
476 |
|
|
|
|
|
|
|
|
756 |
|
|
|
|
|
Share loan to employees
The share loan to employees account represents the
outstanding balance of the non recourse loans provided to our
employees under the Telstra Employee Share Ownership Plans
(TESOP 97 and TESOP 99).
Shares held by employee share plan trusts
The shares held by employee share plan trusts account
represents the value of shares held by the Telstra
Growthshare Trust (Growthshare) in Telstra Corporation
Limited. The purchase of these shares has been fully funded
by Telstra Corporation Limited. As at 30 June 2006 the number
of shares totalled 17,931,918 (2005: 20,216,091).
Net services received under employee share plans
The net services received under employee share plans account
is used to record the cumulative value of our incentive
shares, options, restricted shares, performance rights and
deferred shares issued under Growthshare. Contributions by
Telstra Corporation Limited to Growthshare are also included
in this account. These contributions are used by the Trust to
purchase Telstra shares on market to underpin the issue of
our equity instruments.
F-70
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
21. Share capital (continued)
Movements in our share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Share capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
5,793 |
|
|
|
6,073 |
|
|
|
5,793 |
|
|
|
6,073 |
|
- share buy-back |
|
|
|
|
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
5,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share loan to employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
(154 |
) |
|
|
(174 |
) |
|
|
(154 |
) |
|
|
(174 |
) |
- amounts repaid on share loans provided to employees |
|
|
|
|
|
|
24 |
|
|
|
20 |
|
|
|
24 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
(130 |
) |
|
|
(154 |
) |
|
|
(130 |
) |
|
|
(154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares held by employee share plan trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
(113 |
) |
|
|
(117 |
) |
|
|
(113 |
) |
|
|
(117 |
) |
- additional shares purchased |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
- shares issued to employees under employee share plans |
|
|
|
|
|
|
20 |
|
|
|
4 |
|
|
|
20 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
(99 |
) |
|
|
(113 |
) |
|
|
(99 |
) |
|
|
(113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net services received under employee share plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
10 |
|
|
|
4 |
|
|
|
10 |
|
|
|
4 |
|
- share based payments |
|
|
7 |
|
|
|
15 |
|
|
|
10 |
|
|
|
15 |
|
|
|
10 |
|
- shares issued to employees under employee share plans |
|
|
|
|
|
|
(20 |
) |
|
|
(4 |
) |
|
|
(20 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
5 |
|
|
|
10 |
|
|
|
5 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
5,569 |
|
|
|
5,536 |
|
|
|
|
|
|
|
|
|
|
F-71
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
22. Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Foreign currency translation reserve |
|
|
(210 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
14 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
Consolidation fair value reserve |
|
|
32 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
General reserve |
|
|
4 |
|
|
|
4 |
|
|
|
194 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
(160 |
) |
|
|
(153 |
) |
|
|
210 |
|
|
|
194 |
|
|
|
|
|
|
Foreign currency translation reserve
The foreign currency translation reserve is used to record
exchange differences arising from the conversion of the
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 entities and
associated entities. The foreign currency translation reserve
applicable to jointly controlled and associated entities is
shown in note 30.
Cash flow hedging reserve
The cash flow hedging reserve represents, where a hedge
qualifies for hedge accounting, the effective portion of
gains or losses on remeasuring the fair value of the hedge
instrument until such time as the hedged item affects the
income statement. At this time the gains or losses are
transferred to the income statement.
The transitional rules for first time adoption of A-IFRS
required that we restate our comparative financial report
using A-IFRS, except for AASB 132: Financial Instruments:
Disclosure and Presentation and AASB 139: Financial
Instruments: Recognition and Measurement, where comparative
information was not required to be restated.
Accordingly, we have applied previous AGAAP in the
comparative information.
Consolidation fair value reserve
The consolidation fair value reserve represents our share of
the fair value adjustments to TelstraClear Limited net assets
upon acquisition of a controlling interest. The reserve
balance is amortised over the useful life of the underlying
revalued assets.
General reserve
The general reserve represents other items we have taken
directly to equity.
F-72
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
22. Reserves (continued)
Movements in our reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
(195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
- reserves recognised on equity accounting our interest in jointly controlled
and associated entities |
|
|
|
|
|
|
1 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
- adjustment on translation of financial statements of non-Australian
controlled entities |
|
|
|
|
|
|
(36 |
) |
|
|
(193 |
) |
|
|
|
|
|
|
|
|
- transfer of foreign currency translation reserve on sale of jointly controlled entity |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- reduction on dilution of ownership of Telstra CSL Limited |
|
|
24 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
(210 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- adjustment to opening balance on adoption of new accounting standard (i) |
|
|
|
|
|
|
79 |
|
|
|
|
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted opening balance |
|
|
|
|
|
|
79 |
|
|
|
|
|
|
|
82 |
|
|
|
|
|
- net hedging gains recognised directly in equity |
|
|
|
|
|
|
327 |
|
|
|
|
|
|
|
327 |
|
|
|
|
|
- net hedging gains removed from equity and included in profit for the year |
|
|
|
|
|
|
(420 |
) |
|
|
|
|
|
|
(421 |
) |
|
|
|
|
- income tax on cash flow hedging reserve |
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation fair value reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
38 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
- transfers to retained profits |
|
|
23 |
|
|
|
(6 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
32 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
4 |
|
|
|
5 |
|
|
|
194 |
|
|
|
194 |
|
- reserves recognised on equity accounting our interest in jointly controlled and
associated entities |
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
- transfer of reserve on sale of associates |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
194 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(160 |
) |
|
|
(153 |
) |
|
|
210 |
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Adjustment on adoption of AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement from 1
July 2005. Refer to note 36 for further details. |
F-73
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
23. Retained profits and minority interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Retained profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
8,273 |
|
|
|
8,618 |
|
|
|
7,413 |
|
|
|
7,558 |
|
- adjustment to opening balance on adoption of new accounting standard (i) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted opening balance |
|
|
|
|
|
|
8,268 |
|
|
|
8,618 |
|
|
|
7,408 |
|
|
|
7,558 |
|
- profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
- actuarial gain/(loss) on our defined benefit plans |
|
|
|
|
|
|
958 |
|
|
|
(90 |
) |
|
|
945 |
|
|
|
(85 |
) |
- income tax on our actuarial gain on our defined benefit plans |
|
|
|
|
|
|
(284 |
) |
|
|
24 |
|
|
|
(284 |
) |
|
|
24 |
|
- dividends paid |
|
|
4 |
|
|
|
(4,970 |
) |
|
|
(4,124 |
) |
|
|
(4,970 |
) |
|
|
(4,124 |
) |
- share buy-back |
|
|
21 |
|
|
|
|
|
|
|
(476 |
) |
|
|
|
|
|
|
(476 |
) |
- transfers from consolidation fair value reserve |
|
|
22 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
- transfer of reserve on sale of associates |
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
- dilution gain recognised on CSL New World Mobility Group merger (ii) |
|
|
24 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
7,177 |
|
|
|
8,273 |
|
|
|
6,336 |
|
|
|
7,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance |
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
- increase in minority interests due to acquisitions |
|
|
|
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
|
|
|
|
246 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Adjustment on adoption of AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement from 1
July 2005. Refer to note 36 for further details. |
|
(ii) |
|
Dilution gain represents net gain recognised on the
merger of the Telstra CSL Group and New World Mobility Group.
Refer to note 24 for details. |
F-74
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
(a) Reconciliation of profit to net cash provided by operating
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
3,237 |
|
|
|
4,516 |
|
Add/(subtract) the following transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortisation |
|
|
7 |
|
|
|
4,087 |
|
|
|
3,034 |
|
|
|
3,529 |
|
|
|
3,657 |
|
|
|
3,206 |
|
Finance income |
|
|
6 |
|
|
|
(66 |
) |
|
|
(49 |
) |
|
|
(83 |
) |
|
|
(63 |
) |
|
|
(101 |
) |
Finance costs |
|
|
7 |
|
|
|
1,002 |
|
|
|
744 |
|
|
|
963 |
|
|
|
985 |
|
|
|
943 |
|
Dividend revenue |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(560 |
) |
|
|
(224 |
) |
Share based payments |
|
|
7 |
|
|
|
15 |
|
|
|
11 |
|
|
|
10 |
|
|
|
15 |
|
|
|
10 |
|
Defined benefit expense |
|
|
7 |
|
|
|
185 |
|
|
|
137 |
|
|
|
203 |
|
|
|
182 |
|
|
|
201 |
|
Net gain on disposal of property, plant and equipment |
|
|
6 |
|
|
|
(23 |
) |
|
|
(17 |
) |
|
|
(9 |
) |
|
|
(20 |
) |
|
|
(10 |
) |
Net gain on disposal of controlled entities |
|
|
6 |
|
|
|
(4 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on disposal of other investments |
|
|
6 |
|
|
|
(58 |
) |
|
|
(43 |
) |
|
|
(79 |
) |
|
|
(59 |
) |
|
|
(85 |
) |
Share of net (gain)/loss from jointly controlled and associated entities |
|
|
30 |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
Impairment losses (excluding inventories, trade and other receivables) |
|
|
7 |
|
|
|
137 |
|
|
|
102 |
|
|
|
29 |
|
|
|
760 |
|
|
|
519 |
|
Reversal of impairment losses (excluding trade and other receivables) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
(349 |
) |
Decrease in non cash receivable from related entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(361 |
) |
Foreign exchange differences |
|
|
|
|
|
|
28 |
|
|
|
21 |
|
|
|
(25 |
) |
|
|
(46 |
) |
|
|
4 |
|
Other |
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
(52 |
) |
|
|
9 |
|
|
|
(20 |
) |
Movements in operating assets and liabilities
(net of acquisitions of controlled entity balances) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)/decrease in trade and other receivables |
|
|
|
|
|
|
(140 |
) |
|
|
(104 |
) |
|
|
43 |
|
|
|
(204 |
) |
|
|
62 |
|
(Increase)/decrease in inventories |
|
|
|
|
|
|
10 |
|
|
|
7 |
|
|
|
9 |
|
|
|
14 |
|
|
|
7 |
|
(Increase)/decrease in prepayments and other assets |
|
|
|
|
|
|
30 |
|
|
|
22 |
|
|
|
(23 |
) |
|
|
20 |
|
|
|
(26 |
) |
Increase/(decrease) in trade and other payables |
|
|
|
|
|
|
243 |
|
|
|
180 |
|
|
|
(8 |
) |
|
|
517 |
|
|
|
25 |
|
Increase/(decrease) in revenue received in advance |
|
|
|
|
|
|
55 |
|
|
|
41 |
|
|
|
(13 |
) |
|
|
23 |
|
|
|
10 |
|
Increase/(decrease) in net taxes payable |
|
|
|
|
|
|
(502 |
) |
|
|
(373 |
) |
|
|
32 |
|
|
|
(537 |
) |
|
|
193 |
|
Increase/(decrease) in provisions |
|
|
|
|
|
|
383 |
|
|
|
285 |
|
|
|
31 |
|
|
|
396 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
8,562 |
|
|
|
6,356 |
|
|
|
8,960 |
|
|
|
8,311 |
|
|
|
8,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Reconciliation of cash balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the year as shown in the statement of
cash flows agrees to the net amount of the following
items in the notes to the financial statements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
10 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,548 |
|
|
|
474 |
|
|
|
1,368 |
|
Bank overdraft |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
689 |
|
|
|
511 |
|
|
|
1,534 |
|
|
|
474 |
|
|
|
1,368 |
|
|
|
|
|
|
|
|
|
|
F-75
o
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(c) Goods and Services Tax (GST)
Our receipts from trade and other receivables includes
estimated GST of $2,223 million (2005: $2,121 million)
collected by us as agent for the ATO. Our payments of
accounts payable and to employees include estimated GST
payments made by us for goods and services obtained in
undertaking both operating and investing activities. GST paid
associated with operating activities amounted to $941 million
(2005: $784 million) and GST paid relating to investing
activities amounted to $159 million (2005: $243 million).
(d) Significant financing and investing activities that
involve components of non cash
Acquisition of 3G assets
During fiscal 2005, we acquired a 50% interest in Hutchison
3G Australia Pty Ltds existing third generation (3G) radio
access network amounting to $403 million at acquisition date.
As at 30 June 2006, we have paid an additional $312 million
(2005: $22 million) to our joint venture partner for the
acquisition of these assets as the purchase price is being
paid in instalments. The balance outstanding as at 30 June
2006 was settled on 3 July 2006 and is reflected in our trade
and other payables. Refer to note 17 for further information.
(e) Acquisitions
CSL New World Mobility Group
We merged our 100% owned Hong Kong mobile operations (Telstra
CSL Group) with the Hong Kong mobile operations of New World
PCS Holdings Limited and its controlled entities (New World
Mobility Group) to form the CSL New World Mobility Group.
Under the merger agreement, Telstra CSL Limited (Telstra CSL)
issued new shares to New World Mobility Holdings Limited in
return for 100% of the issued capital of the New World
Mobility Group and $44 million in cash. The share issue
diluted Telstras ownership in the merged group to 76.4%. The
effect on the Telstra Group of the merger is detailed below:
|
|
|
|
|
|
|
|
|
|
|
New World Mobility Group |
|
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
|
Consideration for acquisition |
|
|
|
|
|
|
|
|
Fair value of Telstra CSL shares issued |
|
|
577 |
|
|
|
|
|
Cash received on acquisition |
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration |
|
|
533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
Fair value |
|
|
value |
|
|
|
|
Assets/(liabilities)
at acquisition date |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
21 |
|
|
|
21 |
|
Inventories |
|
|
4 |
|
|
|
4 |
|
Property, plant and equipment |
|
|
174 |
|
|
|
174 |
|
Intangible assets |
|
|
109 |
|
|
|
|
|
Other assets |
|
|
14 |
|
|
|
14 |
|
Deferred tax assets |
|
|
21 |
|
|
|
29 |
|
Trade and other payables |
|
|
(97 |
) |
|
|
(75 |
) |
|
|
|
Net identifiable assets acquired |
|
|
246 |
|
|
|
167 |
|
Goodwill on acquisition |
|
|
287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from acquisition date until
30 June 2006 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-76
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(e) Acquisitions (continued)
CSL New World Mobility Group (continued)
The net impact of the merger on the Telstra Group results at
the date of merger are detailed below.
|
|
|
|
|
|
|
Year ended |
|
|
|
30 June |
|
|
|
2006 |
|
|
|
$m |
|
|
Net increase in Telstra Group net assets |
|
|
|
|
Inflow of cash on acquisition (net of transaction costs) |
|
|
42 |
|
New World Mobility Group net identifiable assets
acquired |
|
|
246 |
|
Goodwill on acquisition of New World Mobility Group |
|
|
287 |
|
Reduction of Telstra CSL goodwill on dilution |
|
|
(308 |
) |
|
|
|
|
|
|
|
267 |
|
Represented by the following movements in equity |
|
|
|
|
Minority interest recognised |
|
|
(230 |
) |
Reduction in foreign currency translation reserve on
dilution |
|
|
(19 |
) |
|
|
|
|
Dilution gain recognised as a result of merger |
|
|
18 |
|
|
|
|
|
The CSL New World Mobility Group is a provider of mobile
telecommunication products and services which operates
primarily in Hong Kong. Refer to note 29 for further details
on the acquisition.
Other fiscal 2006 acquisitions
During fiscal 2006, we have also acquired several other
entities. These entities are not individually significant and
have been aggregated as Other in the below table.
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
|
Consideration for acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consideration for acquisitions |
|
|
31 |
|
|
|
|
|
Costs of acquisitions |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of deferred consideration
for prior years acquisition |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outflow of cash on acquisition |
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
Fair value |
|
|
value |
|
|
|
|
Assets/(liabilities)
at acquisition date |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
5 |
|
|
|
5 |
|
Property, plant and equipment |
|
|
2 |
|
|
|
2 |
|
Intangible assets goodwill |
|
|
26 |
|
|
|
26 |
|
Intangible assets other |
|
|
12 |
|
|
|
|
|
Provisions |
|
|
(3 |
) |
|
|
(3 |
) |
Deferred tax liabilities |
|
|
(4 |
) |
|
|
|
|
Other liabilities |
|
|
|
|
|
|
(2 |
) |
|
|
|
Net assets |
|
|
38 |
|
|
|
28 |
|
Adjustment to reflect minority
interests acquired |
|
|
(14 |
) |
|
|
|
|
Adjustment upon increase in
ownership interest from associated
entity to controlled |
|
|
(2 |
) |
|
|
|
|
Goodwill on acquisition |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from acquisition date until 30
June 2006 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Our other acquisitions include:
|
|
100% of the issued share capital of the Converged Networks Group; |
|
|
|
additional 25% interest in
the issued share capital of Invizage Pty Ltd giving us 100% ownership of this entity; |
|
|
|
additional
40% interest in the issued share capital of
Enhanced Processing Technologies Inc giving us 100% ownership of this entity; and |
|
|
|
additional
24.7% interest in the issued share capital of Adstream (Aust) Pty Ltd and its controlled entities
giving us a controlling 58% interest. |
These entities are not individually significant and have
been aggregated as Other. Refer to note 29 for further
details on our acquisitions.
F-77
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(e) Acquisitions (continued)
Fiscal 2005 acquisitions
During fiscal 2005, we completed the following
significant acquisitions:
|
|
100% of the issued share capital of KAZ Group
Limited and its controlled entities (KAZ Group); and |
|
|
100% of the issued share capital of PSINet UK
Limited and its controlled entities (PSINet Group). |
We also acquired several other entities during fiscal 2005.
These entities were not individually significant and have
been aggregated as Other in the below table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KAZ Group (i) |
|
|
PSINet Group (ii) |
|
|
Other (iii) |
|
|
Total |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
Consideration for acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consideration for acquisition |
|
|
333 |
|
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
565 |
|
|
|
|
|
Deferred cash consideration |
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
Costs of acquisition |
|
|
7 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration |
|
|
340 |
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
127 |
|
|
|
|
|
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash balances acquired |
|
|
(4 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
Payments of deferred consideration for
prior years acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
Consideration deferred |
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outflow of cash on acquisition |
|
|
336 |
|
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
132 |
|
|
|
|
|
|
|
573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
Fair value |
|
|
value |
|
|
Fair value |
|
|
value |
|
|
Fair value |
|
|
value |
|
|
Fair value |
|
|
value |
|
Assets/(liabilities) at acquisition date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
4 |
|
|
|
4 |
|
|
|
6 |
|
|
|
6 |
|
|
|
2 |
|
|
|
2 |
|
|
|
12 |
|
|
|
12 |
|
Trade and other receivables |
|
|
75 |
|
|
|
75 |
|
|
|
18 |
|
|
|
18 |
|
|
|
24 |
|
|
|
24 |
|
|
|
117 |
|
|
|
117 |
|
Inventories |
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
11 |
|
|
|
17 |
|
|
|
17 |
|
Property, plant and equipment |
|
|
22 |
|
|
|
21 |
|
|
|
47 |
|
|
|
47 |
|
|
|
6 |
|
|
|
6 |
|
|
|
75 |
|
|
|
74 |
|
Intangible assets |
|
|
123 |
|
|
|
15 |
|
|
|
42 |
|
|
|
|
|
|
|
89 |
|
|
|
14 |
|
|
|
254 |
|
|
|
29 |
|
Other assets |
|
|
3 |
|
|
|
3 |
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
13 |
|
|
|
13 |
|
Deferred tax assets |
|
|
13 |
|
|
|
13 |
|
|
|
1 |
|
|
|
1 |
|
|
|
7 |
|
|
|
7 |
|
|
|
21 |
|
|
|
21 |
|
Trade and other payables |
|
|
(54 |
) |
|
|
(54 |
) |
|
|
(23 |
) |
|
|
(23 |
) |
|
|
(22 |
) |
|
|
(22 |
) |
|
|
(99 |
) |
|
|
(99 |
) |
Provisions |
|
|
(52 |
) |
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(57 |
) |
|
|
(57 |
) |
Borrowings |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
(35 |
) |
|
|
(35 |
) |
|
|
(10 |
) |
|
|
(10 |
) |
|
|
(48 |
) |
|
|
(48 |
) |
Deferred tax liabilities |
|
|
(33 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
(17 |
) |
|
|
(1 |
) |
|
|
(64 |
) |
|
|
(1 |
) |
Current tax liabilities |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
2 |
|
|
|
2 |
|
Other liabilities |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
|
|
(13 |
) |
|
|
(13 |
) |
|
|
(36 |
) |
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
Net assets |
|
|
102 |
|
|
|
26 |
|
|
|
29 |
|
|
|
1 |
|
|
|
76 |
|
|
|
17 |
|
|
|
207 |
|
|
|
44 |
|
Adjustment upon increase in
ownership interest from associated
entity to controlled entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
Goodwill on acquisition |
|
|
238 |
|
|
|
|
|
|
|
95 |
|
|
|
|
|
|
|
52 |
|
|
|
|
|
|
|
385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
340 |
|
|
|
|
|
|
|
124 |
|
|
|
|
|
|
|
127 |
|
|
|
|
|
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) from acquisition date until
30 June 2005 |
|
|
11 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-78
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
24. Notes to the statement of cash flows (continued)
(e) Acquisitions (continued)
|
|
|
(i) |
|
The KAZ Group is a provider of business process
outsourcing, systems integration, consulting, applications
development and information technology management services.
It operates primarily in Australia, but also conducts
business in the United States and Asia. |
|
(ii) |
|
The PSINet Group is a provider of e-business
infrastructure solutions and corporate internet protocol
based communication services. |
|
(iii) |
|
During fiscal 2005, we acquired the following entities: |
|
|
100% of the issued share capital of ESA Holding Pty
Ltd and its controlled entity Damovo (Australia) Pty
Ltd, and of Damovo HK Limited (now known as Telstra
Business Systems); |
|
|
100% of the issued share capital of Universal Publishers Pty Ltd; |
|
|
100% of the issued share capital of Chief Entertainment Pty Ltd; |
|
|
100% of the issued share capital of Sytec Resources and its controlled entities; and |
|
|
|
additional
10% interest in the issued share capital of 1300 Australia Pty Ltd giving us a 60% controlling
interest. |
These entities are not individually significant and
have been aggregated as Other per the previous table.
Other information relating to our acquisitions
We have recognised goodwill of $324 million (2005: $385
million) on acquisition of our controlled entities. The
following factors contributed to the recognition of
goodwill:
|
|
forecast revenues and profitability of the acquired entities; |
|
|
|
cost synergies expected by
combining our current operations with the acquired entities; and |
|
|
|
strategic benefits to the
operations of the Telstra Group. |
We have identified and measured any significant intangible
assets separately from goodwill on acquisition of our
controlled entities.
If our acquisitions during fiscal 2006 had occurred on 1 July
2005, our adjusted consolidated income and consolidated
profit for the year ended 30 June 2005 for the Telstra Group
would have been $23,350 million and $3,174 million
respectively.
If our acquisitions during fiscal 2005 had occurred on 1 July
2004, our adjusted consolidated income and consolidated
profit for the year ended 30 June 2005 for the Telstra Group
would have been $22,515 million and $4,303 million
respectively.
F-79
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
25. 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 that
generate cash inflows that are largely independent of the
cash inflows from other assets or groups of assets.
The carrying amount of our goodwill and intangible assets
with an indefinite useful life are allocated across the
following CGUs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles with indefinite |
|
|
|
Goodwill |
|
|
useful lives |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
CGUs |
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Telstra CSL Group |
|
|
970 |
|
|
|
1,228 |
|
|
|
|
|
|
|
|
|
New World Mobility Group |
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Kaz Group |
|
|
270 |
|
|
|
274 |
|
|
|
|
|
|
|
|
|
TelstraClear Group |
|
|
137 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
United Kingdom Group |
|
|
113 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
Sensis Group (a) |
|
|
36 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
Trading Post Group |
|
|
179 |
|
|
|
178 |
|
|
|
447 |
|
|
|
447 |
|
Universal Publishers |
|
|
15 |
|
|
|
15 |
|
|
|
8 |
|
|
|
8 |
|
Adstream Group |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Business Systems |
|
|
30 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
Other |
|
|
17 |
|
|
|
18 |
|
|
|
8 |
|
|
|
7 |
|
|
|
|
|
|
|
2,073 |
|
|
|
2,037 |
|
|
|
463 |
|
|
|
462 |
|
|
|
|
|
|
|
(a) |
|
Our assessment of the Sensis CGU excludes the Trading
Post Group, Universal Publishers and the Adstream Group that
form part of the Sensis reportable segment. |
In addition to the above CGUs, we have two further
significant CGUs that are assessed for impairment. These two
CGUs are:
|
|
the Telstra Entity CGU, excluding the HFC network;
and |
|
|
|
the CGU comprising the HFC network. |
The Telstra Entity CGU consists of our ubiquitous
telecommunications infrastructure network in Australia,
excluding the HFC network that we consider not to be
integrated with the rest of our telecommunications network.
Assets that form part of the ubiquitous telecommunications
network are considered to be working together to generate our
net cash flows. No one item of telecommunications equipment
is of any value without the other assets to which it is
connected in order to achieve delivery of our products and
services.
F-80
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
25. Impairment (continued)
Impairment testing
Our impairment testing compares the carrying value of an
individual asset or CGU with its recoverable amount as
determined using a value in use calculation.
Our assumptions for determining the recoverable amount of
each CGU are based on past experience and our expectations
for the future. Our cash flow projections are based on five
year management approved forecasts. These forecasts use
management estimates to determine income, expenses, capital
expenditure and cash flows for each CGU.
We have used the following key assumptions in determining
the recoverable amount of our CGUs to which goodwill or
indefinite life intangible assets has been allocated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
Terminal value |
|
|
|
(b) |
|
|
growth rate (c) |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
Telstra CSL Group |
|
|
11.1 |
|
|
|
14.5 |
|
|
|
2.0 |
|
|
|
5.0 |
|
New World Mobility Group |
|
|
12.5 |
|
|
|
|
|
|
|
2.0 |
|
|
|
|
|
Kaz Group |
|
|
16.6 |
|
|
|
16.7 |
|
|
|
3.0 |
|
|
|
3.0 |
|
TelstraClear Group |
|
|
18.0 |
|
|
|
18.0 |
|
|
|
3.0 |
|
|
|
3.0 |
|
United Kingdom Group |
|
|
14.9 |
|
|
|
15.0 |
|
|
|
3.0 |
|
|
|
3.0 |
|
Sensis Group (a) |
|
|
13.7 |
|
|
|
13.7 |
|
|
|
3.0 |
|
|
|
3.0 |
|
Trading Post Group |
|
|
15.3 |
|
|
|
14.3 |
|
|
|
2.5 |
|
|
|
2.5 |
|
Universal Publishers |
|
|
14.3 |
|
|
|
14.3 |
|
|
|
2.5 |
|
|
|
2.5 |
|
Adstream Group |
|
|
18.6 |
|
|
|
|
|
|
|
2.5 |
|
|
|
|
|
Telstra Business Systems |
|
|
15.0 |
|
|
|
17.1 |
|
|
|
2.5 |
|
|
|
2.5 |
|
|
|
|
(a) |
|
Our assessment of the Sensis CGU excludes the Trading
Post Group, Universal Publishers and the Adstream Group that
form part of the Sensis reportable segment. |
|
(b) |
|
Discount rate represents the pre tax discount rate
applied to the cash flow projections. The discount rate
reflects the market determined, risk adjusted, discount rate
which was adjusted for specific risks relating to the CGU
and the countries in which they operate. |
|
(c) |
|
Terminal value growth rate represents the growth rate
applied to extrapolate our cash flows beyond the five year
forecast period. These growth rates are based on our
expectation of the CGUs long term performance in their
respective markets. |
F-81
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
26.Expenditure commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
665 |
|
|
|
529 |
|
|
|
634 |
|
|
|
482 |
|
Within 1-2 years |
|
|
62 |
|
|
|
15 |
|
|
|
60 |
|
|
|
15 |
|
Within 2-3 years |
|
|
32 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
Within 3-4 years |
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
Within 4-5 years |
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
After 5 years |
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
776 |
|
|
|
544 |
|
|
|
743 |
|
|
|
497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments relating to our intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
159 |
|
|
|
38 |
|
|
|
124 |
|
|
|
|
|
Within 1-2 years |
|
|
130 |
|
|
|
26 |
|
|
|
105 |
|
|
|
|
|
Within 2-3 years |
|
|
16 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
305 |
|
|
|
64 |
|
|
|
245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Operating lease commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future lease payments for non-cancellable operating leases not recorded in the
financial statements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
424 |
|
|
|
380 |
|
|
|
260 |
|
|
|
232 |
|
Within 1-2 years |
|
|
290 |
|
|
|
260 |
|
|
|
170 |
|
|
|
154 |
|
Within 2-3 years |
|
|
201 |
|
|
|
209 |
|
|
|
108 |
|
|
|
117 |
|
Within 3-4 years |
|
|
139 |
|
|
|
149 |
|
|
|
60 |
|
|
|
64 |
|
Within 4-5 years |
|
|
118 |
|
|
|
128 |
|
|
|
47 |
|
|
|
49 |
|
After 5 years |
|
|
358 |
|
|
|
397 |
|
|
|
152 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
1,530 |
|
|
|
1,523 |
|
|
|
797 |
|
|
|
770 |
|
|
|
|
|
|
In addition, in fiscal 2006 the Telstra Group had total
future commitments under cancellable operating leases of $356
million (2005: $343 million). In fiscal 2006, the Telstra
Entity has total future commitments under cancellable
operating leases of $354 million (2005: $338 million).
Description of our operating leases
We have operating leases for the following types of
assets:
|
|
rental of land and buildings; |
|
|
|
rental of motor vehicles, caravan huts and trailers, and mechanical aids; and |
|
|
|
rental of
personal computers, laptops, printers and other related equipment that are used in non
communications plant activities. |
The average lease term is:
|
|
7 years for land and buildings; |
|
|
2 years for motor vehicles, 4 years for light
commercial vehicles and 7 to 12 years for trucks and
mechanical aids; and |
|
|
3 years for personal computers and related equipment. |
The majority of our operating leases relate to land and
buildings. We have several subleases with total minimum lease
payments of $59 million (2005: $75 million) for the Telstra
Group and $43 million (2005: $54 million) for the Telstra
Entity. Our property operating leases generally contain
escalation clauses, which are fixed increases generally
between 3% and 5%, or
increases subject to the consumer price index. We do not have
any significant purchase options.
Contingent rental payments exist for motor vehicles and are
not significant compared with total rental payments made.
These are based on unfair wear and tear, excess kilometres
travelled, additional fittings and no financial loss to be
suffered by the leasing company from changes to the original
agreements. Our motor vehicles and related equipment must
also remain in Australia.
A number of our operating leases are considered onerous due
to our transformation project and as such, have been
provided for in our financial statements. Refer to note 19
for details.
F-82
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
26. Expenditure commitments (continued)
|
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|
|
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|
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|
|
|
|
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|
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|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
(c) Finance lease commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
|
|
|
|
13 |
|
|
|
12 |
|
|
|
7 |
|
|
|
5 |
|
Within 1-2 years |
|
|
|
|
|
|
12 |
|
|
|
10 |
|
|
|
6 |
|
|
|
5 |
|
Within 2-3 years |
|
|
|
|
|
|
10 |
|
|
|
10 |
|
|
|
6 |
|
|
|
5 |
|
Within 3-4 years |
|
|
|
|
|
|
8 |
|
|
|
8 |
|
|
|
3 |
|
|
|
5 |
|
Within 4-5 years |
|
|
|
|
|
|
5 |
|
|
|
5 |
|
|
|
1 |
|
|
|
1 |
|
After 5 years |
|
|
|
|
|
|
52 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
|
|
|
|
|
100 |
|
|
|
99 |
|
|
|
23 |
|
|
|
21 |
|
Future finance charges on finance leases |
|
|
|
|
|
|
(45 |
) |
|
|
(47 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
Present value of net future minimum lease payments |
|
|
|
|
|
|
55 |
|
|
|
52 |
|
|
|
20 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded as current borrowings |
|
|
18 |
|
|
|
7 |
|
|
|
5 |
|
|
|
5 |
|
|
|
4 |
|
Recorded as non current borrowings |
|
|
18 |
|
|
|
48 |
|
|
|
47 |
|
|
|
15 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
Total finance lease liabilities |
|
|
18 |
|
|
|
55 |
|
|
|
52 |
|
|
|
20 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
Description of our finance leases
We have finance leases for the following types of assets:
|
|
property leases in our controlled entity, Telstra (PSINet) Limited; |
|
|
|
computer mainframes,
computer processing equipment and other related equipment. |
The average lease term is:
|
|
24 years for the property leases with a remaining
weighted average life of 17 years; and |
|
|
5 years for computer mainframe and associated equipment. |
Interest rates for our finance leases are:
|
|
property leases interest rate of 10.5%;
and |
|
|
|
computer mainframe, computer processing equipment and
associated equipment weighted average interest rate of
7.6%. |
In addition to the above finance lease commitments, we
previously entered into US finance leases for communications
exchange equipment with various entities denominated in US
dollars. We have prepaid all lease rentals due under the
terms of these leases and have no additional payment
obligations.
These entities lease the communications equipment from the
ultimate lessor and then sublease the equipment to us. We
have guaranteed that the lease payments will be paid by these
entities to the ultimate lessor as scheduled over the lease
terms (refer to note 27 for further information).
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
14 for further details on communication assets and equipment
that are held under finance lease.
F-83
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
26. Expenditure commitments (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
(d) Other commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenditure commitments, other than commitments dealt
with in (a), (b) and (c) above, which have not been recorded in
the financial statements are: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
481 |
|
|
|
600 |
|
|
|
317 |
|
|
|
411 |
|
Within 1-2 years |
|
|
236 |
|
|
|
301 |
|
|
|
118 |
|
|
|
127 |
|
Within 2-3 years |
|
|
176 |
|
|
|
213 |
|
|
|
79 |
|
|
|
64 |
|
Within 3-4 years |
|
|
215 |
|
|
|
160 |
|
|
|
46 |
|
|
|
40 |
|
Within 4-5 years |
|
|
111 |
|
|
|
111 |
|
|
|
16 |
|
|
|
18 |
|
After 5 years |
|
|
1,162 |
|
|
|
1,195 |
|
|
|
5 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
2,381 |
|
|
|
2,580 |
|
|
|
581 |
|
|
|
666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our other expenditure commitments include contracts for printing, engineering
and operational support services, information technology services and
building maintenance. In addition, other commitments also include
commitments relating to our investment in FOXTEL. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments relating to our investment in FOXTEL (i): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
144 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
Within 1-2 years |
|
|
113 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
Within 2-3 years |
|
|
93 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
Within 3-4 years |
|
|
95 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
Within 4-5 years |
|
|
92 |
|
|
|
93 |
|
|
|
|
|
|
|
|
|
After 5 years |
|
|
1,140 |
|
|
|
1,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,677 |
|
|
|
1,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Our jointly controlled entity, FOXTEL, has other
commitments amounting to approximately $3,354 million (2005:
$3,642 million). The majority of our 50% share of these
commitments relate to minimum subscriber guarantees (MSG) for
pay television programming agreements. These agreements are
for periods of between 1 and 25 years and are based on
current prices and costs under agreements entered into
between the FOXTEL Partnership and various other parties.
These minimum subscriber payments fluctuate in accordance
with price escalation/reduction formulas contained in the
agreements, as well as foreign currency movements. In
addition to our MSG, FOXTEL has other commitments including
obligations for satellite transponder costs and digital set
top box units. |
F-84
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
27. Contingent liabilities and contingent assets
We have no significant contingent assets as at 30 June
2006. The details and maximum amounts (where reasonable
estimates can be made) are set out below for our contingent
liabilities.
Telstra Entity
Common law claims
Certain common law claims by employees and third parties are
yet to be resolved. As at 30 June 2006, management believes
that the resolution of these contingencies will not have a
significant effect on the Telstra Entitys financial
position, results of operations or cash flows. The maximum
amount of these contingent liabilities cannot be reasonably
estimated.
Included in our common law claims are the following litigation cases:
(a) In November 2002, Seven Network Limited and C7 Pty
Limited (Seven) commenced litigation against us and various
other parties (the respondents) in relation to the
contracts and arrangements between us and some of those other
parties relating to the right to broadcast Australian
Football League and National Rugby League, the contract
between FOXTEL and us for the provision of HFC cable services
(the Broadband Co-operation Agreement) and other matters.
Seven seeks damages and other relief, including that some of
these contracts and arrangements are void. Seven also seeks
orders which would, in effect, require a significant
restructure of the subscription television/sports rights
markets in Australia. Expert reports filed by Seven were at
one time used to suggest that Seven sought total damages of
around $1.1 billion. However, some significant components of
this expert evidence have since been ruled inadmissible by
the trial judge and many of the facts on which Sevens loss
claim is based are contested. In addition to denying
liability at all, the respondents have filed expert reports
to the effect that, even if liability were found to exist,
damages should be assessed at a very significantly lesser
amount. If Seven obtained any order damages or for legal
costs affecting Telstra, the liability arising from that
order may subsequently be apportioned between the relevant
respondents, with Telstra bearing only a portion of the total
liability.
The matter is proceeding before the courts, with final oral
submissions scheduled to commence in September 2006. In light
of the progress of this
case to date, Telstra considers that it is unlikely to have
any material effect on our overall business or financial
position.
(b) In January 2006, a shareholder commenced a
representative proceeding in the Federal Court against
Telstra. The statement of claim alleges that Telstra
breached the Corporations Act and the Australian Stock
Exchange (ASX) Listing Rules by failing to disclose:
|
|
that Telstras senior management had formed an opinion that there had been past deficiencies in
operating expenditure and capital expenditure on telecommunications infrastructure; |
|
|
|
that Telstra
had forecast a long term decline in PSTN revenues; and |
|
|
|
that Telstra had communicated these
matters to the Government. |
The claim seeks orders for compensation for the class of
shareholders who bought shares between the time that these
matters became known to Telstra and the time at which they
were disclosed to the market. The proceeding is at an early
stage and is unlikely to have any material effect on our
overall business or financial position. Telstra will
vigorously defend the claim.
(c) In December 2005, we increased our prices for line access
provided to our competitors to prices closer to our average
costs of providing that access. The ACCC appears to allege
that these increases left insufficient margin for our
competitors in respect of a lower spend segment of the
retail market. The ACCC somehow considers that our conduct
has or is likely to have the effect of substantially
lessening competition across the retail market and therefore
that we are in breach of the competition rule. On 12 April
2006, the ACCC issued a competition notice against us to this
effect.
The ACCC has yet to commence enforcement proceedings against
us but the maximum potential penalties which had accrued as
at 30 June 2006 exceeded $200 million and are accruing at $3
million per day. Optus has issued proceedings in the Federal
Court which, in part, rely on the competition notice and seek
damages, a refund and an injunction preventing us from
charging the increased prices and recovering our costs.
Telstra will vigorously defend the Optus proceedings and any
enforcement proceedings which may be brought by the ACCC.
Telstra has challenged the validity of the ACCCs decision to
issue the competition notice (and the preceding consultation
notice) in the Federal Court on administrative law grounds.
Amongst other things, we allege that the competition notice
(and the preceding consultation notice) should be set aside
for uncertainty and that the ACCC did not accord us
procedural fairness by failing to properly consult with us
prior to the issue of the competition notice. The ACCC argues
that it does not owe us any duty of procedural fairness or
natural justice when issuing competition notices.
F-85
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
27. Contingent liabilities and contingent assets (continued)
Telstra Entity (continued)
Indemnities, performance guarantees and financial support
We have provided the following indemnities, performance guarantees and financial support through
the Telstra Entity as follows:
|
|
Indemnities to financial institutions to support bank
guarantees to the value of $347 million (2005: $329 million) in
respect of the performance of contracts. |
|
|
|
Indemnities to financial institutions in respect of the
obligations of our controlled entities. The maximum amount of our
contingent liabilities for this purpose was $311 million (2005:
$282 million).
|
|
|
|
Financial support for certain controlled entities to the amount
necessary to enable those entities to meet their obligations as and
when they fall due. The financial support is subject to conditions
including individual monetary limits totalling $150 million (2005:
$69 million) and a requirement that the entity remains our
controlled entity. |
|
|
|
Guarantees of the performance of jointly controlled entities
under contractual agreements to a maximum amount of $69 million
(2005: $126 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 $843 million (US$626 million) (2005: $850 million
(US$650 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
26 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 2006, this
guarantee has still been provided and $142 million (2005: $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. |
Controlled entities
Indemnities provided by our controlled entities
In fiscal 2006 and fiscal 2005, our controlled entities had no significant outstanding
indemnities in respect of obligations to financial institutions and corporations.
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
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
FOXTELs MSG and other agreements are $1,531 million (2005: $1,689 million).
FOXTEL Equity Contribution Deed (ECD)
FOXTEL previously entered into a $550 million bank
facility arrangement to fund its full digital conversion
and launch of new digital services. As part of this
arrangement, we and FOXTELs other ultimate
shareholders, News Corporation Limited and Publishing
and Broadcasting Limited, entered into an ECD. Under the
ECD, FOXTEL is required to call on a maximum of $200
million in equity contributions in certain specified
circumstances as necessary to avoid default of a
financial covenant. These equity contributions are based
on ownership interests and, as a result, our maximum
contingent liability is $100 million.
We have no joint or several liability relating to our
partners contributions under the ECD. On 31 July 2006,
FOXTEL entered into a $600 million syndicated secured
term loan facility. As a result, the ECD has
subsequently been terminated. Refer to note 34 for
further details.
F-86
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
27. Contingent liabilities and contingent assets (continued)
Other (continued)
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 $154
million (2005: $132 million).
Reach working capital facility
We, together with our co-shareholder PCCW Limited (PCCW),
previously bought a loan facility owed to a banking
syndicate by Reach Finance Ltd, a subsidiary of our 50%
owned joint venture Reach Ltd (Reach). As part of this
arrangement, the shareholders also agreed to provide a
US$50 million working capital facility to Reach. Under
the facility Reach is entitled to request from Telstra a
maximum of US$25 million to assist in meeting ongoing
operational requirements. Drawdowns under this facility
must be repaid at the end of each interest period as
agreed between the parties and the loan must be fully
repaid by 31 December 2007. The applicable interest rate
is LIBOR plus 2.5%. As at 30 June 2006, Reach had not
made any drawdown under this facility.
We have no joint or several liability relating to PCCWs
US$25 million share of the working capital facility.
ASIC deed of cross guarantee
A list of the companies that are part of our deed of
cross guarantee appear in note 29. 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 29 for
further information.
F-87
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits
The employee superannuation schemes that we
participate in or sponsor exist to provide benefits for
our employees and their dependants after finishing
employment with us. It is our policy to contribute to
the schemes at rates specified in the governing rules
for defined contribution schemes, or at rates determined
by the actuaries for defined benefit schemes.
The defined contribution divisions receive fixed
contributions and our legal or constructive obligation
is limited to these contributions.
The present value of our defined benefit obligations for
our defined benefit plans are calculated by an actuary
using the projected unit credit method. This method
determines each year of service as giving rise to an
additional unit of benefit entitlement and measures each
unit separately to calculate the final obligation.
Details of our plans are set out below.
Telstra Superannuation Scheme (Telstra Super)
On 1 July 1990, Telstra Super was established and the
majority of Telstra staff who were previously members of
the Commonwealth Superannuation Scheme (CSS) transferred
into Telstra Super. The Commonwealth has responsibility
for past, present and future liabilities in respect of
former and current Telstra employees who remain in the
CSS. As a result, we have no current ongoing obligations
for these CSS members, other than associated
administration fees.
The Telstra Entity and some of our Australian
controlled entities participate in Telstra Super.
Telstra Super has both defined benefit and defined
contribution divisions. The defined benefit divisions
of Telstra Super are closed to new members.
Our defined benefit divisions provide benefits based on
years of service and final average salary. Post
employment benefits do not include payments for medical
costs.
The funding policy adopted in respect of the defined
benefit divisions is directed at ensuring that benefits
accruing to members and beneficiaries are fully funded
as the benefits fall due. The benefits received by
members of each defined benefit division take into
account factors such as the employees length of
service, final average salary, employer and employee
contributions.
An actuarial investigation of this scheme is carried out
at least every three years.
HK CSL Retirement Scheme
Our controlled entity, Hong Kong CSL Limited (HK CSL),
participates in a superannuation scheme known as the HK
CSL Retirement Scheme. This scheme was established under
the Occupational Retirement Schemes Ordinance (ORSO) and
is
administered by an independent trustee. The scheme has
three defined benefit sections and one defined
contribution section.
The benefits received by members of the defined benefit
schemes are based on the employees remuneration and
length of service.
Actuarial investigations are undertaken annually for this scheme.
Other defined contribution schemes
A number of our subsidiaries also participate in defined
contribution schemes which receive employer and employee
contributions based on a percentage of the employees
salaries. Telstra Group made contribution to these
schemes of $32 million for fiscal 2006.
F-88
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
We use the following measurement dates for our defined benefit plans:
|
|
|
|
|
|
|
Measurement |
|
|
|
date |
|
|
Telstra Super |
|
30 June |
HK CSL Retirement Scheme |
|
31 May |
The fair value of the defined benefit plan assets and the present value of the defined benefit
obligations as at the reporting date is determined by our actuary. The details of the defined
benefit divisions are set out below:
(a) Net defined benefit plan asset
Our net defined benefit plan asset recognised in the
balance sheet is determined as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$ m |
|
|
|
|
Fair value of defined
benefit plan assets |
|
|
4,553 |
|
|
|
4,518 |
|
|
|
4,459 |
|
|
|
4,439 |
|
Present value of the
defined benefit
obligation |
|
|
3,675 |
|
|
|
4,308 |
|
|
|
3,605 |
|
|
|
4,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net defined benefit
asset before adjustment
for contributions tax |
|
|
878 |
|
|
|
210 |
|
|
|
853 |
|
|
|
205 |
|
Adjustment for
contributions tax |
|
|
151 |
|
|
|
37 |
|
|
|
151 |
|
|
|
37 |
|
|
|
|
|
|
Net defined benefit
asset in the balance
sheet at 30 June (i) |
|
|
1,029 |
|
|
|
247 |
|
|
|
1,004 |
|
|
|
242 |
|
|
|
|
|
|
|
Experience adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate actuarial gain
included in defined
benefit plan assets |
|
|
480 |
|
|
|
155 |
|
|
|
474 |
|
|
|
152 |
|
Aggregate actuarial
gain/(loss) included in
the defined benefit
obligation |
|
|
340 |
|
|
|
(233 |
) |
|
|
329 |
|
|
|
(225 |
) |
|
|
|
|
|
Net actuarial gain/(loss) |
|
|
820 |
|
|
|
(78 |
) |
|
|
803 |
|
|
|
(73 |
) |
|
|
|
|
|
|
|
|
(i) |
|
At 30 June the fair value of defined benefit plan
assets exceeds the present value of defined benefit
obligations resulting in a net surplus. We recognise the
net surplus as an asset as we have the ability to
control this surplus to generate future funds that are
available to us in the form of reductions in future
contributions, or as a cash refund. The asset recognised
does not exceed the present value of any economic
benefits available in the form of refunds from the plan
or reductions in future contributions to the plan. |
F-89
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(b) Amounts recognised in the income statement and in equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
The components of defined benefit plan expense recognised in the income
statement are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
227 |
|
|
|
214 |
|
|
|
220 |
|
|
|
210 |
|
Interest cost |
|
|
205 |
|
|
|
205 |
|
|
|
202 |
|
|
|
202 |
|
Expected return on plan assets |
|
|
(322 |
) |
|
|
(317 |
) |
|
|
(316 |
) |
|
|
(312 |
) |
Member contributions |
|
|
(40 |
) |
|
|
(20 |
) |
|
|
(39 |
) |
|
|
(20 |
) |
Curtailment gain |
|
|
(17 |
) |
|
|
|
|
|
|
(17 |
) |
|
|
|
|
Plan expenses after tax |
|
|
15 |
|
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
Notional transfer of funds for defined contribution benefits |
|
|
89 |
|
|
|
75 |
|
|
|
89 |
|
|
|
75 |
|
Adjustment for contributions tax |
|
|
28 |
|
|
|
30 |
|
|
|
28 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
185 |
|
|
|
203 |
|
|
|
182 |
|
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The movements in our defined benefit plan asset recognised directly in
equity
in the statement of recognised income and expense are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gains)/losses on our defined benefit plans |
|
|
(820 |
) |
|
|
78 |
|
|
|
(803 |
) |
|
|
73 |
|
Adjustment to contributions tax |
|
|
(142 |
) |
|
|
12 |
|
|
|
(142 |
) |
|
|
12 |
|
|
|
|
|
|
|
|
|
(962 |
) |
|
|
90 |
|
|
|
(945 |
) |
|
|
85 |
|
|
|
|
|
|
F-90
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(c) Plan assets
Our weighted average asset allocation by major asset
category as a percentage of the fair value of total
plan assets as at 30 June are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super |
|
|
HK CSL Retirement Scheme |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Target |
|
|
Actual |
|
|
Target |
|
|
Actual |
|
|
Target |
|
|
Actual |
|
|
Target |
|
|
Actual |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
Asset allocations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments |
|
|
68 |
|
|
|
69 |
|
|
|
67 |
|
|
|
62 |
|
|
|
60 |
|
|
|
61 |
|
|
|
60 |
|
|
|
64 |
|
Debt instruments |
|
|
12 |
|
|
|
10 |
|
|
|
10 |
|
|
|
14 |
|
|
|
35 |
|
|
|
32 |
|
|
|
35 |
|
|
|
30 |
|
Property |
|
|
15 |
|
|
|
16 |
|
|
|
18 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
5 |
|
|
|
5 |
|
|
|
5 |
|
|
|
11 |
|
|
|
5 |
|
|
|
7 |
|
|
|
5 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
Our defined benefit plans investment strategy is to
control the level of risk by investing in a broad range
of quality investments, and using a range of Australian
and International investment managers who specialise in
cash, fixed interest, shares and property. We constantly
review our investments and adjust our investment
strategy in order to maximise returns within this
controlled risk profile and take advantage of perceived
market inefficiencies.
Investment goals are to earn the best possible returns
within the appropriate strategic level of risk, and
maintain the financial viability of the funds by
ensuring plan assets exceed benefit obligations.
Derivatives are used to limit exposure to market
fluctuations and are used within appropriate control
environments for direct and externally managed
investments. Derivatives are not used for speculative
purposes.
F-91
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(d) Reconciliation of change in fair value of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
Fair value of defined benefit plan assets at beginning of year |
|
|
4,518 |
|
|
|
4,294 |
|
|
|
4,439 |
|
|
|
4,224 |
|
Expected return on plan assets |
|
|
322 |
|
|
|
317 |
|
|
|
316 |
|
|
|
312 |
|
Employer contributions |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Member contributions |
|
|
46 |
|
|
|
24 |
|
|
|
46 |
|
|
|
24 |
|
Notional transfer of funds for defined contribution benefits |
|
|
(89 |
) |
|
|
(75 |
) |
|
|
(89 |
) |
|
|
(75 |
) |
Benefits paid (i) |
|
|
(715 |
) |
|
|
(185 |
) |
|
|
(712 |
) |
|
|
(182 |
) |
Actuarial gains |
|
|
480 |
|
|
|
155 |
|
|
|
474 |
|
|
|
152 |
|
Plan expenses after tax |
|
|
(15 |
) |
|
|
(16 |
) |
|
|
(15 |
) |
|
|
(16 |
) |
Foreign currency exchange rate changes |
|
|
3 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of defined benefit plan assets at end of year |
|
|
4,553 |
|
|
|
4,518 |
|
|
|
4,459 |
|
|
|
4,439 |
|
|
|
|
|
|
Our actual return on defined benefit plan assets was 16.2% (2005:
12.5%) for Telstra Super and 12.5% (2005: 6.8%) for HK CSL Retirement Scheme.
(e) Reconciliation of change in present value of wholly funded defined benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
Present value of defined benefit obligation at beginning of year |
|
|
4,308 |
|
|
|
3,837 |
|
|
|
4,234 |
|
|
|
3,775 |
|
Current service cost |
|
|
227 |
|
|
|
214 |
|
|
|
220 |
|
|
|
210 |
|
Interest cost |
|
|
205 |
|
|
|
205 |
|
|
|
202 |
|
|
|
202 |
|
Member contributions |
|
|
7 |
|
|
|
4 |
|
|
|
7 |
|
|
|
4 |
|
Benefits paid (i) |
|
|
(715 |
) |
|
|
(185 |
) |
|
|
(712 |
) |
|
|
(182 |
) |
Actuarial (gains)/losses |
|
|
(340 |
) |
|
|
233 |
|
|
|
(329 |
) |
|
|
225 |
|
Curtailment gain |
|
|
(17 |
) |
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
Present value of wholly funded defined benefit obligation at end of year |
|
|
3,675 |
|
|
|
4,308 |
|
|
|
3,605 |
|
|
|
4,234 |
|
|
|
|
|
|
|
|
|
(i) |
|
Benefits paid includes $640 million (2005: $116 million) of entitlements (to exiting
defined benefit members) which have been retained in Telstra Super but transferred to the defined
contribution scheme. |
The following benefit payments, which reflect expected future service, are expected to be paid.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 - |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2016 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Expected benefit
payments |
|
|
197 |
|
|
|
204 |
|
|
|
215 |
|
|
|
237 |
|
|
|
257 |
|
|
|
1,712 |
|
|
|
|
F-92
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(f) Principal actuarial assumptions
We used the following major assumptions to determine
our defined benefit plan expense for the year ended 30
June:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super |
|
|
HK CSL Retirement Scheme |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
Discount rate (i) |
|
|
4.7 |
|
|
|
5.1 |
|
|
|
3.7 |
|
|
|
3.8 |
|
Expected rate of return on plan assets (ii) |
|
|
7.5 |
|
|
|
7.5 |
|
|
|
6.8 |
|
|
|
6.8 |
|
Expected rate of increase in future salaries |
|
|
4.0 |
|
|
|
4.0 |
|
|
|
2.5 |
|
|
|
2.5 |
|
We used the following major assumptions to determine
our defined benefit obligations at 30 June:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super |
|
|
HK CSL Retirement Scheme |
|
|
|
Year ended 30 June |
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
Discount rate (i) |
|
|
5.1 |
|
|
|
4.7 |
|
|
|
5.0 |
|
|
|
3.8 |
|
Expected rate of increase in future salaries (ii) |
|
|
3.0 |
|
|
|
4.0 |
|
|
|
4.0 |
|
|
|
4.0 |
|
|
|
|
(i) |
|
The present value of our defined benefit obligations
is determined by discounting the estimated future cash
outflows using a discount rate based on government
guaranteed securities with similar due dates to these
expected cash flows. |
|
|
|
For Telstra Super we have used the 10-year Australian
government bond rate as it has the closest term that one
could get from the Australian bond market to match the
term of the defined benefit obligations. We have not
made any adjustment to reflect the difference between
the term of the bonds and the estimated term of
liabilities due to the observation that the current
government bond yield curve is reasonably flat implying
that the yields from government bonds with a term less
than 10 years are expected to be very similar to the
extrapolated bond yields with a term of 12 to 13 years. |
|
|
|
Based on industry practice in Australia, we have
adjusted the discount rate for Telstra Super to take into
account future investment tax of the fund which is
considered part of the ultimate cost to settle the
obligation. |
|
|
|
Similarly, for the HK CSL Retirement Scheme we have used
the 10 year Hong Kong exchange fund yields as it has the
closest term that one could get from the Hong Kong market
to match the term of the defined benefit obligations. |
|
|
|
The discount rate used in calculating the defined benefit
obligation at 30 June 2006 was 5.1% p.a. after the
adjustment to take into account future investment tax.
Holding all other assumptions constant, the effect of a
one percentage point decline in the discount rate
assumption would be an increase in the 2007 defined
benefit plan expense of approximately $69 million and an
increase in the defined benefit obligation at 30 June
2006 of approximately $334 million. |
|
(ii) |
|
The expected rate of return on assets has been based
on historical and future expectations of returns for each
of the major categories of asset classes over the
subsequent 10 year period, or longer. Estimates are
based on a combination of factors including the current
market outlook for interest rates, inflation, earnings
growth and currency strength. To determine the aggregate
return, the expected future return of each asset class is
weighted according to the strategic asset allocation of
total plan assets. |
|
|
|
Our assumption for the expected long-term rate of return
on assets is 7% for 2007. As a sensitivity measure,
holding all other assumptions constant, the effect of a
one percentage point decline in the return on assets
assumption would be an increase in our fiscal 2007
defined benefit plan expense of approximately $44
million. |
F-93
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(g) Employer contributions
Telstra Super
In accordance with our funding deed with the trustee of
Telstra Super, we are required to make future employer
payments to Telstra Super in relation to the defined
benefit plan as may be required. Our contributions to
Telstra Super will recommence when the vested benefits
index (VBI) the ratio of defined benefit plan assets to
defined benefit members vested benefits falls to 103%.
Our actuary is satisfied that contributions to maintain
the VBI at this rate will maintain the financial position
of Telstra Super at a satisfactory level. The VBI of the
defined benefit divisions is 115% as at 30 June 2006 (30
June 2005: 111%).
As at 30 June 2003, K OSullivan FIAA completed an
actuarial investigation of Telstra Super. The next
actuarial investigation of Telstra Super is due to be
completed by 30 June 2007 based on the schemes
financial position as at 30 June 2006.
The actuarial investigation of Telstra Super reported
that a surplus continued to exist. In accordance with
the recommendations within the actuarial investigation,
we were not expected to, and did not make employer
contributions to the Telstra Super defined benefit
divisions for the financial year ended 30 June 2006 and
30 June 2005. The current contribution holiday includes
the contributions otherwise payable to the accumulation
divisions of Telstra Super. The continuance of the
holiday is however dependent on the performance of the
fund and we are monitoring the situation on a monthly
basis in light of current market performance.
Telstra Entitys contribution to the defined contribution
divisions of Telstra Super were insignificant for fiscal
2006 and fiscal 2005. Based on the latest actuarial
investigation, we do not expect to make any contributions
to Telstra Super during fiscal 2007.
HK CSL Retirement Scheme
The contributions payable to the defined benefit
divisions are determined by the actuary using the
attained age normal funding actuarial valuation
method.
Employer contributions made to the HK CSL Retirement
Scheme for the financial year ended 30 June 2006 were $3
million (2005: $3 million). We expect to contribute $3
million (2005: $3 million) to our HK CSL Retirement
Scheme in fiscal 2007.
Annual actuarial investigations are currently
undertaken for this scheme by Watson Wyatt Hong Kong
Limited.
F-94
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
28. Post employment benefits (continued)
(h) Net financial position of plan
The financial position of the defined benefit divisions
of Telstra Super and the HK CSL Retirement Scheme is
shown as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net scheme assets |
|
|
Accrued benefits |
|
|
Net surplus (i) |
|
|
Vested benefits |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Telstra Super (ii) |
|
|
4,459 |
|
|
|
4,439 |
|
|
|
3,079 |
|
|
|
3,281 |
|
|
|
1,380 |
|
|
|
1,158 |
|
|
|
3,853 |
|
|
|
3,995 |
|
HK CSL Retirement Scheme (iii) |
|
|
94 |
|
|
|
79 |
|
|
|
74 |
|
|
|
74 |
|
|
|
20 |
|
|
|
5 |
|
|
|
68 |
|
|
|
63 |
|
|
|
|
|
|
|
4,553 |
|
|
|
4,518 |
|
|
|
3,153 |
|
|
|
3,355 |
|
|
|
1,400 |
|
|
|
1,163 |
|
|
|
3,921 |
|
|
|
4,058 |
|
|
|
|
|
|
|
(i) |
|
In accordance with AAS 25: Financial Reporting by
Superannuation Plans the plans net surplus is
determined as the difference between the present value
of the accrued benefits and the net market value of plan
assets. |
|
(ii) |
|
Amounts for Telstra Super have been taken from the
audited financial report of the scheme as at 30 June
2006 and 30 June 2005. The scheme assets are stated at
net market values. |
|
(iii) |
|
Amounts for the defined benefit divisions of the
HK CSL Retirement Scheme have been taken from the
actuarial valuation of the scheme as at 30 June 2006 and
30 June 2005. The scheme assets are stated at net market
values. |
|
|
|
The estimated period over which the benefits of our
members will be returned is 11 years for Telstra Super
(2005: 12 years) and 14.5 years for the HK CSL
Retirement Scheme (2005: 14.7 years). |
|
|
|
The net surplus under AAS 25 of $1,400 million (30 June
2005: $1,163 million) differs from the net defined
benefit asset of $1,029 million (30 June 2005: $247
million) recognised in the balance sheet due to different
measurement rules in the relevant accounting standards
AAS 25 and AASB 119: Employee Benefits. Both standards
require present value discounting of future benefits,
however AAS 25 requires the use of a discount rate equal
to an expected asset return whereas AASB 119 requires an
after-tax bond yield. |
F-95
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities
The ultimate parent entity of the Telstra Group is
the Commonwealth Government of Australia. Below is a list
of our investments in controlled entities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
Parent entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Corporation Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecommunications Equipment Finance Pty Ltd * (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Finance Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Corporate Services Pty Limited * (a) |
|
Australia |
|
|
7 |
|
|
|
7 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Transport Communications Australia Pty Ltd * |
|
Australia |
|
|
4 |
|
|
|
4 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra ESOP Trustee Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Growthshare Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Media Pty Limited * |
|
Australia |
|
|
393 |
|
|
|
380 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Multimedia Pty Limited (a) |
|
Australia |
|
|
2,678 |
|
|
|
2,678 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra International Limited (a) |
|
Australia |
|
|
2 |
|
|
|
84 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra New Wave Pty Ltd * (a) |
|
Australia |
|
|
1 |
|
|
|
1 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Hypertokens Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Hypermax Holdings Pty Ltd * |
|
Australia |
|
|
8 |
|
|
|
8 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Chief Entertainment Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Data & Text Mining Technologies Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Lyrebird Technologies Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra OnAir Infrastructure Holdings Pty Ltd * (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
Telstra 3G Spectrum Holdings Pty Ltd * |
|
Australia |
|
|
302 |
|
|
|
302 |
|
|
|
100.0 |
|
|
|
100.0 |
|
1300 Australia Pty Ltd * |
|
Australia |
|
|
5 |
|
|
|
5 |
|
|
|
60.0 |
|
|
|
60.0 |
|
Telstra OnAir Holdings Pty Ltd * |
|
Australia |
|
|
478 |
|
|
|
302 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Converged Networks Pty Ltd * (h) |
|
Australia |
|
|
1 |
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Telstra Payment Solutions Pty Limited (formerly Keycorp
Solutions Limited) * (c) (h) |
|
Australia |
|
|
56 |
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
ESA Holding Pty Ltd * (j) |
|
Australia |
|
|
|
|
|
|
16 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Business Systems Pty Ltd * |
|
Australia |
|
|
69 |
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Communications Limited (a) |
|
Australia |
|
|
29 |
|
|
|
29 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telecom Australia (Saudi) Company Limited (d) (e) (f) (g) |
|
Saudi Arabia |
|
|
|
|
|
|
|
|
|
|
50.0 |
|
|
|
50.0 |
|
Telstra Rewards Pty Ltd * |
|
Australia |
|
|
14 |
|
|
|
14 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Visa Card Trust (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Qantas Telstra Card Trust (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Visa Business Card Trust (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Media Holdings Pty Limited (a) |
|
Australia |
|
|
30 |
|
|
|
30 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Enterprise Services Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Pay TV Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Communications Network Holdings Pty Ltd * (h) |
|
Australia |
|
|
4 |
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Advanced Digital Communications (WA) Pty Ltd * (h) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Western Communications Solutions Pty Ltd * (h) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Adstream (Aust) Pty Ltd (i) |
|
Australia |
|
|
23 |
|
|
|
|
|
|
|
58.0 |
|
|
|
|
|
Adstream Ltd (g) (i) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Quickcut (Aust) Pty Ltd (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
(continued over page)
F-96
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
Controlled entities (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Holdings Pty Ltd (a) |
|
Australia |
|
|
7,176 |
|
|
|
7,176 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Beijing Australia Telecommunications Technical
Consulting Services Company Limited (e) (g) |
|
China |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Holdings (Bermuda) No. 2 Limited (g) |
|
Bermuda |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CSL New World Mobility Limited (formerly Telstra
CSL Limited) (c) (g) (h) |
|
Bermuda |
|
|
|
|
|
|
|
|
|
|
76.4 |
|
|
|
100.0 |
|
Bestclass Holdings Ltd (g) |
|
British Virgin Islands |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Hong Kong CSL Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Integrated Business Systems Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
One2Free Personalcom Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CSL Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
New World PCS Holdings Limited (g) (h) |
|
Cayman Islands |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
New World 3G Limited (g) (h) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
New World PCS Limited (g) (h) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
New World Mobility Limited (g) (h) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Telstra Holdings (Bermuda) No 1 Limited (g) |
|
Bermuda |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra International HK Limited (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Damovo HK Ltd (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Japan Retail K.K. (g) |
|
Japan |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Singapore Pte Ltd (g) |
|
Singapore |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Global Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
PT Telstra Nusantara (g) |
|
Indonesia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Europe Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra (Cable Telecom) Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra (PSINet) Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra (CTE) Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Cable Telecommunication Ltd (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
PSINet Datacentre UK Ltd (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Inteligen Communications Limited (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Jersey Limited (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
PSINet Hosting Centre Ltd (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Cordoba Holdings Ltd (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
London Hosting Centre Ltd (g) |
|
Jersey |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Inc. (g) |
|
United States |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra India (Private) Limited (g) |
|
India |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra New Zealand Holdings Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
TelstraClear Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
TelstraSaturn Holdings Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
(continued over page)
F-97
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
Controlled entities (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sytec Resources Ltd (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sytec Resources (Australia) Pty Ltd * (g) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
DMZ Global Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
DMZ Global (Australia) Pty Ltd * (g) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CLEAR Communications Limited (g) |
|
New Zealand |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Network Design and Construction Limited (a) |
|
Australia |
|
|
20 |
|
|
|
177 |
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Global Holdings Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Telecommunications India Private Limited (g) |
|
India |
|
|
|
|
|
|
|
|
|
|
98.0 |
|
|
|
98.0 |
|
PT NDC Indonesia (d) (g) |
|
Indonesia |
|
|
|
|
|
|
|
|
|
|
95.0 |
|
|
|
95.0 |
|
NDC Global Philippines, Inc (d) (e) (g) |
|
Philippines |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Global Services (Thailand) Limited (d) (g) |
|
Thailand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49.0 |
|
NDC Global Holdings (Thailand) Limited (d) (g) |
|
Thailand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49.0 |
|
NDC Global Services (Thailand) Limited (d) (g) |
|
Thailand |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51.0 |
|
NDC Global Services Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
NDC Telecommunications India Private Limited (g) |
|
India |
|
|
|
|
|
|
|
|
|
|
2.0 |
|
|
|
2.0 |
|
Telstra Services Solutions Holdings Limited (a) |
|
Australia |
|
|
911 |
|
|
|
911 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra CB.net Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra CB.Com Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra CB.fs Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Telstra eBusiness Services Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Australasian Insurance Systems Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
TRC Computer Systems Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
DBA Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Brokerlink Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
81.3 |
|
|
|
81.3 |
|
DBA Computer Systems Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Brokerlink Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
18.7 |
|
|
|
18.7 |
|
Unilink Group Pty Ltd * (d) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
KAZ Group Pty Limited (a) (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Computer Services (SEA) Pte Limited (d) (g) |
|
Singapore |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Computer Services (HK) Ltd (g) |
|
Hong Kong |
|
|
|
|
|
|
|
|
|
|
75.0 |
|
|
|
75.0 |
|
Enhanced Processing Technologies Inc (g) (i) |
|
United States |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
Australian Administration Services Pty Ltd |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
AAS Superannuation Services Pty Limited |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Business Services Australia Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Business Services Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Software Solutions Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Atune Financial Solutions Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Technology Services Pty Ltd |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
IOCORE Asia Pacific Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Techsouth Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
KAZ Technology Services Australia Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Fundi Software Pty Ltd * (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
(continued over page)
F-98
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Telstra Entitys recorded |
|
|
% of equity held by |
|
Name of entity |
|
incorporation |
|
amount of investment (#) |
|
|
immediate parent |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
$m |
|
|
$m |
|
|
% |
|
|
% |
|
|
|
|
|
Controlled entities (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensis Pty Ltd (a) (j) |
|
Australia |
|
|
851 |
|
|
|
851 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Platefood Limited (h) (g) |
|
United Kingdom |
|
|
|
|
|
|
|
|
|
|
61.0 |
|
|
|
|
|
Just Listed Pty Limited * (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CitySearch Australia Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
CitySearch Canberra Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Group Pty Limited (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
0.0 |
|
|
|
33.0 |
|
Trading Post (Australia) Holdings Pty Ltd (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Group Pty Limited (a) (j) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
67.0 |
|
The Melbourne Trading Post Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
The National Trading Post Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Australian Retirement Publications
Pty Limited * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Collectormania Australia Pty Ltd * (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
The Personal Trading Post Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Auto Trader Australia Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
WA Auto Trader Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sydney Buy & Sell Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sydney Auto Trader Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Ad Mag SA & NSW Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Ad Mag AGI Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post (AW) Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Warranty Direct (Australia) Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post (TCA) Pty Ltd (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Research Resources Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Queensland Trading Post Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Marketing (Qld) Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post on the Net Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Australia Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Appraised Staff Agency Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Tradernet Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post Classifieds Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Trading Post On Line Pty Limited * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sensis Holdings Pty Ltd * (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Invizage Pty Ltd * (i) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
75.0 |
|
PC S.O.S. Pty Ltd * |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Universal Publishers Pty Limited (a) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
Sensis (Victoria) Pty Ltd * (h) |
|
Australia |
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
|
|
|
Total investment in consolidated entities |
|
|
|
|
13,062 |
|
|
|
12,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# |
|
The amounts recorded are before any provision for
reduction in value. |
|
* |
|
These entities are Australian small proprietary
limited companies,
which are not required to prepare and lodge individual
audited financial reports with the Australian
Securities and Investment Commission. |
F-99
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(a) ASIC deed of cross guarantee
On 31 May 2006 and 28 June 2006, the Telstra Entity and
certain of its controlled entities entered into two
revocation deeds, the combined effect of which is to revoke
the deed of cross guarantee dated 4 June 1996 (1996 Deed) in
its entirety. In accordance with the terms of the 1996 Deed,
revocation of the deed does not take effect until the date
which is 6 months after lodgement of the relevant revocation
deed with the Australian Securities and Investment
Commission (ASIC).
A new deed of cross guarantee was entered into on 28 June
2006 (New Deed), pursuant to an ASIC Order dated 22 June
2006 (ASIC Order). The New Deed was entered into between the
parties to the revocation deed dated 28 June 2006 and a
number of additional controlled entities of the Telstra
Entity. The New Deed took effect immediately upon lodgement
with ASIC on 30 June 2006.
The following companies have entered into the 1996 Deed
and/or the New Deed:
|
|
Telstra Corporation Limited (i) (ii); |
|
|
Telstra Corporate Services Pty Limited (i) (ii); |
|
|
Telstra Multimedia Pty Limited (i) (ii); |
|
|
Telstra International Limited (i) (ii); |
|
|
Telstra Communications Limited (i) (ii); |
|
|
Telstra Media Holdings Pty Limited (i); |
|
|
Telstra Enterprise Services Pty Limited (i); |
|
|
Telstra Pay TV Pty Ltd (i); |
|
|
Telstra Holdings Pty Ltd (i) (ii); |
|
|
Network Design and Construction Limited (i) (ii); |
|
|
NDC Global Holdings Pty Limited (i) (ii); |
|
|
NDC Global Services Pty Limited (i) (ii); |
|
|
Telstra Services Solutions Holdings Limited (i) (ii); |
|
|
Telstra eBusiness Services Pty Limited (i) (ii); |
|
|
Australasian Insurance Systems Pty Ltd (i); |
|
|
TRC Computer Systems Pty Ltd (i); |
|
|
Brokerlink Pty Ltd (i); |
|
|
DBA Computer Systems Pty Ltd (i); |
|
|
KAZ Group Limited (ii); |
|
|
KAZ Business Services Pty Ltd (ii); |
|
|
KAZ Software Solutions Pty Ltd (ii); |
|
|
Atune Financial Services Pty Ltd (ii); |
|
|
Sensis Pty Ltd (i) (ii); |
|
|
Trading Post (Australia) Holdings Pty Ltd (i) (ii); |
|
|
Trading Post Group Pty Limited (i) (ii); |
|
|
The Melbourne Trading Post Pty Ltd (i) (ii); |
|
|
The National Trading Post Pty Ltd (i) (ii); |
|
|
Collectormania Australia Pty Ltd (i) (ii); |
|
|
Australian Retirement Publications Pty Limited (i); |
|
|
The Personal Trading Post Pty Limited (i) (ii); |
|
|
Auto Trader Australia Pty Ltd (i) (ii); |
|
|
WA Auto Trader Pty Ltd (i) (ii); |
|
|
Just Listed Pty Limited (i) (ii); |
|
|
Trading Post (TCA) Pty Ltd (i) (ii); |
|
|
Trading Post Australia Pty Limited (i) (ii); and |
|
|
Universal Publishers Pty Limited (ii). |
(i) Companies which form the 1996 Deed
(ii) Companies which form the New Deed
Telstra Finance Limited is trustee under both the 1996 Deed
and the New Deed, however is not a group entity under
either deed.
In respect of both the 1996 Deed and the New Deed, the
relevant group entities under the deed:
|
|
form a closed group and extended closed group as defined in the ASIC Class Order 98/1418 (Class
Order) and the ASIC Order; |
|
|
|
do not have to prepare and lodge audited financial reports under the Corporations Act 2001.
This does not apply to Telstra Corporation Limited; and |
|
|
|
guarantee the payment in full of the debts of the other
parties to the deed in the event of their winding up. |
The following companies ceased to be party to the 1996 Deed
due to a revocation deed as at 11 September 2005:
|
|
Telstra New Wave Pty Ltd; |
|
|
Telstra CB.net Limited; |
|
|
Telstra CB.Com Limited; and |
(b) ASIC deed of cross guarantee financial information
The consolidated assets and liabilities of the closed group
and extended closed group is presented according to both the
Class Order and the ASIC Order as follows. This excludes
Telstra Finance Limited. All significant transactions
between members of the closed group have been eliminated.
F-100
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(b) ASIC deed of cross guarantee financial information (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed group balance sheet |
|
New Deed |
|
|
1996 Deed |
|
|
|
As at 30 |
|
|
|
|
|
|
June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
479 |
|
|
|
501 |
|
|
|
1,421 |
|
Trade and other receivables |
|
|
3,377 |
|
|
|
3,533 |
|
|
|
3,553 |
|
Inventories |
|
|
182 |
|
|
|
175 |
|
|
|
191 |
|
Derivative financial assets |
|
|
22 |
|
|
|
22 |
|
|
|
4 |
|
Prepayments |
|
|
190 |
|
|
|
202 |
|
|
|
217 |
|
|
|
|
|
|
|
Total current assets |
|
|
4,250 |
|
|
|
4,433 |
|
|
|
5,386 |
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
876 |
|
|
|
870 |
|
|
|
884 |
|
Inventories |
|
|
19 |
|
|
|
19 |
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
22 |
|
|
|
21 |
|
|
|
46 |
|
Investments other |
|
|
3,348 |
|
|
|
3,421 |
|
|
|
3,244 |
|
Property, plant and equipment |
|
|
21,792 |
|
|
|
21,785 |
|
|
|
21,190 |
|
Intangibles |
|
|
3,491 |
|
|
|
3,389 |
|
|
|
3,655 |
|
Derivative financial assets |
|
|
392 |
|
|
|
392 |
|
|
|
|
|
Defined benefit assets |
|
|
1,004 |
|
|
|
1,004 |
|
|
|
241 |
|
|
|
|
|
|
|
Total non current assets |
|
|
30,944 |
|
|
|
30,901 |
|
|
|
29,275 |
|
|
|
|
|
|
|
Total assets |
|
|
35,194 |
|
|
|
35,334 |
|
|
|
34,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
2,991 |
|
|
|
2,973 |
|
|
|
2,041 |
|
Borrowings |
|
|
2,531 |
|
|
|
2,323 |
|
|
|
2,159 |
|
Current tax liabilities |
|
|
400 |
|
|
|
400 |
|
|
|
518 |
|
Provisions |
|
|
708 |
|
|
|
697 |
|
|
|
378 |
|
Derivative financial liabilities |
|
|
13 |
|
|
|
13 |
|
|
|
11 |
|
Revenue received in advance |
|
|
1,089 |
|
|
|
1,089 |
|
|
|
1,090 |
|
|
|
|
|
|
|
Total current liabilities |
|
|
7,732 |
|
|
|
7,495 |
|
|
|
6,197 |
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
65 |
|
|
|
65 |
|
|
|
62 |
|
Borrowings |
|
|
11,376 |
|
|
|
11,376 |
|
|
|
10,907 |
|
Deferred tax liabilities |
|
|
1,582 |
|
|
|
1,589 |
|
|
|
1,664 |
|
Provisions |
|
|
951 |
|
|
|
945 |
|
|
|
855 |
|
Derivative financial liabilities |
|
|
768 |
|
|
|
768 |
|
|
|
864 |
|
Revenue received in advance |
|
|
401 |
|
|
|
400 |
|
|
|
387 |
|
|
|
|
|
|
|
Total non current liabilities |
|
|
15,143 |
|
|
|
15,143 |
|
|
|
14,739 |
|
|
|
|
|
|
|
Total liabilities |
|
|
22,875 |
|
|
|
22,638 |
|
|
|
20,936 |
|
|
|
|
|
|
|
Net assets |
|
|
12,319 |
|
|
|
12,696 |
|
|
|
13,725 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
5,569 |
|
|
|
5,569 |
|
|
|
5,536 |
|
Reserves |
|
|
18 |
|
|
|
18 |
|
|
|
12 |
|
Retained profits |
|
|
6,732 |
|
|
|
7,109 |
|
|
|
8,177 |
|
|
|
|
|
|
|
Equity available to the closed group |
|
|
12,319 |
|
|
|
12,696 |
|
|
|
13,725 |
|
|
|
|
|
|
|
F-101
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(b) ASIC deed of cross guarantee financial information (continued)
The consolidated profit for the year of the closed group and
extended closed group is presented according to both the
Class Order and the ASIC Order as follows. This excludes
Telstra Finance Limited. All significant transactions
between members of the closed group have been eliminated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed group income statement and retained profits reconciliation |
|
|
|
|
|
New Deed |
|
|
1996 Deed |
|
|
|
|
|
|
|
Year ended |
|
|
Year ended 30 June |
|
|
|
|
|
|
|
30 June 2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (excluding finance income) |
|
|
|
|
|
|
20,323 |
|
|
|
20,594 |
|
|
|
20,173 |
|
Other income |
|
|
|
|
|
|
304 |
|
|
|
318 |
|
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,627 |
|
|
|
20,912 |
|
|
|
20,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
3,843 |
|
|
|
3,796 |
|
|
|
3,387 |
|
Goods and services purchased |
|
|
|
|
|
|
3,372 |
|
|
|
3,652 |
|
|
|
3,266 |
|
Other expenses |
|
|
|
|
|
|
4,317 |
|
|
|
4,349 |
|
|
|
3,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,532 |
|
|
|
11,797 |
|
|
|
10,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net (gain)/loss from jointly controlled and associated entities |
|
|
|
|
|
|
(10 |
) |
|
|
(12 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,522 |
|
|
|
11,785 |
|
|
|
10,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) |
|
|
|
|
|
|
9,105 |
|
|
|
9,127 |
|
|
|
10,139 |
|
Depreciation and amortisation |
|
|
|
|
|
|
3,721 |
|
|
|
3,717 |
|
|
|
3,228 |
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income tax expense (EBIT) |
|
|
|
|
|
|
5,384 |
|
|
|
5,410 |
|
|
|
6,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
|
120 |
|
|
|
120 |
|
|
|
156 |
|
Finance costs |
|
|
|
|
|
|
978 |
|
|
|
975 |
|
|
|
936 |
|
|
|
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
858 |
|
|
|
855 |
|
|
|
780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
4,526 |
|
|
|
4,555 |
|
|
|
6,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
1,380 |
|
|
|
1,378 |
|
|
|
1,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year available to the closed group |
|
|
|
|
|
|
3,146 |
|
|
|
3,177 |
|
|
|
4,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained profits at the beginning of the financial year available to the closed group |
|
|
|
|
|
|
7,894 |
|
|
|
8,177 |
|
|
|
8,467 |
|
Actuarial gain/(loss) on our defined benefit plans (net of tax effect) |
|
|
|
|
|
|
661 |
|
|
|
661 |
|
|
|
(61 |
) |
Share buy-back |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
(476 |
) |
Transfer out of closed group |
|
|
|
|
|
|
|
|
|
|
64 |
|
|
|
|
|
Transfers to retained profits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
Total available for distribution |
|
|
|
|
|
|
11,701 |
|
|
|
12,079 |
|
|
|
12,301 |
|
Dividends paid |
|
|
|
|
|
|
4,969 |
|
|
|
4,970 |
|
|
|
4,124 |
|
|
|
|
|
|
|
|
|
|
|
Retained profits at the end of the financial year available to the closed group |
|
|
|
|
|
|
6,732 |
|
|
|
7,109 |
|
|
|
8,177 |
|
|
|
|
|
|
|
|
|
|
|
F-102
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(c) Change of company names
|
|
Keycorp Solutions Limited changed its name to Telstra
Payment Solutions Limited on 2 September 2005. |
|
|
|
Furthermore, the status of this controlled entity changed
from a public to a private company on 18 May 2006 to be
named Telstra Payment Solutions Pty Limited. |
|
|
|
On 31 March 2006, Telstra CSL Limited changed its
name to CSL New World Mobility Limited. |
(d) Liquidations
As at 30 June 2006, the following controlled entities were
in voluntary liquidation:
|
|
Telecom Australia (Saudi) Company Limited; |
|
|
NDC Global Philippines, Inc; |
|
|
Qantas Telstra Card Trust; |
|
|
Telstra Visa Business Card Trust; |
|
|
Telstra Visa Card Trust; and |
|
|
KAZ Computer Services (SEA) Pte Limited. |
The following companies were liquidated or deregistered
during fiscal 2006:
|
|
NDC Global Services (Thailand) Limited; |
|
|
NDC Global Holdings (Thailand) Limited; |
|
|
Telecommunications Equipment Finance Pty Ltd; |
|
|
Telstra OnAir Infrastructure Holdings Pty Ltd; and |
(e) Controlled entities with different balance dates
The following companies have balance dates that differ
from our balance date of 30 June for fiscal 2006:
|
|
Telecom Australia (Saudi) Company Limited 31 December; |
|
|
Beijing Australia Telecommunications Technical
Consulting Services Company Limited 31 December;
and |
|
|
NDC Global Philippines, Inc 31 December. |
Financial reports prepared as at 30 June are used for
consolidation purposes.
(f) Controlled entities in which our equity ownership is
less than or equal to 50%
We own 50% of the issued 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 group
financial report.
(g) Controlled entities not individually audited by the
Australian National Audit Office
Companies not audited by the Australian National Audit
Office, our Australian statutory auditor.
F-103
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
29. Investments in controlled entities (continued)
(h) New incorporations and investments
|
|
On 11 August 2005, we established a new entity named
Platefood Limited to facilitate a new investment for
nominal consideration. |
|
|
On 25 August 2005, we established a new entity
named Sensis (Victoria) Pty Ltd to facilitate a new
investment for nominal consideration. |
|
|
On 1 July 2005, we acquired 100% of the issued capital
of Keycorp Solutions Limited for a total consideration
of $56 million including acquisition costs. Subsequent
to acquisition, the entity was renamed to Telstra
Payment Solutions Pty Limited. |
|
|
On 31 March 2006, we acquired 100% of the issued
capital of the Converged Networks Group for a total
consideration of $5 million including acquisition
costs. Converged Networks Group included the following
controlled entities: |
|
|
|
Converged Networks Pty Ltd; |
|
|
|
|
Communications Network Holdings Pty Ltd; |
|
|
|
Advanced Digital Communications (WA) Pty Ltd;
and |
|
|
|
|
Western Communications Solutions Pty Ltd. |
|
|
Converged Networks Group is a provider of voice and
data networks which operates primarily in Western
Australia. |
|
|
|
On 31 March 2006, we merged our 100% owned Hong Kong
mobile operations (Telstra CSL Group) with the Hong
Kong mobile operations of New World PCS Holdings
Limited and its controlled entities (New World Mobility
Group) to form the CSL New World Mobility Group. |
|
|
|
Under the merger agreement, Telstra CSL Limited issued new shares to New World Mobility Holdings Limited in return
for 100% of the issued capital of the New World Mobility
Group and $42 million in net proceeds (net of acquisition
costs). The fair value of the Telstra CSL Limited shares
issued amounted to $577 million and diluted our ownership
in the merged group to 76.4%. Our merger with the New
World Mobility Group included the acquisition of the
following controlled entities: |
|
|
|
New World PCS Holdings Limited; |
|
|
|
New World 3G Limited; |
|
|
|
New World PCS Limited; and |
|
|
|
New World Mobility Limited. |
The CSL New World Mobility Group is a provider of
mobile telecommunication products and services which
operates primarily in Hong Kong.
(i) Other acquisitions
|
|
On 1 July 2005, our controlled entity Sensis Holdings
Pty Ltd acquired a further 25% of the issued share
capital of Invizage Pty Ltd for a total cash
consideration of $5 million including acquisition
costs. |
|
|
|
Invizage Pty Ltd is a provider of information technology
services for small and medium Australian organisations. |
|
|
|
On 22 December 2005, our controlled entity Kaz Group
Pty Limited acquired a further 40% of the issued share
capital of Enhanced Processing Technologies Inc for
nominal consideration, giving us ownership of the
entity. Prior to this date, Enhanced Processing
Technologies was classified as a jointly controlled
entity. |
|
|
|
Enhanced Processing Technologies Inc is a provider of
cheque processing technology and services which operates
primarily in the United States. |
|
|
|
On 1 February 2006, we acquired a further 24.7% of the
issued capital of Adstream (Aust) Pty Ltd and its
controlled entities (Adstream Group) for a total
consideration of $21 million including acquisition
costs, giving us a controlling interest of 58%. Prior
to this date, Adstream (Aust) Pty Ltd was classified as
a jointly controlled entity. Our acquisition of the
Adstream Group included the following controlled
entities: |
|
|
|
Adstream Ltd; and |
|
|
|
|
Quickcut (Aust) Pty Ltd. |
|
|
The Adstream Group is a provider of on-line services to
advertisers that streamlines client approval and
distribution of electronic advertising to media outlets. |
(j) Sales and disposals
|
|
On 31 August 2005, Trading Post Group Pty Limited
(TPG) sold its investment in Just Listed Pty Ltd to
Sensis Pty Ltd (Sensis). |
|
|
|
In addition, Sensis sold its 33% interest in TPG to
Trading Post (Australia) Holdings Pty Ltd on 31 August
2005. |
|
|
|
These controlled entities are all within the Telstra Group. |
|
|
|
On 1 May 2006, our controlled entity KAZ Group Pty
Limited divested its interest in Fundi Software Pty
Ltd in a management buy-out for a total consideration
of $4 million. |
|
|
|
On 26 June 2006, ESA Holding Pty Ltd sold its
investment in Telstra Business Systems Pty Ltd to the
Telstra Entity. |
F-104
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities
Our investments in jointly controlled and associated entities are listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
Ownership |
|
|
Telstra Groups carrying |
|
|
Telstra Entitys carrying |
|
Name of Entity |
|
activities |
|
interest |
|
|
amount of investment (*) |
|
|
amount of investment (*) |
|
|
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
% |
|
|
% |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Partnerships (h) (i) |
|
Pay television |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Services Pty Limited (h) |
|
Customer service |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Management Pty Limited |
|
Management services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Cable Television Pty Ltd (a) (h) |
|
Pay television |
|
|
80.0 |
|
|
|
80.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reach Ltd
(incorporated in Bermuda) (e) (h) |
|
International connectivity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xantic B.V.
(incorporated in The Netherlands) (b) |
|
Global satellite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
communications |
|
|
|
|
|
|
35.0 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
30 |
|
TNAS Limited (incorporated in New Zealand) (e) (h) |
|
Toll free number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
portability in New Zealand |
|
|
33.3 |
|
|
|
33.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial advice and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Solutions Pty Ltd (h) |
|
education services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HelpYouPay Systems Pty Ltd (b) |
|
Debt management services |
|
|
|
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HelpYouPay Pty Ltd (b) |
|
Debt management services |
|
|
|
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business process |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced Processing Technologies Pty Ltd (a) |
|
outsourcing |
|
|
60.0 |
|
|
|
60.0 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced Processing Technologies Inc
(incorporated in United States) (c) |
|
Software sales |
|
|
|
|
|
|
60.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital advertising and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adstream (Aust) Pty Ltd (c) |
|
asset management |
|
|
|
|
|
|
33.3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
3GIS Pty Ltd (e) |
|
Management services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3GIS Partnership (e) |
|
3G network services |
|
|
50.0 |
|
|
|
50.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridge Mobile Pte Ltd (incorporated in
Singapore) |
|
Regional roaming provider |
|
|
12.5 |
|
|
|
12.5 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Mobile phone content |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
m.Net Corporation Limited (d) |
|
provider |
|
|
26.4 |
|
|
|
39.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
36 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associated entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia-Japan Cable Holdings Limited
(incorporated in Bermuda) (d) (e) (h) |
|
Network cable provider |
|
|
46.9 |
|
|
|
39.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Super Pty Ltd (a) (h) |
|
Superannuation trustee |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keycorp Limited (d) |
|
solutions |
|
|
47.6 |
|
|
|
47.8 |
|
|
|
18 |
|
|
|
8 |
|
|
|
18 |
|
|
|
8 |
|
|
|
Charitable trustee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Foundation Ltd (a) |
|
organisation |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet recruitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LinkMe Pty Ltd |
|
provider |
|
|
40.0 |
|
|
|
40.0 |
|
|
|
3 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
12 |
|
|
|
18 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unless noted at (e), all investments have a balance date of
30 June and are incorporated in Australia. Our voting power
is the same as our ownership interest unless otherwise
noted.
(i) This includes both the FOXTEL Partnership and the
FOXTEL Television Partnership.
(*) The Telstra Group carrying amounts are calculated using
the equity method of accounting. The Telstra Entitys
carrying amounts are at cost less any accumulated impairment
loss.
F-105
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(a) Associated entities and jointly controlled
entities in which we own more than 50% equity
|
|
We own 80% of the equity of FOXTEL Cable Television
Pty Ltd. This entity is disclosed as a jointly
controlled entity as the outside equity shareholders
have participating rights that prevent us from
dominating the decision making of the Board of
Directors. Effective voting power is restricted to 50% and we
have joint control. |
|
|
|
We own 100% of the equity of Telstra Super Pty Ltd,
the trustee for the Telstra Superannuation Scheme
(Telstra Super). We do not consolidate Telstra Super
Pty Ltd as we do not control the Board of Directors.
We have equal representation with employee
representatives on the Board. Our voting power is
limited to 44%, which is equivalent to our
representation on the Board. The entity is therefore
classified as an associated entity as we have
significant influence over it. |
|
|
|
We own 100% of the equity of Telstra Foundation Ltd
(TFL). TFL is limited by guarantee (guaranteed to
$100) with Telstra Corporation Limited being the
sole member. We did not contribute any equity to TFL
on incorporation. TFL is the trustee of the Telstra
Community Development Fund and manager of the
Telstra Kids Fund. We do not consolidate TFL as we
do not control the Board. However, due to our Board
representation we significantly influence this
entity. Our voting power is limited to 43%, which is
equivalent to our representation on the Board. |
|
|
|
We own 60% of the equity of Enhanced Processing
Technologies Pty Ltd. This entity is subject to
joint control based on the shareholders agreement,
under which mutual consent of the shareholders is
required in determining the financial and operating
policies of the entity. As a result, it has been
classified as a jointly controlled entity. |
(b) Sale of investments
|
|
On 30 July 2005, we completed the sale of our 50%
shareholding in HelpYouPay Pty Ltd. The revenue on
sale of the investment was not considered
significant. |
|
|
On 30 July 2005, we completed the sale of our 50%
shareholding in HelpYouPay Systems Pty Ltd. The
revenue on sale of the investment was not considered
significant. |
|
|
On 16 February 2006, we completed the sale of our
35% shareholding in Xantic B.V. for $89 million
(US$67 million). During fiscal 2006, we received $18
million (US$13 million) as a result of a capital
return by Xantic B.V. |
(c) Investments no longer equity accounted
|
|
On 22 December 2005, we acquired the remaining
40% shareholding in Enhanced Processing
Technologies Inc giving us ownership of the
entity. Prior to this date Enhanced Processing
Technologies Inc was a jointly controlled entity
and was equity accounted. Refer to note 29 for
further details. |
|
|
On 1 February 2006, we acquired an additional 24.7%
shareholding in Adstream (Aust) Pty Ltd giving us a
controlling interest. Prior to this date Adstream
(Aust) Pty Ltd was a jointly controlled entity and
was equity accounted. Refer to note 29 for further
details. |
(d) Other changes in jointly controlled and associated entities
|
|
On 1 July 2005, we acquired an intangible asset
from our associated entity Keycorp Limited (Keycorp)
for $55 million. We reduced the value of the
intangible asset recognised and increased our
investment in Keycorp to the extent to which this
transaction is unrealised outside the Telstra Group.
This resulted in a $26 million increase in the
carrying value of our investment. Under the terms of
the transaction Keycorp also returned capital to its
shareholders, our share amounting to $16 million.
Refer to (g) for details on our movements in the
consolidated equity amount of our associated
entities. |
|
|
|
In addition, our investment in Keycorp decreased from
47.8% to 47.6% on 29 August 2005. The decrease was due
to a dilution in our shareholding. |
|
|
On 10 August 2005, our investment in m.Net
Corporation Limited decreased from 39.5% to 26.4%.
The decrease was due to a dilution in our
shareholding. |
|
|
On 16 November 2005, our investment in
Australia-Japan Cable Holdings Limited increased
from 39.9% to 46.9%. The increase was due to another
investor forfeiting their interest in the
investment. |
F-106
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(e) Jointly controlled and associated entities with
different balance dates
The following jointly controlled and associated entities
have different balance dates to our balance date of 30
June for fiscal 2006:
|
|
Reach Ltd 31 December; |
|
|
|
TNAS Limited 31 March; |
|
|
|
3GIS Pty Ltd 31 December; |
|
|
|
3GIS Partnership 31 December; and |
|
|
|
Australia-Japan Cable Holdings Limited 31 December. |
Financial reports prepared as at 30 June are used for
equity accounting purposes. Our ownership interest in
jointly controlled and associated entities with different
balance dates is the same at that balance date as 30 June
unless otherwise noted.
(f) Share of jointly controlled and associated entities
net (profits)/ losses
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$ m |
|
|
$ m |
|
|
|
|
Net (profit)/loss from jointly controlled and
associated entities has been contributed by
the following entities: |
|
|
|
|
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
- FOXTEL Partnerships |
|
|
5 |
|
|
|
5 |
|
- Stellar Call Centres Pty Ltd |
|
|
|
|
|
|
(3 |
) |
- Xantic B.V. |
|
|
(12 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
(3 |
) |
|
|
|
Associated entities |
|
|
|
|
|
|
|
|
- Keycorp Limited |
|
|
1 |
|
|
|
(5 |
) |
- LinkMe Pty Ltd |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
(8 |
) |
|
|
|
Net (profit)/loss from jointly controlled
entities has been adjusted by the following: |
|
|
|
|
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
- Reach Ltd (i) |
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
(5 |
) |
|
|
94 |
|
|
|
|
|
|
|
(i) |
|
In fiscal 2005, previously unrecognised equity
accounted losses in Reach Ltd (Reach) were recognised due
to our commitment to fund 50% of Reachs committed
capital expenditure, which was accounted for as an
investment in Reach. Refer to note 36 for further
details. |
F-107
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(g) Other disclosures for jointly controlled and associated entities
The movements in the consolidated equity accounted amount
of our jointly controlled and associated entities are
summarised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled |
|
|
|
|
|
|
|
|
|
|
entities |
|
|
Associated entities |
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
|
|
|
|
30 June |
|
|
30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Carrying amount of investments at beginning of year |
|
|
|
|
|
|
36 |
|
|
|
40 |
|
|
|
12 |
|
|
|
|
|
Additional investments made during the year |
|
|
|
|
|
|
5 |
|
|
|
14 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
54 |
|
|
|
12 |
|
|
|
3 |
|
Share of profits/(losses) before income tax expense |
|
|
|
|
|
|
6 |
|
|
|
2 |
|
|
|
(3 |
) |
|
|
12 |
|
Share of income tax expense |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
1 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
Share of profits/(losses) for the year after income tax expense |
|
|
|
|
|
|
6 |
|
|
|
1 |
|
|
|
(2 |
) |
|
|
5 |
|
Amortisation of unrealised inter-entity profits after income tax |
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of profits/(losses) for the year |
|
|
|
|
|
|
7 |
|
|
|
3 |
|
|
|
(2 |
) |
|
|
5 |
|
Dividends and distributions received |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
Share of reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Share of foreign currency translation reserve and movements due to
exchange rate
translations |
|
|
|
|
|
|
1 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
Sale, transfers and reductions of investments during the year |
|
|
|
|
|
|
(47 |
) |
|
|
(16 |
) |
|
|
(15 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of investments before reduction to recoverable amount |
|
|
|
|
|
|
2 |
|
|
|
38 |
|
|
|
21 |
|
|
|
12 |
|
Impairment losses recognised in the income statement during the year |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of investments at end of year |
|
|
13 |
|
|
|
2 |
|
|
|
36 |
|
|
|
21 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
Our share of contingent liabilities of jointly controlled and
associated
entities we are not directly liable for these |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
Our share of capital commitments contracted for by our jointly
controlled
and associated entities we are not directly liable for these (i) |
|
|
|
|
|
|
11 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
Our share of other expenditure commitments contracted for by our
jointly
controlled and associated entities (other than the supply of
inventories) we are not
directly liable for these (i) |
|
|
|
|
|
|
40 |
|
|
|
52 |
|
|
|
2 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
The commitments and guarantees of our jointly
controlled entities for which we are directly liable are
included within note 26 and note 27 respectively. |
F-108
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(g) Other disclosures for jointly controlled and
associated entities (continued)
Summarised presentation of all of our jointly
controlled and associated entities assets,
liabilities, revenue and expense items (including
jointly controlled and associated entities where
equity accounting has been suspended):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled |
|
|
|
|
|
|
entities |
|
|
Associated entities |
|
|
|
Telstra Group |
|
|
Telstra Group |
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
30 June |
|
|
30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Current assets |
|
|
556 |
|
|
|
695 |
|
|
|
73 |
|
|
|
131 |
|
Non current assets |
|
|
811 |
|
|
|
909 |
|
|
|
346 |
|
|
|
354 |
|
|
|
|
|
|
Total assets |
|
|
1,367 |
|
|
|
1,604 |
|
|
|
419 |
|
|
|
485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
950 |
|
|
|
1,521 |
|
|
|
58 |
|
|
|
88 |
|
Non current liabilities |
|
|
927 |
|
|
|
579 |
|
|
|
536 |
|
|
|
502 |
|
|
|
|
|
|
Total liabilities |
|
|
1,877 |
|
|
|
2,100 |
|
|
|
594 |
|
|
|
590 |
|
|
|
|
|
|
Net assets |
|
|
(510 |
) |
|
|
(496 |
) |
|
|
(175 |
) |
|
|
(105 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
2,152 |
|
|
|
2,335 |
|
|
|
150 |
|
|
|
174 |
|
Total expenses |
|
|
2,067 |
|
|
|
2,140 |
|
|
|
180 |
|
|
|
211 |
|
|
|
|
|
|
Profit/(loss) before income tax expense |
|
|
85 |
|
|
|
195 |
|
|
|
(30 |
) |
|
|
(37 |
) |
Income tax expense |
|
|
3 |
|
|
|
8 |
|
|
|
4 |
|
|
|
6 |
|
|
|
|
|
|
Profit/(loss) for the year |
|
|
82 |
|
|
|
187 |
|
|
|
(34 |
) |
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarised presentation of our share
of all our jointly controlled and
associated
entities revenue and expense items
(including jointly controlled entities
where
equity accounting has been suspended): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
1,369 |
|
|
|
1,377 |
|
|
|
71 |
|
|
|
81 |
|
Total expenses |
|
|
1,326 |
|
|
|
1,280 |
|
|
|
85 |
|
|
|
96 |
|
|
|
|
|
|
Profit/(loss) before income tax expense |
|
|
43 |
|
|
|
97 |
|
|
|
(14 |
) |
|
|
(15 |
) |
Income tax expense |
|
|
2 |
|
|
|
5 |
|
|
|
2 |
|
|
|
3 |
|
|
|
|
|
|
Profit/(loss) for the year |
|
|
41 |
|
|
|
92 |
|
|
|
(16 |
) |
|
|
(18 |
) |
|
|
|
|
|
F-109
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
30. Investments in jointly controlled and associated entities (continued)
(h) Suspension of equity accounting
Our unrecognised share of (profits)/losses for the period
and cumulatively, for our entities where equity
accounting has ceased and the investment is recorded at
zero due to losses made by these entities and/or
reductions in the equity accounted carrying amount, is
shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
Period Cumulative |
|
|
Period Cumulative |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Jointly controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOXTEL Partnerships |
|
|
(1 |
) |
|
|
117 |
|
|
|
80 |
|
|
|
118 |
|
Reach Ltd |
|
|
(34 |
) |
|
|
575 |
|
|
|
(206 |
) |
|
|
609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associated entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia-Japan Cable Holdings Limited |
|
|
36 |
|
|
|
143 |
|
|
|
14 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
835 |
|
|
|
(112 |
) |
|
|
834 |
|
|
|
|
|
|
Equity accounting has also been suspended for the
following jointly controlled and associated entities:
|
|
Customer Services Pty Limited; |
|
|
|
FOXTEL Cable Television Pty Ltd; |
|
|
|
TNAS Limited; |
|
|
|
Money Solutions Pty Ltd; and |
|
|
|
Telstra Super Pty Ltd. |
There are no significant unrecognised profits/losses in these entities.
F-110
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans
The Company has a number of employee share plans
that are available for directors, executives and
employees, these include:
|
|
the Telstra Employee Share Ownership Plans
(TESOP99 and TESOP97); and |
|
|
|
those conducted
through the Telstra Growthshare Trust. |
The nature of each plan, details of plan holdings,
movements in
holdings, and other relevant information is
disclosed below:
(a) TESOP99 and TESOP97
As part of the Commonwealths sale of its shareholding
in fiscal 2000 and fiscal 1998 we offered eligible
employees the opportunity to buy ordinary shares of
Telstra. These share plans were:
|
|
the Telstra Employee Share Ownership Plan II
(TESOP99); and |
|
|
|
the Telstra Employee Share Ownership
Plan (TESOP97). |
Participating employees are entitled to receive
dividends and voting rights in the shares. Telstra ESOP
Trustee Pty Ltd is the trustee for TESOP99 and TESOP97
and holds the shares on behalf of participants. This
company is 100% owned by Telstra.
Generally, employees were offered interest free loans by
the Telstra Entity to acquire certain shares and in some
cases became entitled to certain extra shares and loyalty
shares as a result of participating in the plans. All
shares acquired under the plans were transferred from the
Commonwealth either to the employees or to the trustee
for the benefit of the employees.
While a participant remains an employee of the Telstra
Entity, a company in which Telstra owns greater than 50%
equity, or the company which was their employer when the
shares were acquired, there is no date by which the
employee has to repay the loan. The loan may, however,
be repaid in full at any time by the employee using his
or her own funds.
The loan shares, extra shares and in the case of
TESOP99, the loyalty shares, were subject to a
restriction on the sale of the shares or transfer to the
employee for three years, or until the relevant
employment ceased. This restriction period has now been
fulfilled under each plan.
If a participating employee leaves the Telstra Entity, a
company in which Telstra owns greater than 50% equity, or
the company which was their employer when the shares were
acquired, to acquire the relevant shares the employee
must repay their loan within two months of leaving. This
is the case except where the restriction period has ended
because of the employees death or disablement (in this
case the loan must be repaid within 12 months).
If the employee does not repay the loan when required,
the trustee can sell the shares. The sale proceeds must
then be used to pay the costs of the sale and any amount
outstanding on the loan, after which the balance will be
paid to the employee. The Telstra Entitys recourse under
the loan is limited to the amount recoverable through the
sale of the employees shares.
F-111
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(a) TESOP99 and TESOP97 (continued)
The following information details the number of
outstanding equity instruments and loan balances relevant to the TESOP99 and
TESOP97 plans:
|
|
|
|
|
|
|
|
|
|
|
Employee share plans |
|
|
As at 30 June |
|
|
2006 |
|
2005 |
|
Market price of Telstra shares |
|
$ |
3.68 per share |
|
|
$ |
5.06 per share |
|
Employee share loan balance |
|
$ |
130 million |
|
|
$ |
154 million |
|
|
|
|
|
|
|
|
|
|
TESOP99 |
|
|
|
|
|
|
|
|
Remaining number of loan shares |
|
|
14,387,400 |
|
|
|
14,535,900 |
|
|
|
|
|
|
|
|
|
|
TESOP97 |
|
|
|
|
|
|
|
|
Remaining number of loan shares |
|
|
32,573,300 |
|
|
|
36,674,100 |
|
Remaining number of extra shares |
|
|
8,143,325 |
|
|
|
9,168,525 |
|
The fair value of these shares as at 30 June 2006 based
on the market value of Telstra shares at balance date
amounts to $203 million (2005: $306 million).
The Telstra ESOP Trustee continues to hold the loan
shares where the employee has ceased employment and
elected not to repay the loan, until the share price is
sufficient to recover the loan amount and associated
costs. The Trustee will then sell the shares. As at 30
June 2006, there were 6,418,300 shares held for this
purpose (2005: 5,603,100).
The movements in the number of instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
TESOP97 |
|
TESOP99 |
|
|
number |
|
number |
|
Equity instruments outstanding as
at 30 June 2004 |
|
|
48,327,000 |
|
|
|
14,622,000 |
|
Exercised |
|
|
(2,484,375 |
) |
|
|
(86,100 |
) |
|
|
|
Equity instruments outstanding as
at 30 June 2005 |
|
|
45,842,625 |
|
|
|
14,535,900 |
|
Exercised |
|
|
(5,126,000 |
) |
|
|
(148,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments outstanding as
at 30 June 2006 |
|
|
40,716,625 |
|
|
|
14,387,400 |
|
|
|
|
The weighted average loan still to be repaid for the
TESOP97 equity instrument is $1.04 (2005: $1.33), and
TESOP99 equity instrument is $6.13 (2005: $6.42).
The weighted average share price at the date of the
transfers of Telstra shares relating to the exercise of
these instruments was $3.95 for TESOP 99 (2005: $4.77)
and $3.96 for TESOP 97 (2005: $4.77) based on the
closing market price on those dates. The total proceeds
received on exercise of TESOP99 was $5 million (2005: $4
million) and TESOP97 was $19 million (2005: $15
million).
F-112
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust
The Telstra Growthshare Trust commenced in fiscal 2000.
Under the trust, Telstra operates a number of different
short and long term
incentive equity plans whereby the following equity
based instruments may be allocated:
|
|
incentive shares; |
|
|
|
sign-on bonus
shares; |
|
|
|
performance
rights; |
|
|
|
deferred shares; |
|
|
|
restricted
shares; and |
|
|
|
options. |
In addition, the following share plans are operated
for our non executive directors and certain
eligible employees:
|
|
directshares; and |
|
|
|
ownshares. |
The trustee for the trust is Telstra Growthshare Pty Ltd.
This company is 100% owned by Telstra. Funding is
provided to the Telstra Growthshare Trust to purchase Telstra shares on the
market to underpin the equity instruments issued.
In fiscal 2006, we recorded an expense of $15 million for
our share based payments (2005: $10 million). As at 30
June 2006, we had a total expense yet to be recognised of
$25 million (2005: $17 million), which is expected to be
recognised over a weighted average of 2 years (2005: 2
years).
Our election not to apply AASB 2: Share based payment
(AASB 2) to equity instruments granted prior to 7
November 2002, as permitted under AASB 1: First-time
Adoption of Australian Equivalents to International
Financial Reporting Standards (AASB 1), has reduced the
expense we have recorded, as well as the total expense we
are yet to recognise. Refer to note 36(a) for further
details.
Short term incentive equity plan
Incentive shares
In fiscal 2006, the Board allocated the executives half
of their short term incentive payments as rights to
acquire Telstra shares. These incentive shares vest in
equal parts over a period of one, two and three years on
the anniversary of their allocation date, subject to the
executives continued employment with any entity that
forms part of the Telstra Group. The executive can
exercise their vested incentive shares at a cost of $1 in
total for all of the incentive shares exercised on a
particular day.
Once the vested incentive shares are exercised, Telstra
shares will be transferred to the executive. Until this
time, the executive cannot use the incentive shares (or
vested incentive shares) to vote or receive dividends.
Any dividends paid by the Company prior to exercise will
increase the number of incentive shares allocated to the
executive. The Board has decided not to continue the
short term incentive share plan and the short term
incentive payment for fiscal 2006 will be delivered in
cash.
Incentive shares movements during the year
The following incentive shares were granted during fiscal 2006:
|
|
|
|
|
Effective commencement date of instruments
|
|
19 August 2005
|
Number of incentive shares issued
|
|
1,986,435 |
Market price of Telstra shares on grant date
|
|
$4.77 |
Exercise date 1 year incentive shares
|
|
19 August 2006
|
Exercise date 2 year incentive shares
|
|
19 August 2007
|
Exercise date 3 year incentive shares
|
|
19 August 2008
|
Expiration date
|
|
2 years from each
exercise date
|
During fiscal 2006, 53,467 incentive shares were
forfeited due to resignation, and 97,382 incentive shares
were exercised as a result of those executives being made
redundant. As a result of the above movements, 1,835,586
incentive shares were outstanding as at 30 June 2006.
There were no incentive shares that were exercisable at
30 June 2006.
The fair value of the August 2005 allocation of
incentive shares was $4.77. This was calculated using a
Black Scholes option pricing model. The following
weighted average assumptions were used in determining
the valuation:
|
|
|
|
|
|
|
Growthshare |
|
|
incentive shares |
|
|
August 2005 |
Risk free rate - 1 year incentive shares |
|
|
5.12 |
% |
Risk free rate - 2 year incentive shares |
|
|
5.06 |
% |
Risk free rate - 3 year incentive shares |
|
|
5.06 |
% |
Expected stock volatility |
|
|
15 |
% |
Long term incentive equity plans
(i) Nature of share plans
The purpose of the long term incentive plans is to align
key executives rewards with shareholders interests, and
reward performance improvement whilst supporting business
plans and corporate strategies. These plans are
administered through the Telstra
Growthshare Trust. The Board determines who is
invited to participate in the share plans.
F-113
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
Long term incentive equity plans
(i) Nature of share plans (continued)
Allocations have been made over a number of years in the
form of performance rights, restricted shares and options
under our long term incentive plan, and deferred shares
under our deferred remuneration
plan. Instruments issued represent a right to acquire a
share in Telstra. Generally, the performance rights,
restricted shares and options may only be exercised to
acquire Telstra shares if a performance hurdle is
satisfied in the performance period and in the case of
options, the exercise price is paid by the executive.
Deferred shares may only be exercised when a prescribed
period of service has been completed.
Performance rights
We have seven types of performance rights on issue. These are:
|
|
total shareholder return (TSR) performance rights are
based on Telstras total shareholder return; |
|
|
|
earnings per share (EPS) performance rights are based
on the growth of earnings per share in the year of
allocation and two subsequent years; |
|
|
|
operating expense growth (OEG) performance rights
- are based on a reduction in Telstras operating
expenses; |
|
|
|
revenue growth (RG) performance rights are based on
increases in Telstras revenue; |
|
|
|
network transformation (NT) performance rights are
based on completion of certain elements in Telstras
network transformation program; |
|
|
|
information technology transformation (ITT) performance
rights -are based on a reduction in the number of
business support systems (BSS) and operational support
systems (OSS) systems used by companies in the Telstra
Group; and |
|
|
|
return on investment (ROI) performance rights are
based on an increase in the earnings before interest and
tax for Telstra relative to the average investment. |
For all types of performance rights, an executive is not
entitled to Telstra shares before the performance rights
allocated under Telstra Growthshare become vested
performance rights and are therefore exercisable. If the
performance hurdle is satisfied during the performance
period, a specified number of performance rights as
determined in accordance with the trust deed and terms of
issue, will become vested performance rights. The vested
performance rights can then be exercised at any time
before the expiry date, otherwise they will lapse. Once
the vested performance rights are exercised, Telstra
shares will be transferred to the executive. Until this
time, the executive cannot use the performance rights (or
vested performance rights) to vote or receive dividends.
Telstra shares will be transferred to the executive on
exercise of vested performance rights. The executive may
exercise the performance rights at a cost of $1 in total
for all of the performance rights exercised on a
particular day.
Deferred shares
The executives were previously provided part of their
annual fixed remuneration in the form of rights to
Telstra shares that vest upon completing certain
employment requirements. Generally, if an
executive continues to be employed by an entity that
forms part of the Telstra Group three years after the
commencement date of the instrument, the deferred share
will become a vested deferred share.
Vested deferred shares must be exercised before the
expiry date, otherwise they will lapse. Once exercised,
Telstra shares will be transferred to the executive.
Until this time, the executive can not use the deferred
shares or vested deferred shares to vote or receive
dividends. The executive may exercise the deferred shares
at a cost of $1 in total for all of the deferred shares
exercised on a particular day.
Restricted shares
The executive is not entitled to Telstra shares before
the restricted shares allocated under the trust are
exercised. If the performance hurdle is satisfied in the
performance period, the restricted shares will vest and
may be exercised at any time before the expiry date,
otherwise they will lapse. Once the restricted shares
have vested, they become restricted trust shares, which
will generally be held by the trustee for the executive
for a certain period. Once converted into restricted
trust shares, the executive has an interest in Telstra
shares and is entitled to dividends, other distributions,
and voting rights.
Restricted trust shares are held by the Trustee until the earlier of:
|
|
the period determined in accordance with the
trust deed; |
|
|
|
the executive finishes employment with Telstra;
or |
|
|
|
a date nominated by the Board. |
The executive may exercise restricted shares at a cost of
$1 in total for all of the restricted shares exercised on
a particular day.
F-114
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(i) Nature of the share plans (continued)
Options
An executive is not entitled to Telstra shares before the
options allocated under Telstra Growthshare initially
vest, and then are exercised. This means that the
executive cannot use options to vote or receive
dividends. If the performance hurdle is satisfied in the
performance period, options may be exercised at any time
before the expiry date otherwise they will lapse. Details
of the performance hurdle for options is detailed below.
Once the options are exercised and the option price
paid, Telstra shares will be transferred to the
executive.
(ii) Performance hurdles
Performance hurdles for instruments issued in fiscal 2006
TSR performance rights
For allocations of TSR performance rights issued in
fiscal 2006, the applicable performance hurdle is based
on the market value of Telstra shares and the value of
accumulated dividends paid to Telstra shareholders. TSR
performance rights vest if Telstras total shareholder
return exceeds certain targets over the performance
period, which is the five years to 30 June 2010. If the
total shareholder return is:
|
|
equal to the minimum target then 50% of the allocation
becomes exercisable (except for the CEO, who will receive
75% of the allocated performance rights); |
|
|
|
between the maximum and minimum targets then the number
of exercisable TSR performance rights is scaled
proportionately between 50% and 100% (with the exception
of the CEO whose number of performance rights is scaled
proportionately between 75% and 100%); |
|
|
|
equal to or greater than the maximum target then 100%
of the TSR performance rights will become exercisable; or |
|
|
|
is less than the minimum target all TSR performance
rights will lapse. |
OEG, RG, NT and ITT performance rights
For allocations of the OEG, RG, NT and ITT performance
rights issued in fiscal 2006, the performance hurdles
for the initial performance period are:
|
|
if the minimum target is achieved in the initial
performance period, (1 July 2005 to 30 June 2008) then
50% of the allocation of performance rights will become
exercisable (except for the CEO, who will receive 75% of
the allocated performance rights); |
|
|
|
if the result achieved is between the maximum and
minimum targets, then the number of exercisable
performance rights is scaled proportionately between 50%
and 100% (with the exception of the CEO whose number of
performance rights is scaled proportionately between 75%
and 100%); |
|
|
|
if the maximum target is achieved then 100% of the
performance rights will become exercisable; or |
|
|
|
if the minimum target is not achieved 25% of the
performance rights allocated to the initial performance
period will lapse. |
Of the performance rights that have not become
exercisable in the initial performance period, 75%
will be added to the subsequent performance period
allocation. The performance targets for the subsequent
performance period (1 July 2005 to 30 June 2010) are:
|
|
if the minimum target is met, 50% of the allocation
will become exercisable (except for the CEO, who will
receive 75% of the allocated performance rights); |
|
|
|
if the result achieved is between the maximum and
minimum targets, then the number of exercisable
performance rights is scaled proportionately between 50%
and 100% (with the exception of the CEO whose number of
performance rights is scaled proportionately between 75%
and 100%); or |
|
|
|
if the maximum target is achieved then all of the
performance rights will become exercisable. |
If the minimum target is not met in the subsequent
performance period, all performance rights will
lapse.
ROI performance rights
For the allocation of ROI performance rights issued in
fiscal 2006, if the return on investment is:
|
|
equal to the minimum target then 50% of the allocation
will become exercisable (except for the CEO, who will
receive 75% of the allocated performance rights); |
|
|
|
between the maximum and minimum targets, the number of
exercisable ROI performance rights is scaled
proportionately between 50% and 100% (with the exception
of the CEO whose number of performance rights is scaled
proportionately between 75% and 100%); |
|
|
|
greater than the maximum target then 100% of the ROI
performance rights will become exercisable; or |
|
|
|
is less than the minimum target 25% of the allocated
ROI performance rights will lapse. |
If the ROI performance rights have not become exercisable
in this period, 75% of these performance rights will be
added to the allocation of TSR performance rights for
measurement against the TSR performance hurdle. If this
TSR performance hurdle is not achieved, all ROI
performance rights will lapse.
F-115
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(ii) Performance hurdles (continued)
Performance hurdle for instruments issued between 30 June 2001 and 30 June 2005
EPS performance rights
The number of EPS performance rights that become vested EPS performance rights, and therefore
become exercisable, is based on the following:
|
|
if the cumulative growth in EPS from 1 July 2004 to 30 June 2007 is equal to 15.7%
then 50% of the allocation becomes exercisable; |
|
|
if the cumulative growth in EPS is greater than 15.7% and less than 33.1% then the
number of exercisable performance rights is scaled proportionately between 50% and 100%; |
|
|
if the cumulative growth in EPS exceeds 33.1% then 100% of the EPS performance
rights will become exercisable; or |
|
|
if Telstra does not achieve cumulative growth in EPS of 15.7%, all EPS performance
rights will lapse. |
TSR performance rights and options
For allocations of TSR performance rights made between 30 June 2001 and 30 June 2005, and options
issued during fiscal 2002, the applicable performance hurdle is based on comparing Telstras
total shareholder return (TSR) with the TSRs of the companies in the S&P/ASX 200 (Industrial)
Index (peer group) within the performance period.
The companies in the peer group are anchored at the effective date of allocation, and this same
peer group of companies are then tracked during the performance period. At the end of each
quarter during the performance period, the 30 day average TSR is calculated for Telstra and the
companies in the peer group for each trading day during that quarter.
Both the number of TSR performance rights and the number of options potentially exercisable are
based on the following.
If in the first quarter of the performance period, Telstras percentile ranking is the 50th
percentile or above then:
|
|
the number of TSR performance rights and options that become exercisable for that
quarter is scaled proportionately from the 50th percentile (at which 50% of the
allocation becomes exercisable) to the 75th percentile (at which 100% of the allocation
becomes exercisable); and |
|
|
in subsequent quarters, the number that become exercisable is based on the same
proportionate scale, but is reduced by the number of performance rights or options that
have previously become exercisable. The percentile ranking achieved needs to be above
that achieved in previous quarters for additional performance rights and options to
become exercisable. |
If in the first quarter of the performance period, the percentile ranking is less than the 50th
percentile then:
|
|
half of the allocation will lapse; and |
|
|
in subsequent quarters, the remaining 50% of the options or performance rights
will become exercisable if the ranking is the 50th percentile or above for that quarter. |
If Telstra does not achieve or exceed the 50th percentile ranking in any quarter of the
performance period, all TSR performance rights and options will lapse.
Performance hurdle for instruments issued prior to 30 June 2001
For all allocations prior to 30 June 2001, which include restricted shares and options, the
applicable performance hurdle was that the average Telstra Accumulation Index must exceed the
average S&P/ASX 200 (Industrial) Index (replacing the superseded All Industrials Accumulation
Index) for thirty consecutive days within the performance period. If the performance hurdle is
satisfied for these allocations, all of the relevant options or restricted shares would become
exercisable (i.e. they do not become exercisable on a proportionate basis).
F-116
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(ii) Performance hurdles (continued)
The following outlines the targets to be achieved for the fiscal 2006 allocation of performance
rights to become exercisable:
|
|
|
|
|
|
|
|
|
|
|
3 Year performance rights |
|
5 Year performance rights |
|
|
Initial performance period |
|
Subsequent performance period |
|
|
Minimum target |
|
Maximum target |
|
Minimum target |
|
Maximum target |
|
TSR performance rights
|
|
N/A
|
|
N/A
|
|
(a)
|
|
(a) |
|
|
|
|
|
|
|
|
|
OEG performance rights
|
|
2.2% operating
expense growth
|
|
1.2% operating
expense growth
|
|
1.1% operating
expense growth
|
|
0.0% operating
expense growth |
|
|
|
|
|
|
|
|
|
RG performance rights
|
|
2.0% revenue growth
|
|
2.5% revenue growth
|
|
2.0% revenue growth
|
|
2.5%revenue growth |
|
|
|
|
|
|
|
|
|
NT
performance rights
|
|
IP Core and Ethernet
complete by 30 June
2008
|
|
IP Core and Ethernet
complete by 31
December 2007
|
|
Multi Service Edge, Soft
Switch Platform, Fibre
to the Node and
Wireless NGN complete
by 30 June 2010
|
|
Multi Service Edge, Soft
Switch Platform, Fibre
to the Node and
Wireless NGN complete
by 31 December 2009 |
|
|
|
|
|
|
|
|
|
ITT performance rights
|
|
350 OSS and BSS
systems
|
|
250 OSS and BSS
systems
|
|
250 OSS and BSS
systems
|
|
200 OSS and BSS
systems |
|
|
|
|
|
|
|
|
|
ROI performance rights
|
|
23.5% return on
investment
|
|
24.5% return on
investment
|
|
N/A
|
|
N/A |
|
|
|
(a) |
|
The applicable performance hurdle is based on the market value of Telstra shares and the
value of accumulated dividends paid to Telstra shareholders. This has been set by the Board. |
F-117
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iii) Instruments outstanding at the beginning of fiscal 2006
The following performance rights, deferred shares, restricted shares and options were outstanding
at the start of fiscal 2006, but were yet to vest with executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
Exercise date |
|
|
instruments |
|
Commencement |
|
Performance |
|
Exercise |
|
(once performance |
|
|
outstanding |
|
date |
|
hurdle period |
|
price |
|
hurdle met) |
|
|
|
|
|
|
|
|
from |
|
to |
|
|
|
|
|
anytime before: |
|
Growthshare 2001 - Sept 2000 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
2,413,900 |
|
|
8 Sept 2000
|
|
8 Sept 2003
|
|
8 Sept 2005
|
|
|
|
$6.28 |
|
8 Sept 2010 |
Restricted shares
|
|
|
500,600 |
|
|
8 Sept 2000
|
|
8 Sept 2003
|
|
8 Sept 2005
|
|
$1 per parcel exercised
|
|
8 Sept 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2001 - March 2001 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
150,000 |
|
|
16 March 2001
|
|
16 March 2004
|
|
16 March 2006
|
|
|
|
$6.55 |
|
16 March 2011 |
Restricted shares
|
|
|
40,000 |
|
|
16 March 2001
|
|
16 March 2004
|
|
16 March 2006
|
|
$1 per parcel exercised
|
|
16 March 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2002 - Sept 2001 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
13,325,153 |
|
|
6 Sept 2001
|
|
6 Sept 2004
|
|
6 Sept 2006
|
|
|
|
$4.90 |
|
6 Sept 2011 |
TSR Performance rights
|
|
|
1,273,782 |
|
|
6 Sept 2001
|
|
6 Sept 2004
|
|
6 Sept 2006
|
|
$1 per parcel exercised
|
|
8 Dec 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2002 - March 2002 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,602,000 |
|
|
14 March 2002
|
|
14 March 2005
|
|
14 March 2007
|
|
|
|
$5.63 |
|
14 March 2012 |
TSR Performance rights
|
|
|
136,000 |
|
|
14 March 2002
|
|
14 March 2005
|
|
14 March 2007
|
|
$1 per parcel exercised
|
|
14 June 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2003 - Sept 2002 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares
|
|
|
1,774,023 |
|
|
5 Sept 2002
|
|
N/A
|
|
|
|
$1 per parcel exercised
|
|
5 Sept 2007 |
TSR Performance rights
|
|
|
3,687,224 |
|
|
5 Sept 2002
|
|
5 Sept 2005
|
|
5 Sept 2007
|
|
$1 per parcel exercised
|
|
5 Dec 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2003 - March 2003 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares
|
|
|
18,600 |
|
|
7 March 2003
|
|
N/A
|
|
|
|
$1 per parcel exercised
|
|
7 March 2008 |
TSR Performance rights
|
|
|
37,200 |
|
|
7 March 2003
|
|
7 March 2006
|
|
7 March 2008
|
|
$1 per parcel exercised
|
|
7 June 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2004 - Sept 2003 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares
|
|
|
2,025,008 |
|
|
5 Sept 2003
|
|
N/A
|
|
|
|
$1 per parcel exercised
|
|
5 Sept 2008 |
TSR Performance rights
|
|
|
4,099,546 |
|
|
5 Sept 2003
|
|
5 Sept 2006
|
|
5 Sept 2008
|
|
$1 per parcel exercised
|
|
5 Dec 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2004 - February 2004 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares
|
|
|
18,350 |
|
|
20 Feb 2004
|
|
N/A
|
|
|
|
$1 per parcel exercised
|
|
20 Feb 2009 |
TSR Performance rights
|
|
|
36,700 |
|
|
20 Feb 2004
|
|
20 Feb 2007
|
|
20 Feb 2009
|
|
$1 per parcel exercised
|
|
20 May 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growthshare 2005 - August 2004 allocation |
|
|
|
|
|
|
|
|
|
|
|
|
TSR Performance rights
|
|
|
2,424,714 |
|
|
20 Aug 2004
|
|
20 Aug 2007
|
|
20 Aug 2009
|
|
$1 per parcel exercised
|
|
20 Nov 2009 |
EPS Performance rights
|
|
|
2,424,714 |
|
|
20 Aug 2004
|
|
1 July 2004
|
|
30 June 2007
|
|
$1 per parcel exercised
|
|
20 Nov 2009 |
As deferred shares are allocated as annual fixed remuneration, there is no performance
hurdle. Generally, deferred shares will become vested deferred shares after a specified service
period.
F-118
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iv) Instruments granted during the financial year
The following performance rights were granted in February 2006 in relation to the 2005 long
term incentive plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR |
|
|
OEG |
|
|
RG |
|
|
NT |
|
|
ITT |
|
|
ROI |
|
|
|
performance |
|
|
performance |
|
|
performance |
|
|
performance |
|
|
performance |
|
|
performance |
|
|
|
rights |
|
|
rights |
|
|
rights |
|
|
rights |
|
|
rights |
|
|
rights |
|
Number of executives who were allocated
performance rights |
|
|
|
220 |
|
|
|
220 |
|
|
|
220 |
|
|
|
220 |
|
|
|
220 |
|
|
|
220 |
Effective commencement date of instruments |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
24 Feb 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
hurdle period i.e. over what time period
executives have to satisfy the performance hurdle for the instruments to
vest |
|
1 July 2005 to
30 June 2010 |
|
1 July 2005 to
30 June 2008 |
|
1 July 2005 to
30 June 2008 |
|
1 July 2005 to
30 June 2008 |
|
1 July 2005 to
30 June 2008 |
|
1 July 2005 to
30 June 2008 |
|
|
|
|
|
|
1 July 2005 to |
|
1 July 2005 to |
|
1 July 2005 to |
|
1 July 2005 to |
|
|
|
|
Subsequent performance hurdle period |
|
|
|
N/A |
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
30 June 2010 |
|
|
|
N/A |
Number of performance rights issued |
|
|
|
571,943 |
|
|
|
1,143,886 |
|
|
|
1,143,886 |
|
|
|
857,914 |
|
|
|
857,914 |
|
|
|
1,143,886 |
|
|
$1per parcel |
|
$1per parcel |
|
$1per parcel |
|
$1per parcel |
|
$1per parcel |
|
$1per parcel |
Exercise price (once the performance rights |
|
of instruments |
|
of instruments |
|
of instruments |
|
of instruments |
|
of instruments |
|
of instruments |
become exercisable) |
|
exercised |
|
exercised |
|
exercised |
|
exercised |
|
exercised |
|
exercised |
Market price of Telstra shares on
commencement date |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
|
|
$ |
3.87 |
Fair value (per instrument) |
|
|
$ |
0.66 |
|
|
$ |
3.18 |
|
|
$ |
3.18 |
|
|
$ |
3.18 |
|
|
$ |
3.18 |
|
|
$ |
3.37 |
|
|
any time |
|
any time |
|
any time |
|
any time |
|
any time |
|
any time |
Exercise date (once the instruments become |
|
before |
|
before |
|
before |
|
before |
|
before |
|
before |
exercisable) |
|
19 Aug 2012 |
|
19 Aug 2012 |
|
19 Aug 2012 |
|
19 Aug 2012 |
|
19 Aug 2012 |
|
19 Aug 2012 |
The following performance rights were granted in August 2004:
|
|
|
|
|
|
|
|
|
|
|
|
TSR performance |
|
|
EPS performance |
|
|
|
rights |
|
|
rights |
|
Number of executives who were allocated
performance rights |
|
|
|
178 |
|
|
|
178 |
Effective commencement date of performance
rights |
|
20 Aug 2004 |
|
20 Aug 2004 |
Performance hurdle period i.e. over what time
period executives have to satisfy the performance hurdle for the instruments to vest |
|
20 Aug 2007 to
20 Aug 2009 |
|
1 Jul 2004 to
30 Jun 2007 |
Number of performance rights issued |
|
|
|
2,473,000 |
|
|
|
2,473,000 |
|
|
$1per parcel of |
|
$1per parcel of |
Exercise
price (once the instruments become exercisable) |
|
instruments
exercised |
|
instruments
exercised |
Market price of Telstra shares on commencement
date |
|
|
$ |
4.89 |
|
|
$ |
4.89 |
Fair value (per instrument) |
|
|
$ |
2.63 |
|
|
$ |
4.18 |
Exercise
date (once the instruments become exercisable) |
|
any time before 20 Nov 2009 |
|
any time before
20 Nov 2009 |
F-119
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iv) Instruments granted during the financial year (continued)
The fair value was calculated using a valuation technique that is consistent with the Black
Scholes methodology and utilises Monte Carlo simulations. The following weighted average
assumptions were used in determining the valuation:
|
|
|
|
|
|
|
|
|
|
|
Growthshare |
|
|
performance rights |
|
|
Feb 2006 |
|
Aug 2004 |
|
Share price
|
|
$ |
3.87 |
|
|
$ |
4.89 |
|
Risk free rate
|
|
|
5.20 |
% |
|
|
5.39 |
% |
Dividend yield
|
|
|
6.0 |
% |
|
|
5.5 |
% |
Expected stock volatility
|
|
|
19 |
% |
|
|
13.1 |
% |
Expected life performance rights
|
|
date the
instruments
become
exercisable
|
|
|
5.25 years
|
|
Expected rate of achievement of TSR
performance hurdles
|
|
|
15 |
% |
|
|
62 |
% |
|
|
|
The expected stock volatility is a measure of the amount by which the price is expected to
fluctuate during a period. This was based on historical daily and weekly closing share prices.
As the RG, OEG, NTT, IT and ROI performance rights are not based on market conditions, no
adjustment for the expected achievement of the performance hurdles was made in the valuation.
F-120
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(v) Instruments which have been forfeited during the financial year
The following instruments issued to participating employees have been forfeited during the
financial year due to cessation of employment:
|
|
|
|
|
|
|
|
|
|
|
Instruments forfeited |
|
|
|
during year ended 30 June |
|
Allocation |
|
2006 |
|
|
2005 |
|
|
Options |
|
|
|
|
|
|
|
|
September 2000 |
|
|
|
|
|
|
419,447 |
|
September 2001 |
|
|
888,153 |
|
|
|
1,631,444 |
|
March 2002 |
|
|
|
|
|
|
80,000 |
|
|
Restricted shares |
|
|
|
|
|
|
|
|
September 2000 |
|
|
|
|
|
|
86,608 |
|
|
Deferred shares |
|
|
|
|
|
|
|
|
September 2002 |
|
|
41,292 |
|
|
|
105,856 |
|
March 2003 |
|
|
506 |
|
|
|
3,500 |
|
September 2003 |
|
|
94,713 |
|
|
|
116,595 |
|
|
TSR Performance rights |
|
|
|
|
|
|
|
|
September 2001 |
|
|
5,500 |
|
|
|
158,762 |
|
March 2002 |
|
|
|
|
|
|
6,800 |
|
September 2002 |
|
|
180,281 |
|
|
|
223,096 |
|
March 2003 |
|
|
1,012 |
|
|
|
7,000 |
|
September 2003 |
|
|
272,118 |
|
|
|
244,648 |
|
August 2004 |
|
|
198,314 |
|
|
|
48,286 |
|
February 2006 |
|
|
4,612 |
|
|
|
|
|
|
EPS Performance rights |
|
|
|
|
|
|
|
|
August 2004 |
|
|
198,314 |
|
|
|
48,286 |
|
|
OEG Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
9,225 |
|
|
|
|
|
|
RG Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
9,225 |
|
|
|
|
|
|
NT Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
6,918 |
|
|
|
|
|
|
ITT Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
6,918 |
|
|
|
|
|
|
ROI Performance rights |
|
|
|
|
|
|
|
|
February 2006 |
|
|
9,225 |
|
|
|
|
|
(vi) Instruments exercised during the financial year
In fiscal 2006, there were 2,000 (2005: nil) options that were exercised from the September 2001
allocation at the exercise price of $4.90. The total proceeds received on exercise of these
options was $9,800 (2005: nil). The share price at the date of the transfers of Telstra shares
relating to these options was $4.81 (2005: nil).
There were 1,241,282 (2005: nil) performance rights exercised from the September 2001 allocation.
These instruments were exercised at various dates throughout the year. The weighted average share
price at the date of the transfers of Telstra shares relating to the exercise of these
instruments was $4.69 (2005: nil) based on the closing market price on those dates.
There was also 1,516,003 deferred shares (2005: 49,834) that were exercised from the September
2002 allocation, 2,094 (2005: nil) deferred shares from the March 2003 and 500,054 deferred
shares (2005: 27,486) that were
exercised from the September 2003 allocation. These instruments were exercised at various dates
throughout the year. The weighted average share price at the date of the transfers of Telstra
shares relating to the exercise of these instruments was $4.43 (2005: $4.87) based on the closing
market price on those dates.
The total proceeds received on exercise of our options, deferred shares and performance rights
was $10,027 (2005: $8), which includes $9,800 from the exercise of our September 2001 allocation
of options.
F-121
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(vii) Instruments which have expired during the financial year
The following instruments issued to participating employees have expired due to the performance
hurdle not being met:
|
|
|
|
|
|
|
|
|
|
|
Instruments expired |
|
|
|
during year ended 30 June |
|
Allocation |
|
2006 |
|
|
2005 |
|
|
Options |
|
|
|
|
|
|
|
|
September 1999 |
|
|
|
|
|
|
1,395,000 |
|
September 2000 |
|
|
2,413,900 |
|
|
|
|
|
March 2001 |
|
|
150,000 |
|
|
|
|
|
September 2001 |
|
|
|
|
|
|
16,846,680 |
|
March 2002 |
|
|
801,000 |
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
September 1999 |
|
|
|
|
|
|
236,500 |
|
September 2000 |
|
|
500,600 |
|
|
|
|
|
March 2001 |
|
|
40,000 |
|
|
|
|
|
|
TSR Performance rights |
|
|
|
|
|
|
|
|
September 2001 |
|
|
|
|
|
|
1,607,066 |
|
March 2002 |
|
|
68,000 |
|
|
|
|
|
September 2002 |
|
|
1,865,832 |
|
|
|
|
|
(viii) Instruments outstanding at the end of fiscal 2006
After movements in our share plans during the financial year, the following instruments remain
outstanding as at 30 June 2006:
|
|
|
|
|
|
|
Number |
|
|
outstanding |
|
|
As at 30 June 2006 |
|
Growthshare 2002 - Sept 2001 allocation |
|
|
|
|
Options |
|
|
12,435,000 |
|
TSR Performance rights |
|
|
27,000 |
|
|
|
|
|
|
Growthshare 2002 - March 2002 allocation |
|
|
|
|
Options |
|
|
801,000 |
|
TSR Performance rights |
|
|
68,000 |
|
|
|
|
|
|
Growthshare 2003 - Sept 2002 allocation |
|
|
|
|
Deferred shares |
|
|
216,728 |
|
TSR Performance rights |
|
|
1,641,111 |
|
|
|
|
|
|
Growthshare 2003 - March 2003 allocation |
|
|
|
|
Deferred shares |
|
|
16,000 |
|
TSR Performance rights |
|
|
36,188 |
|
|
|
|
|
|
Growthshare 2004 - Sept 2003 allocation |
|
|
|
|
Deferred shares |
|
|
1,430,241 |
|
TSR Performance rights |
|
|
3,827,428 |
|
|
|
|
|
|
Growthshare 2004 - February 2004 allocation |
|
|
|
|
Deferred shares |
|
|
18,350 |
|
TSR Performance rights |
|
|
36,700 |
|
|
|
|
|
|
Growthshare 2005 - August 2004 allocation |
|
|
|
|
TSR Performance Rights |
|
|
2,226,400 |
|
EPS Performance Rights |
|
|
2,226,400 |
|
|
|
|
|
|
Growthshare 2006 - February 2006 allocation |
|
|
|
|
TSR Performance Rights |
|
|
567,331 |
|
OEG Performance Rights |
|
|
1,134,661 |
|
RG Performance Rights |
|
|
1,134,661 |
|
NT Performance Rights |
|
|
850,996 |
|
ITT Performance Rights |
|
|
850,996 |
|
ROI Performance Rights |
|
|
1,134,661 |
|
Only the September 2001 allocation of options and TSR performance rights, and the September 2002
allocation of deferred shares have become vested instruments, however, they are yet to be
exercised.
F-122
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(ix) Summary of movements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive shares (i) |
|
Options |
|
Restricted shares |
|
Deferred shares |
|
Performance rights (ii) |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
|
|
|
average fair |
|
|
Number |
|
value |
|
Number |
|
value |
|
Number |
|
value |
|
Number |
|
value |
|
Number |
|
value |
|
|
|
|
|
|
|
|
|
Equity instruments outstanding as at 30 June 2004 |
|
|
|
|
|
|
|
|
|
|
37,863,624 |
|
|
$ |
1.18 |
|
|
|
863,708 |
|
|
$ |
4.18 |
|
|
|
4,139,252 |
|
|
$ |
4.34 |
|
|
|
11,517,824 |
|
|
$ |
2.98 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,946,000 |
|
|
$ |
3.41 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
(2,130,891 |
) |
|
$ |
1.22 |
|
|
|
(86,608 |
) |
|
$ |
3.62 |
|
|
|
(225,951 |
) |
|
$ |
4.34 |
|
|
|
(736,878 |
) |
|
$ |
3.04 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,320 |
) |
|
$ |
4.37 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
|
|
|
|
|
|
|
|
(18,241,680 |
) |
|
$ |
1.15 |
|
|
|
(236,500 |
) |
|
$ |
5.64 |
|
|
|
|
|
|
|
|
|
|
|
(1,607,066 |
) |
|
$ |
2.86 |
|
|
|
|
Equity instruments outstanding
as at 30 June 2005 |
|
|
|
|
|
|
|
|
|
|
17,491,053 |
|
|
$ |
1.20 |
|
|
|
540,600 |
|
|
$ |
3.63 |
|
|
|
3,835,981 |
|
|
$ |
4.34 |
|
|
|
14,119,880 |
|
|
$ |
3.14 |
|
Granted |
|
|
1,986,435 |
|
|
$ |
4.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,719,429 |
|
|
$ |
2.97 |
|
Forfeited |
|
|
(150,849 |
) |
|
$ |
4.77 |
|
|
|
(888,153 |
) |
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
(136,511 |
) |
|
$ |
4.32 |
|
|
|
(901,662 |
) |
|
$ |
3.19 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
(2,000 |
) |
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
(2,018,151 |
) |
|
$ |
4.38 |
|
|
|
(1,241,282 |
) |
|
$ |
2.86 |
|
Expired |
|
|
|
|
|
|
|
|
|
|
(3,364,900 |
) |
|
$ |
1.49 |
|
|
|
(540,600 |
) |
|
$ |
3.63 |
|
|
|
|
|
|
|
|
|
|
|
(1,933,832 |
) |
|
$ |
2.99 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments outstanding
as at 30 June 2006 |
|
|
1,835,586 |
|
|
$ |
4.77 |
|
|
|
13,236,000 |
|
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
1,681,319 |
|
|
$ |
4.30 |
|
|
|
15,762,533 |
|
|
$ |
3.12 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments exercisable
as at 30 June 2006 |
|
|
105,899 |
|
|
$ |
4.77 |
|
|
|
12,435,000 |
|
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
216,728 |
|
|
$ |
4.41 |
|
|
|
27,000 |
|
|
$ |
2.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
The incentive shares exercisable relate to those executives that
have been made redundant and are then consequently entitled to the incentive
shares. |
|
(ii) |
|
Performance rights include TSR, EPS, OEG, RG, NT, ITT and ROI performance rights. |
F-123
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
Telstra directshare and ownshare
(i) Nature of Telstra directshare and ownshare
Telstra directshare
Non-executive directors are required to sacrifice a minimum of 20% of their fees toward the
acquisition of restricted Telstra shares, known as directshares. Shares are acquired by the
trustee from time to time and allocated to the participating directors on a 6 monthly basis, on
dates determined by the trustee at its discretion. Although the trustee holds the shares in
trust, the participant retains the beneficial interest in the shares (dividends, voting rights,
bonuses and rights issues) until they are transferred at expiration of the restriction period.
The restriction period continues:
|
|
for five years from the date of allocation of the shares; |
|
|
until the participating director is no longer a director of, or is no longer
employed by, a company in the Telstra Group; or |
|
|
until the Board of Telstra determines that an event has occurred. |
At the end of the restriction period, the directshares will be transferred to the participating
director. The participating director is not able to deal in the shares until this transfer has
taken place.
The expense associated with shares allocated under this plan is included in the disclosure for
directors remuneration.
Telstra ownshare
Certain eligible employees may be provided part of their remuneration in Telstra shares. Those
employees indicate a preference to be provided Telstra shares as part of their remuneration.
Shares are acquired by the trustee from time to time and allocated to these employees at the time
their application is accepted. Although the trustee holds the shares in trust, the participant
retains the beneficial interest in the shares (dividends, voting rights, bonuses or rights
issues) until they are transferred at expiration of the restriction period.
The restriction period continues:
|
|
for three years or five years depending on the elections available to the
participant at the time of allocation; |
|
|
|
until the participant ceases employment with the Telstra Group; or |
|
|
|
until the Board of Telstra determines that an event has occurred. |
At the end of the restriction period, the ownshares will be transferred to the participant. The
participant is not able to deal in the shares until this transfer has taken place.
(ii) Instruments outstanding at the beginning of fiscal 2006
The following directshares and ownshares were outstanding at the start of fiscal 2006 but were
held by the trustee for the benefit of the relevant directors or employees pending expiration of
the restriction period:
|
|
|
|
|
|
|
Number of |
|
|
instruments |
|
|
outstanding |
|
|
|
Directshares |
|
|
|
|
15 September 2000 allocation |
|
|
4,364 |
|
19 March 2001 allocation |
|
|
7,439 |
|
14 September 2001 allocation |
|
|
9,463 |
|
14 March 2002 allocation |
|
|
11,857 |
|
5 September 2002 allocation |
|
|
12,937 |
|
7 March 2003 allocation |
|
|
29,922 |
|
5 September 2003 allocation |
|
|
23,132 |
|
20 February 2004 allocation |
|
|
26,369 |
|
20 August 2005 allocation |
|
|
7,567 |
|
19 February 2005 allocation |
|
|
26,013 |
|
|
|
|
|
|
|
|
|
159,063 |
|
|
|
|
|
|
|
|
|
|
|
Ownshares |
|
|
|
|
15 September 2000 allocation |
|
|
49,928 |
|
14 September 2001 allocation |
|
|
47,202 |
|
5 September 2002 allocation |
|
|
471,135 |
|
28 October 2002 allocation |
|
|
138,232 |
|
5 September 2003 allocation |
|
|
333,587 |
|
31 October 2003 allocation |
|
|
207,140 |
|
20 August 2004 allocation |
|
|
318,074 |
|
29 October 2004 allocation |
|
|
247,168 |
|
|
|
|
|
|
|
|
|
1,812,466 |
|
|
|
|
|
|
F-124
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iii) Instruments granted during the financial year
The following directshares were granted in August and February of fiscal 2006 and fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directshare Equity Plan |
|
|
|
|
|
|
Aug 2005 |
|
|
Feb 2006 |
|
|
Aug 2004 |
|
|
Feb 2005 |
|
|
Number of eligible non-executive directors |
|
|
6 |
|
|
|
6 |
|
|
|
8 |
|
|
|
8 |
|
Number of participants in the plan |
|
|
6 |
|
|
|
6 |
|
|
|
8 |
|
|
|
8 |
|
Grant date of shares |
|
19 August 2005 |
|
|
17 February 2006 |
|
|
20 August 2004 |
|
|
19 February 2005 |
|
Number of shares allocated |
|
|
20,699 |
|
|
|
31,286 |
|
|
|
7,567 |
|
|
|
26,013 |
|
Fair value of shares allocated |
|
$4.78 per share |
|
|
$4.05 per share |
|
|
$4.89 per share |
|
|
$5.29 per share |
|
Total fair value of shares allocated |
|
|
$98,941 |
|
|
|
$126,708 |
|
|
|
$37,003 |
|
|
|
$137,609 |
|
The following ownshares were granted in August and October of fiscal 2006 and fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownshare Equity Plan |
|
|
|
|
|
|
Aug 2005 |
|
|
Oct 2005 |
|
|
Aug 2004 |
|
|
Oct 2004 |
|
|
Number of eligible participants |
|
|
9,612 |
|
|
|
17,559 |
|
|
|
8,975 |
|
|
|
16,062 |
|
Number of participants in the plan |
|
|
414 |
|
|
|
151 |
|
|
|
311 |
|
|
|
173 |
|
Grant date of shares |
|
19 August 2005 |
|
|
28 October 2005 |
|
|
20 August 2004 |
|
|
29 October 2004 |
|
Number of shares allocated |
|
|
506,420 |
|
|
|
270,415 |
|
|
|
348,240 |
|
|
|
250,386 |
|
Fair value of shares allocated |
|
$4.78 per share |
|
$4.18 per share |
|
$4.89 per share |
|
$4.67 per share |
Total fair value of shares allocated |
|
|
$2,420,688 |
|
|
|
$1,130,335 |
|
|
|
$1,702,894 |
|
|
|
$1,169,303 |
|
On an allocation of directshares and ownshares, the participants in the plans are not required to
make any payment to the Telstra Entity. The August allocation of ownshares relates to employees
short term incentive payments and the October allocation relates to shares acquired through
salary sacrifice by employees.
The fair value of the instruments issued is determined by the remuneration foregone by the
participant. The number of directshares or ownshares allocated is based on the weighted average
price of a Telstra share in the week ending on the day before allocation date, in conjunction
with the remuneration foregone.
F-125
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
31. Employee share plans (continued)
(b) Telstra Growthshare Trust (continued)
(iv) Instruments exercised during the financial year
Directshares and ownshares are not required to be exercised. The fully paid shares held by the
Telstra Growthshare Trust relating to these instruments are merely transferred to the
participants at the completion of the restriction period.
The following fully paid shares have been distributed from the Telstra Growthshare Trust at
various dates throughout fiscal 2006 to directors and executives under the directshare and
ownshare plans respectively:
|
|
|
|
|
|
|
|
|
|
|
No. of shares |
|
|
|
|
distributed |
|
Fair value |
|
Directshares
|
|
|
45,060 |
|
|
$ |
189,415 |
|
Ownshares
|
|
|
901,607 |
|
|
$ |
3,763,870 |
|
The following fully paid shares relating to the same plans were distributed during fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
No. of shares |
|
|
|
|
distributed |
|
Fair value |
|
Directshares
|
|
|
13,644 |
|
|
$ |
68,629 |
|
Ownshares
|
|
|
425,950 |
|
|
$ |
2,033,620 |
|
The fair value of directshares and ownshares distributed is determined through reference to the
closing market price of a Telstra share on the date of transfer.
(v) Instruments outstanding at the end of fiscal 2006
|
|
|
|
|
|
|
No. of instruments |
|
|
|
outstanding as at |
|
|
|
30 June 2006 |
|
|
Directshares |
|
|
|
|
14 September 2001 allocation |
|
|
5,616 |
|
14 March 2002 allocation |
|
|
8,348 |
|
5 September 2002 allocation |
|
|
8,933 |
|
7 March 2003 allocation |
|
|
23,879 |
|
5 September 2003 allocation |
|
|
18,488 |
|
20 February 2004 allocation |
|
|
21,380 |
|
20 August 2005 allocation |
|
|
6,223 |
|
19 February 2005 allocation |
|
|
21,136 |
|
19 August 2005 allocation |
|
|
20,699 |
|
17 February 2006 allocation |
|
|
31,286 |
|
|
|
|
|
|
|
|
165,988 |
|
|
|
|
|
|
|
|
|
|
|
|
No. of instruments |
|
|
|
outstanding as at |
|
|
|
30 June 2006 |
|
|
Ownshares |
|
|
|
|
14 September 2001 allocation |
|
|
32,395 |
|
5 September 2003 allocation |
|
|
293,764 |
|
31 October 2003 allocation |
|
|
165,932 |
|
20 August 2004 allocation |
|
|
282,031 |
|
29 October 2004 allocation |
|
|
194,084 |
|
19 August 2005 allocation |
|
|
474,237 |
|
28 October 2005 allocation |
|
|
245,251 |
|
|
|
|
|
|
|
|
1,687,694 |
|
|
|
|
|
Sign-on bonus shares
Certain eligible employees may be provided sign-on bonus shares upon commencing employment at
Telstra. These shares are held in trust, although the participant retains the beneficial interest
in the shares (dividends, voting rights, bonuses or rights issues) until they are transferred at
expiration of the restriction period.
The restriction period continues:
|
|
until a date determined by the chief executive officer; or |
|
|
|
until the Board of Telstra determines that an event has occurred. |
At the end of the restriction period, the sign-on bonus shares will be transferred to the
participating employee. The employee is not able to deal in the shares until this transfer has
taken place.
There were 67,694 (2005: nil) sign-on bonus shares issued in fiscal 2006 to one employee (2005:
nil) on 30 March 2006. The fair value of the shares allocated was $3.69 with a total fair value
allocated of $249,791. These shares were still outstanding at 30 June 2006.
The fair value of the sign-on bonus shares is based on the weighted average price of a Telstra
share in the week ending on the day before allocation date.
F-126
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation
Our key management personnel (KMP) have authority and responsibility for planning, directing
and controlling the activities of the Telstra Group. Our KMP consist of:
|
|
the directors of the Telstra Entity; and |
|
|
certain executives in the Chief Executive Officers (CEOs) senior leadership
team, referred to as a senior executive in this report. |
Directors
During fiscal 2006 and fiscal 2005, the directors of the Telstra Entity were:
|
|
|
Name |
|
Position |
|
Current directors |
|
|
|
|
|
Donald G McGauchie
|
|
Chairman, Non Executive Director, appointed Chairman 20 July 2004 |
|
|
|
Solomon D Trujillo
|
|
Chief Executive Officer and Executive Director, appointed 1 July 2005 |
|
|
|
Belinda J Hutchinson
|
|
Non Executive Director, |
|
|
|
Catherine B Livingstone
|
|
Non Executive Director, |
|
|
|
Charles Macek
|
|
Non Executive Director, |
|
|
|
John W Stocker
|
|
Non Executive Director, |
|
|
|
Peter Willcox
|
|
Non Executive Director, appointed 17 May 2006 |
|
|
|
John Zeglis
|
|
Non Executive Director, appointed 17 May 2006 |
|
|
|
Former directors |
|
|
|
|
|
John T Ralph
|
|
Deputy Chairman, Non Executive Director, retired 11 August 2005 |
|
|
|
Zygmunt E Switkowski
|
|
Chief Executive Officer and Executive Director, resigned 1 July 2005 |
|
|
|
Samuel H Chisholm
|
|
Non Executive Director, resigned 28 October 2004 |
|
|
|
Anthony J Clark
|
|
Non Executive Director, retired 11 August 2005 |
|
|
|
John E Fletcher
|
|
Non Executive Director, resigned 30 June 2006 |
Senior executives
On 1 July 2005, Mr Solomon Trujillo was appointed CEO and Executive Director. Subsequent to Mr
Trujillos appointment, we reassessed our KMP in light of the new organisational structure. The
senior executives that qualified as KMP for the current year were:
|
|
|
Name |
|
Position |
|
Fiscal 2006 senior
executives |
|
|
|
|
|
Bruce Akhurst
|
|
Chief Executive Officer, Sensis |
|
|
|
Kate McKenzie
|
|
Group Managing Director, Telstra Wholesale, appointed 16 January 2006 |
|
|
|
David Moffatt
|
|
Group Managing Director, Telstra Consumer Marketing and Channels |
|
|
|
Deena Shiff
|
|
Group Managing Director, Telstra Business, appointed 30 January 2006;
previously Group Managing Director
Telstra Wholesale from 1 January 2005 to 30 January 2006 |
|
|
|
John Stanhope
|
|
Chief Financial Officer and Group Managing Director, Finance and Administration |
|
|
|
David Thodey
|
|
Group Managing Director, Telstra Enterprise and Government |
|
|
|
Gregory Winn
|
|
Group Managing Director, Telstra Operations, appointed 11 August 2005 |
F-127
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
Senior executives (continued)
During fiscal 2005, the senior executives that formed part of our KMP were:
|
|
|
Name |
|
Position |
|
Fiscal 2005 senior
executives |
|
|
|
|
|
Bruce Akhurst
|
|
Chief Executive Officer, Sensis, appointed 1 January 2005; previously Group General
Council and Group
Managing Director, Telstra Wholesale, Telstra Broadband and Media until 31 December 2004 |
|
|
|
Douglas Campbell
|
|
Group Managing Director, Telstra Country Wide, retired 31 December 2005 |
|
|
|
David Moffatt
|
|
Group Managing Director, Telstra Consumer and Marketing |
|
|
|
Ted Pretty
|
|
Group Managing Director, Telstra Technology, Innovation and Products, ceased 19 August 2005 |
|
|
|
Michael Rocca
|
|
Group Managing Director, Infrastructure Services |
|
|
|
Bill Scales
|
|
Group Managing Director, Regulatory, Corporate and Human Relations, retired 12 August 2005 |
|
|
|
Deena Shiff
|
|
Group Managing Director, Telstra Wholesale appointed 1 January 2005 |
|
|
|
John Stanhope
|
|
Chief Financial Officer and Group Managing Director, Finance and Administration |
|
|
|
David Thodey
|
|
Group Managing Director, Telstra Enterprise and Government |
Certain senior executives classified as KMP in the prior year have either resigned, retired or
are no longer considered KMP for the purposes of the applicable accounting standard in fiscal
2006.
KMP aggregate compensation
During fiscal 2006 and fiscal 2005, the aggregate compensation provided to our KMP was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Short term employee benefits |
|
|
21,841,244 |
|
|
|
16,183,799 |
|
|
|
21,841,244 |
|
|
|
16,183,799 |
|
Post employment benefits |
|
|
2,029,681 |
|
|
|
1,468,559 |
|
|
|
2,029,681 |
|
|
|
1,468,559 |
|
Other long term benefits |
|
|
245,279 |
|
|
|
272,833 |
|
|
|
245,279 |
|
|
|
272,833 |
|
Termination benefits |
|
|
4,027,495 |
|
|
|
|
|
|
|
4,027,495 |
|
|
|
|
|
Equity settled share based payments |
|
|
4,907,315 |
|
|
|
9,249,062 |
|
|
|
4,907,315 |
|
|
|
9,249,062 |
|
|
|
|
|
|
|
|
|
33,051,014 |
|
|
|
27,174,253 |
|
|
|
33,051,014 |
|
|
|
27,174,253 |
|
|
|
|
|
|
The compensation for each individual KMP with additional details regarding the category of
compensation is provided on the following pages.
F-128
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation
During fiscal 2006, the compensation provided to each individual KMP was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term employee benefits |
|
|
Post employment |
|
|
Other long |
|
|
Termin- |
|
|
Equity settled share based payments |
|
|
Total |
|
|
|
Salary & |
|
|
Short term |
|
|
Non- |
|
|
|
|
|
|
Superan- |
|
|
Retirement |
|
|
term |
|
|
ation |
|
|
Short term |
|
|
|
|
|
|
Deferred |
|
|
Other |
|
|
|
|
Year ended |
|
fees |
|
|
incentives |
|
|
monetary |
|
|
Other |
|
|
nuation |
|
|
benefits |
|
|
benefits |
|
|
benefits |
|
|
incentives |
|
|
Directshare |
|
|
shares |
|
|
equity |
|
|
|
|
30 June 2006 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D McGauchie |
|
|
312,236 |
|
|
|
|
|
|
|
3,078 |
|
|
|
|
|
|
|
12,158 |
|
|
|
60,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,099 |
|
|
|
|
|
|
|
|
|
|
|
468,665 |
|
J Ralph (a) (e) |
|
|
17,474 |
|
|
|
|
|
|
|
380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
480,402 |
|
S Trujillo (b) (c) |
|
|
2,987,861 |
|
|
|
2,581,200 |
|
|
|
|
|
|
|
1,745,011 |
|
|
|
1,012,139 |
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
309,305 |
|
|
|
8,710,516 |
|
Z Switkowski (a)
(d) |
|
|
5,451 |
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
3,151,526 |
|
|
|
|
|
|
|
|
|
|
|
491,049 |
|
|
|
4,516 |
|
|
|
3,652,858 |
|
A Clark (a) (e) |
|
|
9,015 |
|
|
|
|
|
|
|
458 |
|
|
|
|
|
|
|
970 |
|
|
|
|
|
|
|
|
|
|
|
278,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289,289 |
|
J Fletcher (a) (e) |
|
|
94,209 |
|
|
|
|
|
|
|
2,775 |
|
|
|
|
|
|
|
8,056 |
|
|
|
|
|
|
|
|
|
|
|
134,575 |
|
|
|
|
|
|
|
26,422 |
|
|
|
|
|
|
|
|
|
|
|
266,037 |
|
B Hutchinson |
|
|
100,611 |
|
|
|
|
|
|
|
2,288 |
|
|
|
|
|
|
|
18,551 |
|
|
|
11,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,740 |
|
|
|
|
|
|
|
|
|
|
|
163,133 |
|
C Livingstone |
|
|
113,063 |
|
|
|
|
|
|
|
2,288 |
|
|
|
|
|
|
|
10,998 |
|
|
|
11,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,015 |
|
|
|
|
|
|
|
|
|
|
|
169,213 |
|
C Macek |
|
|
123,032 |
|
|
|
|
|
|
|
2,748 |
|
|
|
|
|
|
|
11,227 |
|
|
|
12,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,565 |
|
|
|
|
|
|
|
|
|
|
|
182,671 |
|
J Stocker |
|
|
110,817 |
|
|
|
|
|
|
|
2,288 |
|
|
|
|
|
|
|
39,006 |
|
|
|
13,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,390 |
|
|
|
|
|
|
|
|
|
|
|
202,527 |
|
P Willcox (b) |
|
|
11,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
|
|
|
|
|
|
|
|
16,176 |
|
J Zeglis (b) |
|
|
12,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
|
|
|
|
|
|
|
|
16,176 |
|
|
|
|
|
|
|
3,898,582 |
|
|
|
2,581,200 |
|
|
|
16,338 |
|
|
|
1,745,011 |
|
|
|
1,114,455 |
|
|
|
109,011 |
|
|
|
75,000 |
|
|
|
4,027,495 |
|
|
|
|
|
|
|
245,701 |
|
|
|
491,049 |
|
|
|
313,821 |
|
|
|
14,617,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B Akhurst |
|
|
984,974 |
|
|
|
1,519,035 |
|
|
|
11,740 |
|
|
|
|
|
|
|
188,026 |
|
|
|
|
|
|
|
29,325 |
|
|
|
|
|
|
|
276,443 |
|
|
|
|
|
|
|
115,592 |
|
|
|
650,036 |
|
|
|
3,775,171 |
|
K McKenzie (b) |
|
|
223,280 |
|
|
|
180,950 |
|
|
|
|
|
|
|
|
|
|
|
20,787 |
|
|
|
|
|
|
|
6,026 |
|
|
|
|
|
|
|
22,067 |
|
|
|
|
|
|
|
|
|
|
|
30,871 |
|
|
|
483,981 |
|
D Moffatt |
|
|
876,970 |
|
|
|
1,019,991 |
|
|
|
18,138 |
|
|
|
|
|
|
|
316,030 |
|
|
|
|
|
|
|
29,825 |
|
|
|
|
|
|
|
131,095 |
|
|
|
|
|
|
|
129,101 |
|
|
|
779,461 |
|
|
|
3,300,611 |
|
D Shiff |
|
|
645,857 |
|
|
|
768,951 |
|
|
|
6,062 |
|
|
|
|
|
|
|
116,643 |
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
155,829 |
|
|
|
|
|
|
|
37,438 |
|
|
|
214,391 |
|
|
|
1,965,171 |
|
J Stanhope |
|
|
919,499 |
|
|
|
655,412 |
|
|
|
9,668 |
|
|
|
|
|
|
|
101,001 |
|
|
|
|
|
|
|
25,825 |
|
|
|
|
|
|
|
126,792 |
|
|
|
|
|
|
|
76,968 |
|
|
|
335,804 |
|
|
|
2,250,969 |
|
D Thodey |
|
|
1,031,086 |
|
|
|
926,798 |
|
|
|
8,248 |
|
|
|
|
|
|
|
52,914 |
|
|
|
|
|
|
|
27,100 |
|
|
|
|
|
|
|
108,869 |
|
|
|
|
|
|
|
105,198 |
|
|
|
560,789 |
|
|
|
2,821,002 |
|
G Winn (b) (f) |
|
|
1,280,944 |
|
|
|
1,408,918 |
|
|
|
1,685 |
|
|
|
1,101,907 |
|
|
|
10,814 |
|
|
|
|
|
|
|
32,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,836,446 |
|
|
|
|
|
|
|
5,962,610 |
|
|
|
6,480,055 |
|
|
|
55,541 |
|
|
|
1,101,907 |
|
|
|
806,215 |
|
|
|
|
|
|
|
170,279 |
|
|
|
|
|
|
|
821,095 |
|
|
|
|
|
|
|
464,297 |
|
|
|
2,571,352 |
|
|
|
18,433,351 |
|
|
|
|
|
|
|
9,861,192 |
|
|
|
9,061,255 |
|
|
|
71,879 |
|
|
|
2,846,918 |
|
|
|
1,920,670 |
|
|
|
109,011 |
|
|
|
245,279 |
|
|
|
4,027,495 |
|
|
|
821,095 |
|
|
|
245,701 |
|
|
|
955,346 |
|
|
|
2,885,173 |
|
|
|
33,051,014 |
|
|
|
|
F-129
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation (continued)
(a) These personnel retired or resigned from their position during
fiscal 2006. After the date of retirement or resignation, these
personnel were not considered to be KMP. As a result, the
disclosed compensation includes only compensation during their
period of services as a KMP.
(b) These personnel were appointed to the position during fiscal
2006. Prior to the date of appointment, these personnel were not
considered to be KMP. As a result, the disclosed compensation
includes only compensation from the date of appointment.
(c) On commencement of employment, Mr Trujillo received a one-off
sign-on bonus of $1,000,000. This bonus was subsequently
transferred to superannuation during fiscal 2006.
In addition, Mr Trujillo received a sign-on incentive in the amount
of 50% of his maximum potential benefit under the short term
incentive plan ($1,500,000), which has been included in short term
incentives. The amount of the sign-on incentive was deducted from
his potential short term incentive for the first year of
employment.
Other compensation for Mr Trujillo relates to compensation provided
for tax equalisation, travel, accommodation and certain relocation
costs.
(d) Dr Switkowski ceased employment with the Company effective 1
July 2005. As a result, Dr Switkowskis compensation includes one
day of benefits, together with his termination benefits and equity
settled share based payments.
Termination benefits relate to entitlements under Dr Switkowskis
employment contract, equal to 12 months fixed remuneration, in
addition to accrued annual leave and long service leave
entitlements. Fixed remuneration comprises salary, superannuation
and the value of salary sacrificed items.
Other equity compensation represents one day of expense for various
instruments, including options, performance rights and restricted
shares. These instruments are subject to performance hurdles and
may become exercisable in future reporting periods. Refer note 33
for further details on Dr. Switkowskis holdings of equity
instruments upon leaving the Company.
Upon ceasing employment, the deferred shares previously allocated
to Dr Switkowski vested and became immediately exercisable. As
such, the unamortised amount of compensation was immediately
recognised.
(e) Termination benefits paid during fiscal 2006 are to directors
that resigned or retired during the year. Termination benefits
represent the payment of retirement benefits that accumulated
during the period of employment.
(f) Other compensation for Mr Winn comprises a one-off sign-on
bonus of $500,000 and compensation provided for tax equalisation,
travel, accommodation and certain relocation costs.
F-130
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation (continued)
During fiscal 2005, the compensation provided to each individual KMP was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term employee benefits |
|
|
Post employment |
|
|
Other long |
|
|
Equity settled share based payments |
|
|
Total |
|
|
|
|
|
|
|
Short term |
|
|
Non- |
|
|
|
|
|
|
Superan- |
|
|
Retirement |
|
|
term |
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
|
Year ended |
|
Salary & fees |
|
|
incentives |
|
|
monetary |
|
|
Other |
|
|
nuation |
|
|
benefits |
|
|
benefits |
|
|
Directshare |
|
|
shares |
|
|
Other equity |
|
|
|
|
30 June 2005 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D McGauchie |
|
|
225,503 |
|
|
|
|
|
|
|
2,317 |
|
|
|
2,837 |
|
|
|
11,484 |
|
|
|
195,396 |
|
|
|
|
|
|
|
60,054 |
|
|
|
|
|
|
|
|
|
|
|
497,591 |
|
J Ralph |
|
|
142,957 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
|
|
|
|
79,940 |
|
|
|
|
|
|
|
19,305 |
|
|
|
|
|
|
|
|
|
|
|
244,455 |
|
Z Switkowski |
|
|
1,830,900 |
|
|
|
1,961,000 |
|
|
|
24,357 |
|
|
|
|
|
|
|
101,850 |
|
|
|
|
|
|
|
52,300 |
|
|
|
|
|
|
|
725,912 |
|
|
|
2,045,313 |
|
|
|
6,741,632 |
|
S Chisholm (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A Clark |
|
|
75,706 |
|
|
|
|
|
|
|
2,753 |
|
|
|
|
|
|
|
8,493 |
|
|
|
48,811 |
|
|
|
|
|
|
|
13,114 |
|
|
|
|
|
|
|
|
|
|
|
148,877 |
|
J Fletcher |
|
|
43,795 |
|
|
|
|
|
|
|
3,015 |
|
|
|
|
|
|
|
6,705 |
|
|
|
35,603 |
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
129,118 |
|
B Hutchinson |
|
|
70,065 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
6,692 |
|
|
|
32,004 |
|
|
|
|
|
|
|
19,189 |
|
|
|
|
|
|
|
|
|
|
|
130,203 |
|
C Livingstone |
|
|
77,764 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
8,537 |
|
|
|
46,216 |
|
|
|
|
|
|
|
21,575 |
|
|
|
|
|
|
|
|
|
|
|
156,345 |
|
C Macek |
|
|
79,584 |
|
|
|
|
|
|
|
2,057 |
|
|
|
|
|
|
|
8,717 |
|
|
|
40,160 |
|
|
|
|
|
|
|
22,075 |
|
|
|
|
|
|
|
|
|
|
|
152,593 |
|
J Stocker |
|
|
71,975 |
|
|
|
|
|
|
|
2,253 |
|
|
|
|
|
|
|
6,478 |
|
|
|
73,130 |
|
|
|
|
|
|
|
52,173 |
|
|
|
|
|
|
|
|
|
|
|
206,009 |
|
|
|
|
|
|
|
2,618,249 |
|
|
|
1,961,000 |
|
|
|
43,511 |
|
|
|
2,837 |
|
|
|
158,956 |
|
|
|
551,260 |
|
|
|
52,300 |
|
|
|
247,485 |
|
|
|
725,912 |
|
|
|
2,045,313 |
|
|
|
8,406,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B Akhurst |
|
|
927,664 |
|
|
|
523,600 |
|
|
|
11,893 |
|
|
|
|
|
|
|
177,086 |
|
|
|
|
|
|
|
29,325 |
|
|
|
|
|
|
|
196,141 |
|
|
|
732,594 |
|
|
|
2,598,303 |
|
D Campbell |
|
|
941,394 |
|
|
|
310,600 |
|
|
|
10,149 |
|
|
|
|
|
|
|
88,356 |
|
|
|
|
|
|
|
26,825 |
|
|
|
|
|
|
|
196,141 |
|
|
|
732,354 |
|
|
|
2,305,819 |
|
D Moffatt (c) |
|
|
1,133,165 |
|
|
|
248,300 |
|
|
|
18,781 |
|
|
|
400,000 |
|
|
|
11,585 |
|
|
|
|
|
|
|
29,825 |
|
|
|
|
|
|
|
220,968 |
|
|
|
801,183 |
|
|
|
2,863,807 |
|
T Pretty (c) |
|
|
1,120,581 |
|
|
|
540,500 |
|
|
|
22,370 |
|
|
|
260,000 |
|
|
|
24,169 |
|
|
|
|
|
|
|
29,825 |
|
|
|
|
|
|
|
224,936 |
|
|
|
789,217 |
|
|
|
3,011,598 |
|
M Rocca |
|
|
735,791 |
|
|
|
416,600 |
|
|
|
9,817 |
|
|
|
|
|
|
|
140,459 |
|
|
|
|
|
|
|
23,375 |
|
|
|
|
|
|
|
145,754 |
|
|
|
401,479 |
|
|
|
1,873,275 |
|
B Scales |
|
|
681,167 |
|
|
|
428,700 |
|
|
|
9,635 |
|
|
|
|
|
|
|
117,583 |
|
|
|
|
|
|
|
21,625 |
|
|
|
|
|
|
|
121,946 |
|
|
|
326,788 |
|
|
|
1,707,444 |
|
D Shiff (b) |
|
|
277,321 |
|
|
|
295,150 |
|
|
|
1,326 |
|
|
|
|
|
|
|
47,680 |
|
|
|
|
|
|
|
8,058 |
|
|
|
|
|
|
|
30,641 |
|
|
|
102,562 |
|
|
|
762,738 |
|
J Stanhope |
|
|
800,685 |
|
|
|
240,150 |
|
|
|
11,398 |
|
|
|
|
|
|
|
99,065 |
|
|
|
|
|
|
|
24,575 |
|
|
|
|
|
|
|
105,628 |
|
|
|
365,338 |
|
|
|
1,646,839 |
|
D Thodey |
|
|
966,890 |
|
|
|
206,200 |
|
|
|
8,375 |
|
|
|
|
|
|
|
52,360 |
|
|
|
|
|
|
|
27,100 |
|
|
|
|
|
|
|
176,235 |
|
|
|
560,447 |
|
|
|
1,997,607 |
|
|
|
|
|
|
|
7,584,658 |
|
|
|
3,209,800 |
|
|
|
103,744 |
|
|
|
660,000 |
|
|
|
758,343 |
|
|
|
|
|
|
|
220,533 |
|
|
|
|
|
|
|
1,418,390 |
|
|
|
4,811,962 |
|
|
|
18,767,430 |
|
|
|
|
|
|
|
10,202,907 |
|
|
|
5,170,800 |
|
|
|
147,255 |
|
|
|
662,837 |
|
|
|
917,299 |
|
|
|
551,260 |
|
|
|
272,833 |
|
|
|
247,485 |
|
|
|
2,144,302 |
|
|
|
6,857,275 |
|
|
|
27,174,253 |
|
|
|
|
F-131
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
KMP individual compensation (continued)
(a) During fiscal 2005, Mr Chisholm declined to receive fees for
his Board duties to Telstra. Mr Chisholm resigned during fiscal
2005.
(b) Ms Shiff was appointed to the position of Group Managing
Director during fiscal 2005. Prior to the date of appointment, Ms
Shiff was not considered to be a KMP. As a result, the disclosed
compensation includes only compensation from the date of
appointment.
(c) Relates to annual contract payments made to certain executives
for continued service with Telstra or as part of their employment
contract. These payments were determined at the executives
initial entry into their contract for employment with the Company.
Principles of compensation
Our directors are remunerated in accordance with the constitution,
which provides for the aggregate limit for directors fees to be
set and varied only by approval of a resolution at the annual
general meeting of shareholders. Our constitution provides that
the allocation of fees to directors within the pool limit shall be
determined by the Board.
In order to maintain the directors independence and impartiality,
the compensation of the non-executive directors is not linked to
the performance of the Company, except through their participation
in Directshares. Our directors must sacrifice at least 20% of
their fees into Telstra shares to align their interests with those
of our shareholders, refer to note 31 for further details on
Directshares.
The Telstra Entity has a Remuneration Committee, which is a
committee of Board members responsible for reviewing and
recommending to the Board the compensation arrangements for the CEO
and executives, which includes the senior executives defined as
KMP.
Our compensation structure includes both fixed remuneration and
performance incentives designed to complement each other and
support the execution of our business strategy in both the short
and long term. Fixed compensation comprised salary,
superannuation and the value of salary sacrificed items.
We reward our senior executives for performance through a
combination of short term incentives (STI) and long term
incentives (LTI). The STI rewards the CEO and executives for
meeting or exceeding specific key annual business and individual
performance measures. Measures and targeted achievement levels
are reviewed each year to reflect changes in the business
priorities for the forthcoming year.
The STI in relation to fiscal 2006 will be delivered in cash. The
STI in relation to fiscal 2005 was allocated half in cash and half
in rights to Telstra shares, called incentive shares. The cash
portion of the fiscal 2005 STI was included in short term employee
benefits during fiscal 2005 and the incentive shares component was
included in equity settled share based payments during fiscal 2006
to represent when the instruments were granted.
The incentive shares vest equally over a period of one, two and
three years on the anniversary of their allocation date, subject to
the executives continued employment with any entity that forms
part of the Telstra Group. The first third granted will vest on 19
August 2006.
In fiscal 2005, Mr Scales and Dr Switkowski were the only senior
executives that received their STI in cash, as they ceased
employment with the Company prior to the allocation of the equity
component.
The LTI is intended to support our business strategy by aligning
executive compensation with key performance measures and targets
that support our transformation. On an annual basis, we invite
selected executives who contribute significantly to sustained
improvement in shareholder value to participate in an equity based
LTI plan, administered through Growthshare. LTI equity instruments
issued through the trust can only be exercised to obtain normal
ordinary shares between certain time periods and if specific long
term Company performance hurdles have been achieved.
During fiscal 2006 and fiscal 2005, our executives received
performance rights which will vest in future reporting periods
depending upon the companys achievement of the relevant
performance
measures. The performance rights have been recorded in other
equity in the KMP individual compensation tables.
During fiscal 2005, our deferred share program was discontinued.
As the deferred shares will continue to vest over the relevant
performance periods, a portion of the value of the deferred shares
will continue to be allocated to the executives compensation until
all deferred shares have vested or lapsed. This treatment is
consistent with our other equity plans which have been
discontinued, such as our option plan and restricted share plan.
The deferred shares have been recorded as deferred remuneration in
the KMP individual compensation tables.
For further details of our LTI plans, including detailed
explanation of performance hurdles and allocations, refer to note
31.
We recognise an expense for all share-based compensation determined
with reference to the fair value at grant date of the equity
instruments issued. The fair value is reflected in the KMPs
compensation over the relevant vesting periods, adjusted to reflect
actual and expected levels of vesting. Refer to note 2.25 for
details on our accounting policy for equity settled share based
payments.
F-132
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
32. Key management personnel compensation (continued)
Individual contracts for services
There are no individual contracts for service with our
non-executive directors other than retirement benefits classified
as post employment benefits. Only directors appointed prior to 30
June 2002 are eligible to receive retirement benefits upon leaving
office.
Our individual senior executives are employed under contracts
without a fixed duration, except Mr Winn who was appointed on a two
year fixed duration contract. Where both parties mutually agree,
Mr Winns contract can be extended for a further one year.
Where Telstra terminates an executives employment prior to the
expiration of their employment contract for reasons other than for
misconduct, the senior executive is entitled to between 1 and 6
months notice depending on their respective contract conditions.
Alternatively, the individual is entitled to payment in lieu of
notice and between 6 and 12 months pay depending on their
respective contract conditions. Both elements are calculated on
fixed remuneration at the time of termination.
We have included detailed disclosures in relation to the
principles of compensation and individual contracts for services
in the Remuneration Report, which forms part of the Directors
Report for the year ended 30 June 2006. In accordance with the
Corporations Amendment Regulations 2006 (No.4), 2001, please refer
to the Remuneration Report for detailed commentary.
F-133
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures
Transactions involving our controlled entities
Our transactions with our controlled entities recorded in the
income statement and balance sheet are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
|
|
|
|
30 June |
|
|
30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Income from controlled entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of goods and services (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,092 |
|
|
|
1,072 |
|
Finance income (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
5 |
|
Dividend revenue (b) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
560 |
|
|
|
223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses to controlled entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of goods and services (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399 |
|
|
|
362 |
|
Finance costs (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment in amounts owed by controlled entities (c) |
|
|
7 |
(a) |
|
|
|
|
|
|
|
|
|
|
382 |
|
|
|
475 |
|
Reversal of impairment in amounts owed by controlled entities (c) |
|
|
7 |
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts receivable at 30 June from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities (a) (d) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
2,267 |
|
|
|
2,194 |
|
Allowance for amounts owed by controlled entities (c) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
(1,851 |
) |
|
|
(1,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416 |
|
|
|
725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities (a) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts payable at 30 June to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled entities payables (a) (d) |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
5 |
|
Controlled entities loans (e) |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,605 |
|
|
|
2,405 |
|
|
|
|
|
|
|
|
|
|
(a) The Telstra Entity sold and purchased goods and services and
received and paid interest to its controlled entities. These
transactions are in the ordinary course of business and are on
normal commercial terms and conditions.
The Telstra Entity and certain Australian controlled entities
have entered into a deed of cross guarantee. Under this deed,
each company (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 29 for further details
regarding our closed group.
Details of our individual significant transactions involving
our controlled entities during fiscal 2006 are detailed as
follows:
|
|
the Telstra Entity received procurement fees from its
controlled entity Sensis Pty Ltd for the use of Yellow Pages® and
White Pages® trademarks amounting to $647 million (2005: $628
million). As at
30 June 2006, the Telstra Entity recorded revenue received
in advance amounting to $332 million (2005: $344 million) for the
use of these trademarks; |
|
|
|
the Telstra Entity paid management
fees to its controlled entity Sensis Pty Ltd amounting to $218
million (2005: $211 million) for
undertaking agency and contract management services for the
national directory service; and |
|
|
|
the Telstra Entity received
income from its controlled entity Telstra Multimedia Pty Ltd
amounting to $292 million (2005: $284 million) for access to
ducts that store the national hybrid fibre coaxial (HFC) cable
network. |
F-134
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
Transactions involving our controlled entities (continued)
(b) The Telstra Entity recorded dividend revenue during fiscal
2006 from the following controlled entities:
|
|
Network Design and Construction Limited of $200 million (2005: $nil); and |
|
|
|
Telstra International Limited of $360 million (2005: $nil). |
During fiscal 2005, the Telstra Entity recognised tax
consolidation distributions from certain wholly owned Australian
entities amounting to $223 million in relation to tax losses
incurred by these entities that were able to be utilised by the
Telstra Entity. This was on the basis that no tax funding
arrangement was in place between the entities within the tax
consolidated group. Refer to note 9 for further details on tax
consolidation.
(c) The profit before income tax expense of the Telstra Entity
included an impairment loss of $382 million (2005: $475 million)
relating to a movement in allowance for amounts owed by a
controlled entity. Refer to note 25 for further details regarding
impairment.
(d) The Telstra Entity and its Australian controlled entities
have formed a tax consolidated group, which is treated as a
single entity for income tax purposes.
During fiscal 2006, the entities within the tax consolidated
group entered into a tax funding arrangement. The amounts
receivable or amounts payable to the Telstra Entity under this
arrangements are due in the next financial year upon final
settlement of the current tax payable for the tax consolidated
group. During fiscal 2005, no tax funding arrangement was in
place and as a result, these funding amounts were recorded in our
investment in controlled entities. Refer to note 9 for further
details on tax consolidation.
(e) The Telstra Entity operates a current account with some of
its Australian controlled entities, being an internal group bank
account used to settle transactions with its controlled entities
or between two controlled entities. Cash deposit balances in the
current account owed to our controlled entities are recorded as
loans. All loan balances with our controlled entities are
unsecured, with settlement required in cash. Refer to note 18 for
further discussion on our borrowings.
Transactions involving our parent entity
The Commonwealth of Australia is the ultimate parent and
controlling entity of the Telstra Group. Telstra Corporation
Limited is the parent entity in the Telstra Group comprising the
Telstra Entity and its controlled entities.
We supply telecommunications services to, and acquire other
services from, the Commonwealth of Australia, its Departments of
State, trading and other agencies. These transactions are made
within normal customer/supplier relationships on terms and
conditions no more favourable than those available to other
customers or suppliers. There are no exclusive rights to supply
any of these services.
Services provided to any one governmental department or agency or
the combination of all of these services in total, do not
represent a significant component of our operating revenues. For
these reasons, the financial report does not disclose
transactions relating to the purchase and sale of goods and
services from or to the Commonwealth of Australia, its
Departments of State, trading and other agencies.
F-135
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
Transactions involving our jointly controlled and
associated entities
Our transactions with our jointly controlled and associated
entities recorded in the income statement and balance sheet are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Year ended/As at |
|
|
Year ended/As at |
|
|
|
|
|
|
|
30 June |
|
|
30 June |
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Income from jointly controlled and associated entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of goods and services (a) |
|
|
|
|
|
|
177 |
|
|
|
165 |
|
|
|
83 |
|
|
|
97 |
|
Finance income (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
Dividend revenue |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
to jointly controlled and associated entities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of goods and services (a) |
|
|
|
|
|
|
510 |
|
|
|
533 |
|
|
|
245 |
|
|
|
277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment in amounts owed by jointly controlled entities |
|
|
7 |
(a) |
|
|
2 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts receivable at 30 June from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled and associated entities trade debtors (a) |
|
|
|
|
|
|
32 |
|
|
|
16 |
|
|
|
22 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled and associated entities loans (b) |
|
|
11 |
|
|
|
229 |
|
|
|
242 |
|
|
|
210 |
|
|
|
204 |
|
Allowance for amounts owed by jointly controlled and associated entities (b) |
|
|
11 |
|
|
|
(215 |
) |
|
|
(210 |
) |
|
|
(210 |
) |
|
|
(204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts payable at 30 June to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jointly controlled and associated entities payables (a) |
|
|
|
|
|
|
62 |
|
|
|
21 |
|
|
|
59 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
(a) We sold and purchased goods and services, and received
interest from our jointly controlled and associated entities.
These transactions are in the ordinary course of business and are
on normal commercial terms and conditions.
Details of our individual significant transactions involving our
jointly controlled and associated entities during fiscal 2006 are
detailed as follows:
|
|
we purchased pay television services amounting to $250 million
(2005: $218 million) from our jointly controlled entity FOXTEL.
The purchases were to enable the resale of FOXTEL services,
including pay television content, to our existing customers as
part of our ongoing product bundling initiatives. In addition, we
made sales for our cost recoveries from FOXTEL of $77 million
(2005: $55 million); and |
|
|
|
purchases were made by the Telstra Group of $198 million (2005:
$226 million) and Telstra Entity of $192 million (2005: $192
million) from our jointly controlled entity Reach Ltd (Reach) in
line with market prices. These were for both the purchase of, and
entitlement to, capacity and connectivity services. Sales were
made for international inbound call termination services,
construction and consultancy by the Telstra Group of $61 million
(2005: $71 million) and the Telstra Entity of $52 million (2005:
$62 million) to Reach. |
F-136
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
Transactions involving our jointly controlled and
associated entities (continued)
(b) Loans provided to jointly controlled and associated entities
relates mainly to loans provided to Reach Ltd (Reach) of $210
million (2005: $204 million) and the 3GIS Partnership (3GIS) of
$14 million (2005: $32 million).
Previously, the Telstra Entity and co-shareholder PCCW Limited
(PCCW) bought out a loan facility owed to a banking syndicate by
Reach Finance Ltd, a controlled entity of our 50% jointly
controlled entity Reach. Our share of the acquisition cost of the
loan was US$155.5 million, which was recognised as a receivable
at the date of the transaction. During fiscal 2005, we
restructured our arrangements with Reach. As a result, the terms
of maturity were altered such that the facility is now an
interest free loan and repayable on or after 31 December 2010
upon the giving of 6 months notice by both PCCW and us. We have
provided for the non-recoverability of the loan as we do not
consider that Reach is in a position to be able to repay the loan
amount in the medium term.
During fiscal 2005, we formed the jointly controlled entity 3GIS,
together with Hutchison 3G Australia Pty Ltd (H3GA), to jointly
own and operate H3GAs existing 3G radio access network and fund
future network development. We provided interest free funding to
3GIS for operational expenditure purposes. As a result, we have
recognised our share of the loan outstanding by 3GIS amounting to
$14 million (2005: $32 million).
Transactions involving other related entities
Post-employment benefits
As at 30 June 2006, Telstra Super owned 12,881,343 (2005:
13,280,885) shares in Telstra Corporation Limited at a cost of
$56 million (2005: $67 million) and a market value of $47 million
(2005: $67 million). In fiscal 2006, we paid dividends to Telstra
Super of $4 million (2005: $5 million). We own 100% of the equity
of Telstra Super Pty Ltd, the trustee for Telstra Super.
Telstra Super also holds bonds issued by Telstra Corporation
Limited. As at 30 June 2006, Telstra Super holds bonds with a
cost of $9 million (2005: $13 million) and a market value of $9
million (2005: $12 million).
All purchases and sales of Telstra shares and bonds by Telstra
Super are determined by the trustee and/or its investment
managers on behalf of the members of Telstra Super.
Key management personnel (KMP)
Our KMP consists of the Telstra Entity non executive directors
and certain senior executives who form part of the chief
executive officers senior leadership team. Our KMP have
authority and responsibility for planning, directing and
controlling the activities of the Telstra Group.
Compensation to our KMP
The compensation of each individual director and senior executive
defined as a KMP including our compensation policy are discussed
in note 32.
Other transactions with our KMP and their related entities
Our KMP have telecommunications services transactions with the
Telstra Group, which are not significant and are both trivial
and domestic in nature. The KMP related entities also have
telecommunications services with us on normal commercial terms
and conditions.
Our KMP are provided with telecommunications and other services
and equipment to assist them in performing their duties. From
time to time, we also make products and services available to our
KMP without charge to enable them to familiarise themselves with
our products, services and
recent technological developments. To the extent it is considered
that this provides a benefit to a KMP, it is included in their
compensation. Refer note 32 for compensation details.
F-137
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in shares of Telstra Entity
During fiscal 2006, our KMP and their related entities held
share capital of the Telstra Entity directly, indirectly or
beneficially as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares |
|
|
|
|
|
Equity |
|
Shares acquired |
|
Total shares |
|
|
|
|
held at |
|
Directshare |
|
instruments |
|
or disposed of |
|
held at |
|
Shares that are |
|
|
30 June 2005 |
|
allocation (a) |
|
exercised |
|
by other means |
|
30 June 2006 (b) |
|
held nominally |
|
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald G McGauchie |
|
|
41,445 |
|
|
|
16,196 |
|
|
|
|
|
|
|
|
|
|
|
57,641 |
|
|
|
55,775 |
|
John T Ralph (b) |
|
|
105,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,641 |
|
|
|
104,641 |
|
Solomon D Trujillo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski (b) |
|
|
155,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,810 |
|
|
|
109,010 |
|
Anthony J Clark (b) |
|
|
83,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,026 |
|
|
|
73,026 |
|
John E Fletcher (b) |
|
|
52,934 |
|
|
|
9,870 |
|
|
|
|
|
|
|
|
|
|
|
62,804 |
|
|
|
61,567 |
|
Belinda J Hutchinson |
|
|
67,107 |
|
|
|
5,870 |
|
|
|
|
|
|
|
1,801 |
|
|
|
74,778 |
|
|
|
35,866 |
|
Catherine B Livingstone |
|
|
39,734 |
|
|
|
6,104 |
|
|
|
|
|
|
|
10,000 |
|
|
|
55,838 |
|
|
|
44,201 |
|
Charles Macek |
|
|
44,005 |
|
|
|
6,571 |
|
|
|
|
|
|
|
|
|
|
|
50,576 |
|
|
|
50,576 |
|
John W Stocker |
|
|
109,657 |
|
|
|
7,374 |
|
|
|
|
|
|
|
|
|
|
|
117,031 |
|
|
|
114,078 |
|
Peter Willcox |
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
10,000 |
|
John Zeglis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
709,359 |
|
|
|
51,985 |
|
|
|
|
|
|
|
11,801 |
|
|
|
773,145 |
|
|
|
658,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
62,491 |
|
|
|
|
|
|
|
125,900 |
|
|
|
(150,532 |
) |
|
|
37,859 |
|
|
|
32,979 |
|
Kate McKenzie |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
3,700 |
|
|
|
|
|
|
|
147,300 |
|
|
|
|
|
|
|
151,000 |
|
|
|
3,100 |
|
Deena Shiff |
|
|
14,480 |
|
|
|
|
|
|
|
36,800 |
|
|
|
(36,800 |
) |
|
|
14,480 |
|
|
|
8,800 |
|
John Stanhope |
|
|
10,940 |
|
|
|
|
|
|
|
46,800 |
|
|
|
3,441 |
|
|
|
61,181 |
|
|
|
3,960 |
|
David Thodey |
|
|
18,262 |
|
|
|
|
|
|
|
51,000 |
|
|
|
(5,000 |
) |
|
|
64,262 |
|
|
|
800 |
|
Gregory Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,873 |
|
|
|
|
|
|
|
407,800 |
|
|
|
(188,891 |
) |
|
|
328,782 |
|
|
|
49,639 |
|
|
|
|
|
|
|
819,232 |
|
|
|
51,985 |
|
|
|
407,800 |
|
|
|
(177,090 |
) |
|
|
1,101,927 |
|
|
|
708,379 |
|
|
|
|
Total shareholdings include shares held by our KMP and their
related entities. Unless related to our employee share plans,
shares acquired or disposed by our KMP during fiscal 2006 were on
an arms length basis at market price.
(a) Shares provided to directors under directshare are subject
to a restriction period. The participating directors are not
able to deal in the shares until the end of the restriction
period, refer to note 31 for further details.
(b) During fiscal 2006, certain directors resigned or retired
from office. For these KMP, the number of shares represent those
held at the date of leaving office.
F-138
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in shares of Telstra Entity (continued)
During fiscal 2005, our KMP and their related entities held
share capital of the Telstra Entity directly, indirectly or
beneficially as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares acquired or |
|
|
|
|
|
|
Total shares held |
|
Directshare |
|
disposed of by |
|
Total shares held |
|
Shares that are |
|
|
at 30 June 2004 |
|
allocation (a) |
|
other means |
|
at 30 June 2005 |
|
held nominally |
|
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald G McGauchie |
|
|
34,328 |
|
|
|
7,117 |
|
|
|
|
|
|
|
41,445 |
|
|
|
41,445 |
|
John T Ralph |
|
|
101,943 |
|
|
|
3,698 |
|
|
|
|
|
|
|
105,641 |
|
|
|
104,641 |
|
Zygmunt E Switkowski |
|
|
155,810 |
|
|
|
|
|
|
|
|
|
|
|
155,810 |
|
|
|
109,010 |
|
Anthony J Clark |
|
|
89,196 |
|
|
|
2,523 |
|
|
|
(8,693 |
) |
|
|
83,026 |
|
|
|
73,026 |
|
John E Fletcher |
|
|
48,060 |
|
|
|
4,874 |
|
|
|
|
|
|
|
52,934 |
|
|
|
52,934 |
|
Belinda J Hutchinson |
|
|
64,948 |
|
|
|
2,159 |
|
|
|
|
|
|
|
67,107 |
|
|
|
29,996 |
|
Catherine B Livingstone |
|
|
37,191 |
|
|
|
2,543 |
|
|
|
|
|
|
|
39,734 |
|
|
|
29,334 |
|
Charles Macek |
|
|
41,462 |
|
|
|
2,543 |
|
|
|
|
|
|
|
44,005 |
|
|
|
44,005 |
|
John W Stocker |
|
|
101,534 |
|
|
|
8,123 |
|
|
|
|
|
|
|
109,657 |
|
|
|
108,857 |
|
|
|
|
|
|
|
674,472 |
|
|
|
33,580 |
|
|
|
(8,693 |
) |
|
|
699,359 |
|
|
|
593,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior executives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
62,491 |
|
|
|
|
|
|
|
|
|
|
|
62,491 |
|
|
|
54,711 |
|
Douglas Campbell |
|
|
37,200 |
|
|
|
|
|
|
|
|
|
|
|
37,200 |
|
|
|
27,500 |
|
David Moffatt |
|
|
3,700 |
|
|
|
|
|
|
|
|
|
|
|
3,700 |
|
|
|
3,100 |
|
Ted Pretty |
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
2,400 |
|
|
|
2,400 |
|
Michael Rocca |
|
|
12,000 |
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
Bill Scales |
|
|
9,916 |
|
|
|
|
|
|
|
|
|
|
|
9,916 |
|
|
|
1,400 |
|
Deena Shiff |
|
|
14,480 |
|
|
|
|
|
|
|
|
|
|
|
14,480 |
|
|
|
8,800 |
|
John Stanhope |
|
|
10,940 |
|
|
|
|
|
|
|
|
|
|
|
10,940 |
|
|
|
3,960 |
|
David Thodey |
|
|
18,262 |
|
|
|
|
|
|
|
|
|
|
|
18,262 |
|
|
|
5,800 |
|
|
|
|
|
|
|
171,389 |
|
|
|
|
|
|
|
|
|
|
|
171,389 |
|
|
|
107,671 |
|
|
|
|
|
|
|
845,861 |
|
|
|
33,580 |
|
|
|
(8,693 |
) |
|
|
870,748 |
|
|
|
700,919 |
|
|
|
|
Total shareholdings include shares held by the KMP and their
related entities. Unless related to our employee share plans,
shares acquired or disposed by our KMP during fiscal 2005 were on
an arms length basis at market price.
(a) Shares provided to directors under directshare are subject
to a restriction period. The participating directors are not
able to deal in the shares until the end of the restriction
period, refer to note 31 for further details.
F-139
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments of Telstra Entity
The following details the balances and changes in instruments issued
for our KMP and their related entities during fiscal 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
|
|
Total held |
|
Granted |
|
Exercised |
|
|
|
|
|
Total held |
|
exercisable |
|
|
|
|
at 30 June |
|
during the |
|
during the |
|
Other |
|
at 30 June |
|
at 30 June |
|
Vested during |
Instrument type |
|
2005 |
|
year |
|
year |
|
changes (a) |
|
2006 (b) |
|
2006 |
|
the year |
director/senior executive |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Performance rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solomon D Trujillo |
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
473,600 |
|
|
|
147,240 |
|
|
|
(59,000 |
) |
|
|
(66,900 |
) |
|
|
494,940 |
|
|
|
|
|
|
|
|
|
Kate McKenzie |
|
|
36,000 |
|
|
|
55,576 |
|
|
|
|
|
|
|
|
|
|
|
91,576 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
521,600 |
|
|
|
149,750 |
|
|
|
(71,000 |
) |
|
|
(76,300 |
) |
|
|
524,050 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
151,600 |
|
|
|
100,420 |
|
|
|
(17,000 |
) |
|
|
(19,800 |
) |
|
|
215,220 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
290,000 |
|
|
|
129,666 |
|
|
|
(23,000 |
) |
|
|
(23,800 |
) |
|
|
372,866 |
|
|
|
|
|
|
|
|
|
David Thodey |
|
|
427,200 |
|
|
|
136,068 |
|
|
|
(51,000 |
) |
|
|
(59,000 |
) |
|
|
453,268 |
|
|
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
39,000 |
|
|
|
|
|
|
|
|
|
|
|
(39,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
(40,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
(5,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
(14,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
805,000 |
|
|
|
|
|
|
|
|
|
|
|
(188,000 |
) |
|
|
617,000 |
|
|
|
617,000 |
|
|
|
|
|
David Moffatt |
|
|
890,000 |
|
|
|
|
|
|
|
|
|
|
|
(150,000 |
) |
|
|
740,000 |
|
|
|
740,000 |
|
|
|
|
|
Deena Shiff |
|
|
202,200 |
|
|
|
|
|
|
|
|
|
|
|
(24,200 |
) |
|
|
178,000 |
|
|
|
178,000 |
|
|
|
|
|
John Stanhope |
|
|
310,000 |
|
|
|
|
|
|
|
|
|
|
|
(69,000 |
) |
|
|
241,000 |
|
|
|
241,000 |
|
|
|
|
|
David Thodey |
|
|
534,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
534,000 |
|
|
|
534,000 |
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
|
|
|
|
109,540 |
|
|
|
|
|
|
|
11,427 |
|
|
|
120,967 |
|
|
|
|
|
|
|
|
|
Kate McKenzie |
|
|
|
|
|
|
17,119 |
|
|
|
|
|
|
|
1,786 |
|
|
|
18,905 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
|
|
|
|
51,946 |
|
|
|
|
|
|
|
5,419 |
|
|
|
57,365 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
|
|
|
|
61,747 |
|
|
|
|
|
|
|
6,441 |
|
|
|
68,188 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
|
|
|
|
50,241 |
|
|
|
|
|
|
|
5,241 |
|
|
|
55,482 |
|
|
|
|
|
|
|
|
|
David Thodey |
|
|
|
|
|
|
43,139 |
|
|
|
|
|
|
|
4,500 |
|
|
|
47,639 |
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
135,300 |
|
|
|
|
|
|
|
(66,900 |
) |
|
|
|
|
|
|
68,400 |
|
|
|
|
|
|
|
66,900 |
|
David Moffatt |
|
|
152,400 |
|
|
|
|
|
|
|
(76,300 |
) |
|
|
|
|
|
|
76,100 |
|
|
|
|
|
|
|
76,300 |
|
Deena Shiff |
|
|
42,300 |
|
|
|
|
|
|
|
(19,800 |
) |
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
19,800 |
|
John Stanhope |
|
|
73,200 |
|
|
|
|
|
|
|
(23,800 |
) |
|
|
|
|
|
|
49,400 |
|
|
|
|
|
|
|
23,800 |
|
David Thodey |
|
|
121,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,600 |
|
|
|
59,000 |
|
|
|
59,000 |
|
TESOP97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
TESOP99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
F-140
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments of Telstra Entity (continued)
(a) During fiscal 2006, other changes for our performance rights,
restricted shares and options are a result of instruments
expiring due to the specified performance hurdles not being
achieved.
Other changes for incentive shares relate to additional incentive
shares provided to our senior executives. Any dividends paid by
the Company prior to the exercise of their incentives shares will
increase the number of Telstra shares allocated to the senior
executive when the vested incentive shares are exercised.
(b) For those KMP that have resigned or retired during fiscal
2006, the number of equity instruments represent those
instruments held at the date of leaving office.
Equity instruments held by the former chief executive officer
Dr Switkowski ceased employment with the Company effective 1 July
2005. The number of equity instruments held by Dr Switkowski at
the date of leaving office were:
|
|
|
|
|
|
|
Holding as at 1 July |
|
|
2005 |
|
|
Number |
|
Performance rights |
|
|
1,643,600 |
|
Restricted shares |
|
|
96,000 |
|
Options |
|
|
1,810,000 |
|
Deferred shares |
|
|
500,700 |
|
TESOP97 |
|
|
2,500 |
|
TESOP99 |
|
|
400 |
|
Upon ceasing employment, the deferred shares allocated to Dr
Switkowski vested and became immediately exercisable, and as such
were included in fiscal 2006 compensation. In addition, the
TESOP97 shares were exercised during fiscal 2006.
Other equity instruments held by Dr Switkowski were not
exercised. These equity instruments are subject to performance
hurdles and may become exercisable during future reporting
periods.
F-141
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments of Telstra Entity (continued)
The following table details the balances and changes in equity
instruments issued under our employee share plans for our KMP
and their related entities during fiscal 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
|
|
Total held |
|
Granted during |
|
Other |
|
Total held |
|
exercisable at |
|
Vested during |
Instrument type |
|
at 30 June 2004 |
|
the year |
|
changes (a) |
|
at 30 June 2005 |
|
30 June 2005 |
|
the year |
director/senior executive |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Performance rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
1,259,400 |
|
|
|
513,200 |
|
|
|
(129,000 |
) |
|
|
1,643,600 |
|
|
|
129,000 |
|
|
|
129,000 |
|
Bruce Akhurst |
|
|
388,600 |
|
|
|
144,000 |
|
|
|
(59,000 |
) |
|
|
473,600 |
|
|
|
59,000 |
|
|
|
59,000 |
|
Douglas Campbell |
|
|
388,600 |
|
|
|
131,600 |
|
|
|
(59,000 |
) |
|
|
461,200 |
|
|
|
59,000 |
|
|
|
59,000 |
|
David Moffatt |
|
|
446,200 |
|
|
|
146,400 |
|
|
|
(71,000 |
) |
|
|
521,600 |
|
|
|
71,000 |
|
|
|
71,000 |
|
Ted Pretty |
|
|
446,200 |
|
|
|
146,400 |
|
|
|
|
|
|
|
592,600 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
251,200 |
|
|
|
115,000 |
|
|
|
(25,000 |
) |
|
|
341,200 |
|
|
|
25,000 |
|
|
|
25,000 |
|
Bill Scales |
|
|
210,400 |
|
|
|
106,400 |
|
|
|
(21,000 |
) |
|
|
295,800 |
|
|
|
21,000 |
|
|
|
21,000 |
|
Deena Shiff |
|
|
118,600 |
|
|
|
50,000 |
|
|
|
(17,000 |
) |
|
|
151,600 |
|
|
|
17,000 |
|
|
|
17,000 |
|
John Stanhope |
|
|
192,400 |
|
|
|
120,600 |
|
|
|
(23,000 |
) |
|
|
290,000 |
|
|
|
23,000 |
|
|
|
23,000 |
|
David Thodey |
|
|
345,200 |
|
|
|
133,000 |
|
|
|
(51,000 |
) |
|
|
427,200 |
|
|
|
51,000 |
|
|
|
51,000 |
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
146,000 |
|
|
|
|
|
|
|
(50,000 |
) |
|
|
96,000 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
60,000 |
|
|
|
|
|
|
|
(21,000 |
) |
|
|
39,000 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
68,000 |
|
|
|
|
|
|
|
(26,000 |
) |
|
|
42,000 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
Ted Pretty |
|
|
21,000 |
|
|
|
|
|
|
|
(21,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
22,000 |
|
|
|
|
|
|
|
(9,000 |
) |
|
|
13,000 |
|
|
|
|
|
|
|
|
|
Bill Scales |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
25,000 |
|
|
|
|
|
|
|
(11,000 |
) |
|
|
14,000 |
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
3,456,000 |
|
|
|
|
|
|
|
(1,646,000 |
) |
|
|
1,810,000 |
|
|
|
1,346,000 |
|
|
|
1,346,000 |
|
Bruce Akhurst |
|
|
1,542,000 |
|
|
|
|
|
|
|
(737,000 |
) |
|
|
805,000 |
|
|
|
617,000 |
|
|
|
617,000 |
|
Douglas Campbell |
|
|
1,597,000 |
|
|
|
|
|
|
|
(777,000 |
) |
|
|
820,000 |
|
|
|
617,000 |
|
|
|
617,000 |
|
David Moffatt |
|
|
1,630,000 |
|
|
|
|
|
|
|
(740,000 |
) |
|
|
890,000 |
|
|
|
740,000 |
|
|
|
740,000 |
|
Ted Pretty |
|
|
1,722,000 |
|
|
|
|
|
|
|
(120,000 |
) |
|
|
1,602,000 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
640,000 |
|
|
|
|
|
|
|
(315,000 |
) |
|
|
325,000 |
|
|
|
262,000 |
|
|
|
262,000 |
|
Bill Scales |
|
|
465,000 |
|
|
|
|
|
|
|
(220,000 |
) |
|
|
245,000 |
|
|
|
220,000 |
|
|
|
220,000 |
|
Deena Shiff |
|
|
380,200 |
|
|
|
|
|
|
|
(178,000 |
) |
|
|
202,200 |
|
|
|
178,000 |
|
|
|
178,000 |
|
John Stanhope |
|
|
616,000 |
|
|
|
|
|
|
|
(306,000 |
) |
|
|
310,000 |
|
|
|
241,000 |
|
|
|
241,000 |
|
David Thodey |
|
|
1,068,000 |
|
|
|
|
|
|
|
(534,000 |
) |
|
|
534,000 |
|
|
|
534,000 |
|
|
|
534,000 |
|
Deferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
500,700 |
|
|
|
|
|
|
|
|
|
|
|
500,700 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
135,300 |
|
|
|
|
|
|
|
|
|
|
|
135,300 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
135,300 |
|
|
|
|
|
|
|
|
|
|
|
135,300 |
|
|
|
|
|
|
|
|
|
David Moffatt |
|
|
152,400 |
|
|
|
|
|
|
|
|
|
|
|
152,400 |
|
|
|
|
|
|
|
|
|
Ted Petty |
|
|
155,100 |
|
|
|
|
|
|
|
|
|
|
|
155,100 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
100,600 |
|
|
|
|
|
|
|
|
|
|
|
100,600 |
|
|
|
|
|
|
|
|
|
Bill Scales |
|
|
84,200 |
|
|
|
|
|
|
|
|
|
|
|
84,200 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
42,300 |
|
|
|
|
|
|
|
|
|
|
|
42,300 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
73,200 |
|
|
|
|
|
|
|
|
|
|
|
73,200 |
|
|
|
|
|
|
|
|
|
David Thodey |
|
|
121,600 |
|
|
|
|
|
|
|
|
|
|
|
121,600 |
|
|
|
|
|
|
|
|
|
F-142
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
33. Related party disclosures (continued)
KMP interests in equity instruments issued from
Growthshare (continued)
The following table details the balances and changes in equity
instruments issued from Growthshare for our KMP and their
related entities during fiscal 2005 (continued).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
Instrument type |
|
Total held |
|
Granted during |
|
Other |
|
Total held |
|
exercisable at |
|
Vested during |
director/senior executive |
|
at 30 June 2004 |
|
the year |
|
changes (a) |
|
at 30 June 2005 |
|
30 June 2005 |
|
the year |
|
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
Number |
|
TESOP97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
Michael Rocca |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
TESOP99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt E Switkowski |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Douglas Campbell |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
John Stanhope |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
(a) Other changes have arisen in fiscal 2005 as a result of
instruments lapsing due to the specified performance hurdles not
being achieved.
F-143
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
34. Events after balance date
We are not aware of any matter or circumstance that has
occurred since 30 June 2006 that, in our opinion, has
significantly affected or may significantly affect in future
years:
|
|
our operations; |
|
|
|
the results of those operations; or |
|
|
|
the state of our affairs;
|
|
other than: |
Dividend declaration
On 10 August 2006, the directors of Telstra Corporation Limited
declared a fully franked final dividend of 14 cents per ordinary
share. The record date for the final dividend will be 25 August
2006 with payment being made on 22 September 2006. Shares will
trade excluding the entitlement to the dividend on 21 August
2006.
A provision for dividend payable has been raised as at the date
of declaration, amounting to $1,739 million. The final dividend
will be fully franked at a tax rate of 30%. The financial effect
of the dividend declaration was not brought to account as at 30
June 2006.
There are no income tax consequences for the Telstra Group and
Telstra Entity resulting from the declaration and payment of the
final ordinary dividend, except for $745 million franking debits
arising from the payment of this dividend that will be adjusted
in our franking account balance.
FOXTEL loan facility
On 31 July 2006, our 50% owned pay television joint venture
FOXTEL entered into a new $600 million syndicated secured term
loan facility to fund the refinancing of previous loan facilities
(including the $550 million syndicated facility), and to enable
it to meet future cash flow and expenditure requirements.
The equity contribution deed (ECD) entered into by us and
FOXTELs other ultimate shareholders, News Corporation Limited
and Publishing and Broadcasting Limited has been terminated.
Under this arrangement, recourse to our controlled entity
Telstra Media Pty Ltd, as a FOXTEL partner, is limited to the
assets of the FOXTEL Partnerships.
F-144
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management
Financial risk factors
We undertake transactions in a range of financial
instruments including:
|
|
cash assets; |
|
|
|
receivables; |
|
|
|
payables; |
|
|
|
deposits; |
|
|
|
bills of exchange and commercial paper; |
|
|
|
listed investments and investments in other corporations; |
|
|
|
various forms of borrowings, including medium term notes,
commercial paper, bank loans and private placements; and |
|
|
|
derivatives. |
Our activities result in exposure to a number of financial risks,
including market risk (interest rate risk, foreign currency risk
and other price risk), credit risk, operational risk and
liquidity risk.
Our overall risk management program seeks to mitigate these risks
and reduce volatility on our financial performance. Risk
management is carried out centrally by our Treasury department,
which is part of our Finance and Administration business unit,
under policies approved by the Board of Directors. The Board
provides written principles for overall risk management, as well
as written policies covering specific areas, such as foreign
exchange risk, interest rate risk, credit risk, use of derivative
financial instruments and non-derivative financial instruments,
and the investment of excess liquidity.
We enter into derivative transactions in accordance with Board
approved policies to manage our exposure to market risks and
volatility of financial outcomes that arise as part of our normal
business operations. These derivative instruments create an
obligation or right that effectively transfers one or more of the
risks associated with an underlying financial instrument, asset
or obligation. Derivative instruments that we use to hedge risks
such as interest rate and foreign currency movements include:
|
|
cross currency swaps; |
|
|
|
interest
rate swaps; and |
|
|
|
forward foreign currency contracts. |
We do not speculatively trade in derivative instruments. Our
derivative transactions are entered into to hedge the risks
relating to underlying physical positions arising from our
business activities.
Comparatives
We have elected to apply the exemption available under AASB 1:
First-time Adoption of Australian Equivalents to International
Financial Reporting Standards (AASB 1) to apply AASB132:
Financial Instruments: Disclosure and Presentation and AASB
139: Financial Instruments: Recognition and Measurement from 1
July 2005. Accordingly, we have changed our accounting policies
for financial instruments from 1 July 2005. We have elected to
early adopt AASB 7: Financial Instruments: Disclosures from 1
July 2005. AASB 7 supersedes the disclosure requirements, but not
the presentation requirements of AASB 132. The early adoption of
AASB 7 did not require comparative information for fiscal 2005 to
be restated and disclosed.
Risks and mitigation
The risks associated with our main financial instruments and
our policies for minimising these risks are detailed below.
(a) Market risk
Market risk is the risk that the fair value or future cash
flows of our financial instruments will
fluctuate because of changes in market prices. Components of
market risk to which we are exposed are discussed below.
(i) Interest
rate risk
Interest rate risk refers to the risk that the value of a
financial instrument or cash flows associated with the instrument
will fluctuate due to changes in market interest rates.
Interest rate risk arises from interest bearing financial assets
and liabilities that we use. Non-derivative interest-bearing
assets are predominantly short term liquid assets. Our interest
rate liability risk arises primarily from long term foreign debt
issued at fixed rates which exposes us to fair value interest
rate risk. Our borrowings which have a variable interest rate
attached give rise to cash flow interest rate risk.
F-145
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(i) Interest rate risk (continued)
Our debt is sourced from a number of financial markets covering
domestic and offshore, short term and long term funding. The
majority of our debt consists of foreign currency denominated
borrowings. We manage our debt in accordance with targeted
currency, interest rate, liquidity, and debt portfolio maturity
profiles. Specifically, we manage interest rate risk on our net
debt portfolio by:
|
|
controlling the proportion of fixed to variable rate
positions in accordance with target levels; |
|
|
|
ensuring access
to diverse sources of funding; |
|
|
|
reducing risks of refinancing
by establishing and managing in accordance with target
maturity profiles; and |
|
|
|
undertaking hedging activities
through the use of derivative instruments. |
We manage the interest rate exposure on our net debt portfolio to
adjust the ratio of fixed interest debt to variable interest debt
to our target rates, as required by our debt management policy.
Where the actual interest rate profile on the physical debt
profile differs substantially from our desired target, we use
derivatives, principally interest rate swaps, to adjust towards
the target net debt profile. Under the interest rate swaps we
agree with other parties to exchange, at specified intervals
(mainly quarterly), the difference between fixed contract rates
and floating rate interest amounts calculated by reference to the
agreed notional principal amounts.
We hedge interest rate and currency risk on most of our foreign
currency borrowings by entering into cross currency principal
swaps and interest rate swaps when required, which have the
economic effect of converting foreign currency borrowings to
Australian dollar borrowings.
The Derivative financial instruments and hedging
activities contained in this note provides further
information.
The exposure to interest rate changes and the contractual
repricing timeframes at 30 June 2006 on our floating rate
financial instruments, which do not have offsetting risk
positions, are shown in Table A below. These instruments also
include cross currency swaps used to hedge our net foreign
investments.
|
|
|
|
|
|
|
|
|
|
|
Contractual repricing dates |
|
|
|
Notional / Principal |
|
Table A |
|
amounts |
|
|
|
6 months or less |
|
|
|
Telstra |
|
|
Telstra |
|
|
|
Group |
|
|
Entity |
|
|
|
As at 30 June |
|
|
As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
|
$m |
|
|
$m |
|
|
|
|
|
Floating rate instruments |
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
Cash at bank |
|
|
181 |
|
|
|
32 |
|
Bills of exchange and commercial paper |
|
|
451 |
|
|
|
387 |
|
Cross currency swaps |
|
|
511 |
|
|
|
511 |
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper |
|
|
1,457 |
|
|
|
1,457 |
|
Interest rate swaps |
|
|
450 |
|
|
|
450 |
|
Cross currency swaps |
|
|
5,246 |
|
|
|
5,246 |
|
Bank loans |
|
|
111 |
|
|
|
110 |
|
|
|
|
|
|
|
|
F-146
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(i) Interest rate risk (continued)
Interest rates on our fixed and floating rate financial
instruments which do not have offsetting risk positions are shown
in Table B below. Foreign interest rate positions on our foreign
cross currency and foreign interest rate swaps and on the
majority of our foreign borrowings are fully offset, resulting in
a nil net foreign interest position.
Accordingly, apart from some foreign borrowings and cross
currency swaps which are used to hedge our net foreign
investments, only the Australian interest rate positions are
included in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table B |
|
|
|
|
|
Telstra Group |
|
Telstra Entity |
|
|
|
|
|
|
As at 30 June 2006 |
|
As at 30 June 2006 |
|
|
|
|
|
|
|
|
|
|
Interest rate range |
|
|
|
|
|
Interest rate range |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
rate (a) |
|
From |
|
To |
|
rate (a) |
|
From |
|
To |
|
|
Note |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
|
Australian dollar interest rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
6.47 |
|
|
|
5.60 |
|
|
|
7.66 |
|
|
|
6.47 |
|
|
|
5.60 |
|
|
|
7.66 |
|
Cross currency swaps |
|
|
|
|
|
|
6.69 |
|
|
|
6.25 |
|
|
|
7.05 |
|
|
|
6.69 |
|
|
|
6.25 |
|
|
|
7.05 |
|
Telstra bonds |
|
|
|
|
|
|
7.21 |
|
|
|
6.48 |
|
|
|
12.60 |
|
|
|
7.21 |
|
|
|
6.48 |
|
|
|
12.60 |
|
Finance lease liabilities |
|
|
|
|
|
|
9.33 |
|
|
|
7.56 |
|
|
|
10.50 |
|
|
|
7.56 |
|
|
|
7.56 |
|
|
|
7.56 |
|
Deferred cash settlements |
|
|
|
|
|
|
12.40 |
|
|
|
12.00 |
|
|
|
12.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
5.87 |
|
|
|
5.75 |
|
|
|
5.93 |
|
|
|
5.87 |
|
|
|
5.75 |
|
|
|
5.93 |
|
Cross currency swaps |
|
|
|
|
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
|
|
5.89 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper |
|
|
|
|
|
|
5.68 |
|
|
|
5.65 |
|
|
|
5.73 |
|
|
|
5.68 |
|
|
|
5.65 |
|
|
|
5.73 |
|
Interest rate swaps |
|
|
|
|
|
|
6.21 |
|
|
|
5.34 |
|
|
|
7.71 |
|
|
|
6.21 |
|
|
|
5.34 |
|
|
|
7.71 |
|
Cross currency swaps |
|
|
|
|
|
|
6.67 |
|
|
|
5.88 |
|
|
|
7.49 |
|
|
|
6.67 |
|
|
|
5.88 |
|
|
|
7.49 |
|
Bank loans |
|
|
|
|
|
|
5.82 |
|
|
|
5.80 |
|
|
|
5.85 |
|
|
|
5.82 |
|
|
|
5.80 |
|
|
|
5.85 |
|
Foreign currency interest rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans (c) |
|
|
|
|
|
|
7.11 |
|
|
|
7.03 |
|
|
|
7.19 |
|
|
|
7.11 |
|
|
|
7.03 |
|
|
|
7.19 |
|
Floating rate instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper (c) |
|
|
|
|
|
|
7.48 |
|
|
|
7.44 |
|
|
|
7.54 |
|
|
|
7.48 |
|
|
|
7.44 |
|
|
|
7.54 |
|
Cross currency swaps Hong Kong dollar (c) |
|
|
|
|
|
|
4.61 |
|
|
|
4.60 |
|
|
|
4.62 |
|
|
|
4.61 |
|
|
|
4.60 |
|
|
|
4.62 |
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank |
|
|
|
|
|
|
5.00 |
|
|
|
0.16 |
|
|
|
7.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The average rate is calculated as the weighted average (based
on principal/notional value) effective interest rate.
(b) The effective yield (effective interest rate) on our net
debt at 30 June 2006 was 6.85% for the Telstra Group and 6.51%
for the Telstra Entity.
(c) Used to hedged our net foreign investments.
F-147
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(i) Interest rate risk (continued)
Sensitivity analysis
Table C shows the effect on profit and equity after tax as at 30
June 2006 if interest rates at that date had been 10 per cent
higher or lower with all other variables held constant, taking
into account all underlying exposures and related hedges.
Concurrent movements in interest rates and parallel shifts in the
yield curves is assumed.
Also included in Table C is the effect on finance costs on our
floating rate instruments if interest rates had been 10 per cent
higher or lower during the year.
A sensitivity of 10 per cent has been selected as this is
considered reasonable given the current level of both short term
and long term Australian dollar interest rates. A 10 per cent
sensitivity would move short term interest rates from around
6.25% to 6.875% representing a 62.5 basis points shift. This
would represent two to three rate increases which is reasonably
possible in the current environment with the bias coming from the
Reserve Bank of Australia and confirmed by market expectations
that interest rates in Australia are more likely to move up than
down in the coming period.
It should be noted that the results reflect the net impact on a
hedged basis which will be primarily reflecting the Australian
dollar floating or Australian dollar fixed position from the
cross currency and interest rate swap hedges and therefore it is
the movement in the Australian dollar interest rates which is the
important assumption in this sensitivity analysis.
The impact of the sensitivity analysis on finance costs is due to
two factors, the impact on interest expense being incurred on our
net floating rate Australian dollar positions during the year and
the ineffectiveness resulting from the change in fair value of
both our derivatives and borrowings which are designated in a
fair value hedge. These two factors offset each other as the
ineffective component results in a gain and the increase in
finance costs results in an increase in expense. The net impact
on net profit is relatively small reflecting the hedge strategy
adopted by Telstra in terms of repricing risk.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table C |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
|
|
|
|
|
|
|
|
Equity (Cash |
|
|
|
|
|
|
|
|
|
|
Equity (Cash |
|
|
|
|
|
|
|
|
|
|
|
flow hedging |
|
|
|
|
|
|
Profit before |
|
|
flow hedging |
|
|
|
Finance costs |
|
|
Net profit |
|
|
reserve) |
|
|
Finance costs |
|
|
income tax |
|
|
reserve |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
If interest rates were 10 per cent higher
with all other
variables held constant increase/(decrease) |
|
|
8 |
|
|
|
(8 |
) |
|
|
29 |
|
|
|
8 |
|
|
|
(8 |
) |
|
|
29 |
|
If interest rates were 10 per cent lower
with all other
variables held constant increase/(decrease) |
|
|
(8 |
) |
|
|
8 |
|
|
|
(29 |
) |
|
|
(8 |
) |
|
|
8 |
|
|
|
(29 |
) |
(ii) Foreign currency risk
Foreign currency risk refers to the risk that the value of a
financial commitment, recognised asset or liability will
fluctuate due to changes in foreign currency rates. Our foreign
currency exchange risk arises primarily from:
|
|
borrowings denominated in foreign currencies; |
|
|
|
firm commitments or highly probable forecast transactions for
receipts and payments settled in foreign currencies or with
prices dependent on foreign currencies; and |
|
|
|
net investments in
foreign operations. |
We are exposed to foreign exchange risk from various currency
exposures, primarily with respect to:
|
|
United States dollars; |
|
|
|
British pounds sterling; |
|
|
|
New Zealand dollars; |
|
|
|
Euro; |
|
|
|
Swiss francs; |
|
|
|
Hong Kong dollars; |
|
|
|
Japanese yen; |
|
|
|
Swedish krona; and |
|
|
|
Singapore dollar. |
F-148
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(a) Market risk (continued)
(ii) Foreign currency risk (continued)
Our economic foreign currency risk is assessed for each
individual currency and for each hedge type, calculated by
aggregating the net exposure for that currency for that hedge
type.
We minimise our exposure to foreign currency risk by initially
seeking contracts effectively denominated in Australian dollars
where possible and economically favourable to do so. Where this
is not possible we manage our exposure as follows.
Foreign exchange risk that arises from firm commitments or highly
probable transactions are managed principally through the use of
forward foreign currency derivatives. We hedge a proportion of
these transactions (such as international telecommunications
traffic transactions settled in foreign currencies) in each
currency in accordance with our risk management policy.
Cash flow foreign currency risk arises primarily from foreign
currency overseas borrowings. We hedge this risk on the major
part of our foreign currency denominated borrowings by
effectively converting them to Australian dollar borrowings by
entering into cross currency swaps at inception to maturity. A
relatively small proportion of our foreign currency borrowings
are not swapped into Australian dollars where they are used as
hedges for foreign exchange exposure such as translation foreign
exchange risk from our offshore business investments.
Foreign currency risk also arises on translation of the net
assets of our non-Australian controlled entities which have a
different functional currency. The foreign currency gains or
losses arising from this risk are recorded through the foreign
currency translation reserve. 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.
Where a subsidiary hedges foreign exchange transactions it
designates hedging instruments with the Treasury department as
fair value hedges or cash flow hedges as appropriate. External
foreign exchange contracts are designated at the group level as
hedges of foreign exchange risk on specific assets, liabilities
or future transactions.
Also refer to Derivative financial instruments and hedging
activities contained in this note.
Sensitivity analysis
The following Table D shows the effect on profit and equity after
tax as at 30 June 2006 from a 10 percent adverse/favourable
movement in exchange rates at that date on a total portfolio
basis with all other variables held constant, taking into account
all underlying exposures and related hedges.
Adverse versus favourable movements are determined relative to
the underlying exposure. An adverse movement in exchange rates
implies an increase in our foreign currency risk exposure and a
worsening of our financial position. A favourable movement in
exchange rates implies a reduction in our foreign currency risk
exposure and an improvement of our financial position.
A sensitivity of 10 per cent has been selected as this is
considered reasonable given the current level of exchange rates
and the volatility observed both on an historical basis and
market expectations for future movement. Looking at the
Australian dollar exchange rate against the United States dollar,
the year end rate of 0.74235 would generate a 10 per cent adverse
position of 0.6681 and a favourable position of 0.8166. This
range is considered reasonable given the historic ranges that
have been observed, for example over the last five years, the
Australian dollar exchange rate against the US dollar has traded
in the range 0.7985 to 0.4848.
Our foreign currency risk exposure from recognised assets and
liabilities arises primarily from our long term borrowings
denominated in foreign currencies. There is no significant impact
on profit from foreign currency movements associated with these
borrowings as they are effectively hedged.
The net gain in the cash flow hedge reserve reflects the result
of exchange rate movements on the derivatives held in our cash
flow hedges which will be released to the income statement in the
future as the underlying hedged items affect profit.
For the Telstra Group, our foreign currency translation risk
associated with our foreign investments results in some
volatility to the foreign currency translation reserve. The
impact on the foreign currency translation reserve relates to the
hedging of our net investments in New Zealand dollars and Hong
Kong dollars where the notional amount hedged equates to
approximately 40%. The net loss of $211 million in the foreign
currency translation reserve takes into account the related
hedges and represents the impact of the unhedged portion. For the
Telstra Entity there is a gain of $78 million resulting from the
hedging instruments used to hedge our net foreign investments.
This amount is transferred to the foreign currency translation
reserve in the Telstra Group.
F-149
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Sensitivity analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table D |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
(foreign |
|
|
Equity |
|
|
|
|
|
|
(foreign |
|
|
Equity |
|
|
|
currency |
|
|
(cash flow |
|
|
|
|
|
|
currency |
|
|
(cash flow |
|
|
|
translation |
|
|
hedging |
|
|
|
|
|
|
translation |
|
|
hedging |
|
|
|
reserve) |
|
|
reserve) |
|
|
|
Net profit |
|
reserve) |
|
|
reserve) |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
If there was a 10% adverse movement in exchange rates with all
other variables held constant increase/(decrease) |
|
|
(211 |
) |
|
|
43 |
|
|
|
78 |
|
|
|
|
|
|
|
41 |
|
If there was a 10% favourable movement in exchange rates with all
other variables held constant increase/(decrease) |
|
|
211 |
|
|
|
(43 |
) |
|
|
(78 |
) |
|
|
|
|
|
|
(41 |
) |
(b) Credit risk
Credit risk is the risk that a contracting entity will not
complete its obligations under a financial instrument and cause
us to make a financial loss. We have exposure to credit risk on
all financial assets included in our balance sheet. To help
manage this risk:
|
|
we have a policy for establishing credit limits for the
entities we deal with; |
|
|
|
we may require collateral where
appropriate; and |
|
|
|
we manage exposure to individual entities we
either transact with or enter into derivative contracts with
(through a system of credit limits). |
The major concentrations of credit risk for the Telstra Group and
the Telstra Entity arise from our transactions in money market
instruments, forward foreign currency contracts, cross currency
and interest rate swaps. For credit purposes, there is only a
credit risk where the contracting entity is liable to pay us in
the event of a closeout. We have policies that limit the amount
of credit exposure to any financial institution. Derivative
counterparties and cash transactions are limited to financial
institutions that meet minimum credit rating criteria in
accordance with our policy requirements.
One of the methods that we use to manage the risk relating to
these instruments is to monitor our exposure by country of
financial institution. When reviewing concentrations of risk, we
adjust for the period to maturity of relevant instruments in our
portfolio to accurately consider our exposure at a point in time.
On this basis, our credit risk exposure on financial assets
outstanding at balance date (which includes a time based
volatility allowance (VAR)) by country of financial institution
is included in Table E below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table E |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Credit risk concentrations (VAR based) |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
% |
|
|
$m |
|
|
% |
|
|
$m |
|
Australia |
|
|
34.6 |
|
|
|
1,983 |
|
|
|
35.1 |
|
|
|
1,983 |
|
United States |
|
|
32.5 |
|
|
|
1,858 |
|
|
|
32.9 |
|
|
|
1,858 |
|
Japan |
|
|
3.9 |
|
|
|
223 |
|
|
|
3.9 |
|
|
|
223 |
|
Europe |
|
|
14.1 |
|
|
|
807 |
|
|
|
14.3 |
|
|
|
807 |
|
United Kingdom |
|
|
4.0 |
|
|
|
229 |
|
|
|
4.1 |
|
|
|
229 |
|
Canada |
|
|
2.3 |
|
|
|
133 |
|
|
|
2.4 |
|
|
|
133 |
|
Switzerland |
|
|
7.1 |
|
|
|
409 |
|
|
|
7.2 |
|
|
|
409 |
|
Hong Kong |
|
|
1.0 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
New Zealand |
|
|
0.5 |
|
|
|
26 |
|
|
|
0.1 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
5,727 |
|
|
|
100.0 |
|
|
|
5,651 |
|
|
|
|
|
|
Our maximum exposure to credit risk based on the recorded amounts
of our financial assets reported at 30 June 2006, net of any
applicable provisions for loss, amounts to $4,889 million for the
Telstra Group and $4,357 million for the Telstra Entity. For the
Telstra Group this comprises current financial assets of $4,411
million (Telstra Entity: $3,839 million) and non current
financial assets of $478 million (Telstra Entity: $518 million).
Details of our financial assets are shown in Table G. Where
entities have a right of set-off and intend to settle on a net
basis under master netting arrangements, this set-off has been
recognised in the financial statements on a net basis.
We do not have any other significant operating exposure to any
individual contracting entity.
We may also be subject to credit risk for transactions which are
not included in the balance sheet, such as when we provide a
guarantee for another party. Details of our contingent
liabilities and contingent assets are available at note 27.
F-150
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(c) Liquidity risk
Liquidity risk includes the risk that, as a result of our
operational liquidity requirements:
|
|
we will not have sufficient funds to settle a transaction on
the due date; |
|
|
|
we will be forced to sell financial assets at a
value which is less than what they are worth; or |
|
|
|
we may be
unable to settle or recover a financial asset at all. |
To help reduce these risks we:
|
|
have a liquidity policy which targets a minimum and average
level of cash and cash equivalents to be maintained; |
|
|
|
have
readily accessible standby facilities and other funding
arrangements in place; |
|
|
|
generally use instruments that are
tradeable in highly liquid markets; and |
|
|
|
have a liquidity
portfolio structure that requires surplus funds to be invested
within various bands of liquid instruments ranging from ultra
liquid, highly liquid and liquid instruments. |
F-151
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
(c) Liquidity risk (continued)
The contractual maturity of our fixed and floating rate financial
liabilities and derivatives at 30 June 2006 are shown in Table F
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table F |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Contractual maturity |
|
|
Contractual maturity |
|
|
|
(nominal cash flows) |
|
|
(nominal cash flows) |
|
|
|
Less than |
|
|
1 to 2 |
|
|
2 to 5 |
|
|
over |
|
|
Less than |
|
|
1 to 2 |
|
|
2 to 5 |
|
|
over 5 |
|
|
|
1 year |
|
|
years |
|
|
years |
|
|
5 years |
|
|
1 year |
|
|
years |
|
|
years |
|
|
years |
|
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
|
$ m |
|
Derivative financial assets and
liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps pay fixed (i) |
|
|
(17 |
) |
|
|
(15 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(17 |
) |
|
|
(15 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
Interest rate swaps pay variable (i) |
|
|
2 |
|
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(7 |
) |
|
|
2 |
|
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(7 |
) |
Cross currency swaps AUD leg (fixed) (ii) |
|
|
(18 |
) |
|
|
(18 |
) |
|
|
(54 |
) |
|
|
(316 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
|
|
(54 |
) |
|
|
(316 |
) |
Cross currency swaps AUD leg
(variable) (ii) |
|
|
(837 |
) |
|
|
(1,648 |
) |
|
|
(3,716 |
) |
|
|
(3,153 |
) |
|
|
(837 |
) |
|
|
(1,648 |
) |
|
|
(3,716 |
) |
|
|
(3,153 |
) |
Forward foreign currency contracts (ii) |
|
|
(779 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(779 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps receive fixed (i) |
|
|
61 |
|
|
|
39 |
|
|
|
97 |
|
|
|
56 |
|
|
|
61 |
|
|
|
39 |
|
|
|
97 |
|
|
|
56 |
|
Interest rate swaps receive variable (i) |
|
|
1 |
|
|
|
2 |
|
|
|
7 |
|
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
7 |
|
|
|
|
|
Cross currency swaps foreign leg (fixed)
(ii) |
|
|
53 |
|
|
|
1,072 |
|
|
|
69 |
|
|
|
166 |
|
|
|
53 |
|
|
|
1,072 |
|
|
|
69 |
|
|
|
166 |
|
Cross currency swaps foreign leg
(variable) (ii) |
|
|
647 |
|
|
|
359 |
|
|
|
3,351 |
|
|
|
2,724 |
|
|
|
647 |
|
|
|
359 |
|
|
|
3,351 |
|
|
|
2,724 |
|
Forward foreign currency contracts (ii) |
|
|
773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-derivative financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra bonds |
|
|
(184 |
) |
|
|
(184 |
) |
|
|
(1,428 |
) |
|
|
(2,014 |
) |
|
|
(184 |
) |
|
|
(184 |
) |
|
|
(1,428 |
) |
|
|
(2,014 |
) |
Bank loans |
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(110 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
(866 |
) |
|
|
(1,813 |
) |
|
|
(4,656 |
) |
|
|
(4,553 |
) |
|
|
(866 |
) |
|
|
(1,813 |
) |
|
|
(4,656 |
) |
|
|
(4,553 |
) |
Finance lease liabilities |
|
|
(13 |
) |
|
|
(12 |
) |
|
|
(23 |
) |
|
|
(52 |
) |
|
|
(7 |
) |
|
|
(6 |
) |
|
|
(10 |
) |
|
|
|
|
Bills of exchange and commercial paper |
|
|
(1,490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred cash settlements |
|
|
(123 |
) |
|
|
(10 |
) |
|
|
(29 |
) |
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-derivative financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bills of exchange and commercial paper |
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) net amounts for interest rate swaps for which net cash
flows are exchanged.
(ii) contractual amounts to be exchanged representing gross
cash flows to be exchanged.
(iii) for floating rate instruments, the amount disclosed is
determined by reference to the interest rate at the last
re-pricing date.
F-152
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Net fair value of our financial assets and financial liabilities
The carrying amounts and fair value of our financial assets
and financial liabilities is shown in Table G below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table G |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Carrying |
|
|
|
|
|
|
Carrying |
|
|
|
|
|
|
amount |
|
|
Fair value |
|
|
amount |
|
|
Fair value |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Financial assets current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and on hand |
|
|
238 |
|
|
|
238 |
|
|
|
87 |
|
|
|
87 |
|
Bills of exchange and commercial paper |
|
|
451 |
|
|
|
451 |
|
|
|
387 |
|
|
|
387 |
|
Trade debtors |
|
|
2,421 |
|
|
|
2,421 |
|
|
|
1,771 |
|
|
|
1,771 |
|
Accrued revenue |
|
|
1,027 |
|
|
|
1,027 |
|
|
|
971 |
|
|
|
971 |
|
Amounts owed by controlled entities |
|
|
|
|
|
|
|
|
|
|
416 |
|
|
|
416 |
|
Other receivables |
|
|
253 |
|
|
|
253 |
|
|
|
186 |
|
|
|
186 |
|
Cross currency swap hedge receivable |
|
|
20 |
|
|
|
20 |
|
|
|
20 |
|
|
|
20 |
|
Forward contract asset |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
4,411 |
|
|
|
4,411 |
|
|
|
3,839 |
|
|
|
3,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts owed by jointly controlled and associated entities |
|
|
14 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Amounts owed by controlled entities |
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
60 |
|
Other receivables |
|
|
73 |
|
|
|
73 |
|
|
|
67 |
|
|
|
67 |
|
Cross currency swap hedge receivable |
|
|
222 |
|
|
|
222 |
|
|
|
222 |
|
|
|
222 |
|
Interest rate swap asset |
|
|
169 |
|
|
|
169 |
|
|
|
169 |
|
|
|
169 |
|
|
|
|
|
|
|
|
|
478 |
|
|
|
478 |
|
|
|
518 |
|
|
|
518 |
|
|
|
|
|
|
|
|
|
4,889 |
|
|
|
4,889 |
|
|
|
4,357 |
|
|
|
4,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade creditors |
|
|
738 |
|
|
|
738 |
|
|
|
586 |
|
|
|
586 |
|
Accrued interest and other accrued expenses |
|
|
2,440 |
|
|
|
2,440 |
|
|
|
2,111 |
|
|
|
2,111 |
|
Other creditors |
|
|
269 |
|
|
|
269 |
|
|
|
171 |
|
|
|
171 |
|
Amounts owed to controlled entities |
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
197 |
|
Deferred cash settlements |
|
|
123 |
|
|
|
123 |
|
|
|
|
|
|
|
- |
|
Loans from wholly owned controlled entities |
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
1,408 |
|
Bills of exchange and commercial paper |
|
|
1,457 |
|
|
|
1,481 |
|
|
|
1,457 |
|
|
|
1,481 |
|
Bank loans |
|
|
111 |
|
|
|
111 |
|
|
|
110 |
|
|
|
110 |
|
Other loans |
|
|
394 |
|
|
|
396 |
|
|
|
394 |
|
|
|
396 |
|
Finance leases |
|
|
7 |
|
|
|
7 |
|
|
|
5 |
|
|
|
5 |
|
Cross currency swap hedge payable |
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
Forward contract liability |
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
5,551 |
|
|
|
5,577 |
|
|
|
6,451 |
|
|
|
6,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other creditors |
|
|
70 |
|
|
|
70 |
|
|
|
65 |
|
|
|
65 |
|
Deferred cash settlements |
|
|
127 |
|
|
|
127 |
|
|
|
|
|
|
|
|
|
Telstra bonds |
|
|
2,613 |
|
|
|
2,658 |
|
|
|
2,613 |
|
|
|
2,658 |
|
Other loans |
|
|
8,748 |
|
|
|
9,336 |
|
|
|
8,748 |
|
|
|
9,273 |
|
Finance leases |
|
|
48 |
|
|
|
48 |
|
|
|
15 |
|
|
|
15 |
|
Cross currency hedge payable |
|
|
612 |
|
|
|
612 |
|
|
|
612 |
|
|
|
612 |
|
Interest rate swap payable |
|
|
156 |
|
|
|
156 |
|
|
|
156 |
|
|
|
156 |
|
|
|
|
|
|
|
|
|
12,374 |
|
|
|
13,007 |
|
|
|
12,209 |
|
|
|
12,779 |
|
|
|
|
|
|
|
|
|
17,925 |
|
|
|
18,584 |
|
|
|
18,660 |
|
|
|
19,256 |
|
|
|
|
|
|
F-153
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Net fair value of our financial assets and financial
liabilities (continued)
(i) Unless there is evidence to suggest otherwise, financial
assets and financial liabilities with a short term to maturity
are considered to approximate net fair value.
(ii) The reported balance of our borrowings and derivative
instruments excludes accrued interest which is recorded in
current trade and other receivables and current trade and
other payables in the balance sheet.
(iii) Derivative financial assets and derivative financial
liabilities are carried at fair value. Fair value is based on the
present value of the estimated future cash flows using an
appropriate market based yield curve (also refer to note 2.27).
(iv) The fair value of the Telstra bonds is calculated as the
present value of the estimated future cash flows using an
appropriate market based yield curve (refer also to note 2.27).
The carrying value of Telstra bonds is at amortised cost.
(v) Other loans comprise predominantly foreign denominated debt.
The difference between the fair value and carrying value arises
from the mixed measurement bases where only part of the foreign
currency borrowing portfolio is carried at fair value with the
remaining part at amortised cost. Fair value is based on the
present value of the estimated future cash flows using an
appropriate market based yield curve (also refer to note 2.27).
The carrying amount of other loans are denominated in the
following currencies:
|
|
|
|
|
|
|
|
|
Table H |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Carrying value |
|
|
|
As at |
|
|
As at |
|
|
|
30 June 2006 |
|
|
30 June 2006 |
|
|
|
$m |
|
|
$m |
|
Australian dollar |
|
|
245 |
|
|
|
245 |
|
Euro |
|
|
6,336 |
|
|
|
6,336 |
|
United States dollar |
|
|
1,028 |
|
|
|
1,028 |
|
United Kingdom pound |
|
|
487 |
|
|
|
487 |
|
Japanese yen |
|
|
472 |
|
|
|
472 |
|
New Zealand dollar |
|
|
164 |
|
|
|
164 |
|
Swiss francs |
|
|
326 |
|
|
|
326 |
|
Singapore dollar |
|
|
84 |
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
9,142 |
|
|
|
9,142 |
|
|
|
|
|
|
|
|
(vi) During the year we incurred impairment losses on our
financial assets of $163 million for the Telstra Group and $520
million for the Telstra Entity. For the Telstra Group impairment
losses comprised $161 million on trade and other receivables and
$2 million on amounts owed by associated entities. For the
Telstra Entity impairment losses comprised $138 million on trade
and other receivables and $382 million on amounts owed by
controlled entities.
F-154
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities
We hold a number of different financial instruments to hedge
risks relating to underlying transactions. Our major exposure to
interest rate risk and foreign currency risk arises from our
long term borrowings. Details of our hedging activities are
provided below.
We designate certain derivatives as either:
|
|
hedges of the fair value of recognised liabilities (fair value
hedges); |
|
|
|
hedges of foreign currency risk associated with
recognised liabilities or highly probable forecast transactions
(cash flow hedges); or |
|
|
|
hedges of a net investment in a foreign
operation (net investment hedge). |
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently
remeasured at their fair value.
The terms and conditions in relation to our derivative
instruments are similar to the terms and conditions of the
underlying hedged items. During the year we discontinued hedge
accounting for our British pound borrowing in a fair value hedge.
There was no material impact on our income statement. All other
hedging relationships were effective at the reporting date.
For further details reference should be made to note 2.26.
(a) Fair value hedges
During the period we held cross currency principal and interest
rate swaps to mitigate our exposure to changes in the fair value
of foreign denominated debt from fluctuations in foreign currency
and interest rates. The hedged items designated were a portion of
our foreign currency denominated borrowings. The changes in the
fair values of the hedged items resulting from movements in
exchange rates and interest rates are offset against the changes
in the value of the cross currency and interest rate swaps. The
objective of this hedging is to convert foreign currency
borrowings to floating Australian dollar borrowings.
Gains or losses from remeasuring the fair value of the hedge
instrument are recognised within finance costs in the income
statement, together with gains and losses in relation to the
hedged item where those gains or losses relate to the hedged
risks. This net result largely represents ineffectiveness
attributable to movements in Telstras borrowing margins. The
remeasurement of the hedged items resulted in a loss before tax
of $3 million (Telstra Entity: $3 million) and the changes in the
fair value of the hedging instruments resulted in a gain before
tax of $29 million (Telstra Entity: $29 million) resulting in a
net gain before tax of $26 million (Telstra Entity: $26 million)
recorded in finance costs in the 2006 financial year.
The effectiveness of the hedging relationship is tested
prospectively and retrospectively by means of statistical methods
using a regression analysis. Regression analysis is used to
analyse the relationship between the derivative instruments (the
dependent variable) and the underlying borrowings (the
independent variable). The primary objective is to determine if
changes to the hedged item and derivative are highly correlated
and, thus, supportive of the assertion that there will be a high
degree of offset in fair values achieved by the hedge.
Refer to Table J and Table K for the value of our derivatives
designated as fair value hedges at 30 June 2006.
(b) Cash flow hedges
Cash flow hedges are used to hedge exposures relating to our
borrowings and our ongoing business activities, where we have
highly probable purchase or settlement commitments in foreign
currencies.
During the year, we entered into cross currency and interest rate
swaps as cash flow hedges of future payments denominated in
foreign currency resulting from our long-term overseas
borrowings. The hedged items designated were a portion of the
outflows associated with these foreign denominated borrowings.
The objective of this hedging is to hedge foreign currency risks
arising from spot rate changes and thereby mitigate the risk of
payment fluctuations as a result of exchange rate movements.
We also entered into forward foreign currency contracts as cash
flow hedges to hedge forecast transactions denominated in foreign
currency which hedge foreign currency risk arising from spot
rate changes. The hedged items comprised highly probable forecast
foreign currency payments for operating and capital items.
The effectiveness of the hedging relationship relating to our
borrowings is calculated prospectively and retrospectively by
means of statistical methods using a regression analysis. The
actual derivative instruments in a cash flow hedge are regressed
against the hypothetical derivative. The primary objective is to
determine if changes to the hedged item and derivative are highly
correlated and, thus, supportive of the assertion that there will
be a high degree of offset in cash flows achieved by the hedge.
The effectiveness of our hedges relating to highly probable
transactions is assessed prospectively based on matching of
critical terms. As both the nominal volumes and currencies of the
hedged item and the hedging instrument are identical, a highly
effective hedging relationship is expected. An effectiveness test
is carried out retrospectively using the cumulative dollar-offset
method. For this, the changes in the fair values of the hedging
instrument and the hedged item attributable to exchange rate
changes are calculated and a ratio is created. If this ratio is
between 80 and 125 per cent, the hedge is effective.
F-155
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(b) Cash flow hedges (continued)
The effective portion of gains or losses on remeasuring the fair
value of the hedge instrument are recognised directly in equity
in the cash flow hedging reserve until such time as the hedged
item affects profit or loss, then the gains or losses are
transferred to other revenue or other expenses in the income
statement. In our hedge of forecast transactions, when the
forecast transaction that is hedged results in the recognition of
a non-financial asset (for example, inventory or fixed asset),
the gains and losses previously deferred in equity are
transferred from equity and included in the measurement of the
initial cost or carrying amount of the asset. Gains or losses on
any portion of the hedge determined to be ineffective are
recognised immediately in the income statement within other
expenses or other revenue. During the year there was no material
ineffectiveness attributable to our cash flow hedges.
If a forecast transaction is no longer expected to occur, the
cumulative gains or losses on the hedging instrument that were
deferred in equity are transferred immediately to the income
statement. During the year we did not discontinue hedge
accounting for forecast transactions no longer expected to occur.
During 2006, net gains totalling $229 million after tax (Telstra
Entity: $229 million) resulting from the change in the fair value
of derivatives were taken directly to equity in the cash flow
hedge reserve. These changes constitute the effective portion of
the hedging relationship. Net gains amounting to $294 million
after tax (Telstra Entity: $295 million) recognised in the cash
flow hedge reserve were transferred to the income statement
during the year.
Refer to Table J, Table K and Table L for the value of our
derivatives designated as cash flow hedges at 30 June 2006.
The following table shows the maturities of the payments, that
is when the cash flows are expected to occur.
|
|
|
|
|
|
|
|
|
Table I |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
Nominal cash outflows |
|
|
|
As at |
|
|
As at |
|
|
|
30 June 2006 |
|
|
30 June 2006 |
|
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
|
Highly probable forecast
purchases (i) |
|
|
|
|
|
|
|
|
- less than one year |
|
|
(757 |
) |
|
|
(734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings (ii) |
|
|
|
|
|
|
|
|
- less than one year |
|
|
(431 |
) |
|
|
(431 |
) |
- one to five years |
|
|
(2,924 |
) |
|
|
(2,924 |
) |
- greater than five years |
|
|
(1,978 |
) |
|
|
(1,978 |
) |
|
|
|
|
|
|
|
|
|
|
(5,333 |
) |
|
|
(5,333 |
) |
|
|
|
|
|
|
|
(i) These amounts will affect our income statement in the same
time period as the cash flows are expected to occur except for
purchases of fixed assets in which case the gains and losses on
the associated hedging instruments are included in the
measurement of the initial cost of the asset. The hedged asset
purchases affect profit as the assets are depreciated over their
useful lives. Included in the forecast purchases of $757 million
(Telstra Entity: $734 million) are $593 million of fixed asset
purchases (Telstra Entity: $593 million).
(ii) The impact on our income statement from foreign currency
translation movements associated with these hedged borrowings is
expected to be nil as these borrowings are effectively hedged.
(c) Hedges of net investments in foreign operations
We have exposure to foreign currency risk as a result of our
investments in offshore activities, including our investments in
TelstraClear Limited and Hong Kong CSL Limited (CSL). This risk
is created by the translation of the net assets of these entities
from their functional currency to Australian dollars. We hedge
our investments in foreign operations to mitigate exposure to
this risk using forward foreign currency contracts, cross
currency swaps and/or borrowings in the relevant currency of the
investment.
The effectiveness of the hedging relationship is tested using
prospective and retrospective effectiveness tests. In a
retrospective effectiveness test, the changes in the fair value
of the hedging instruments and the change in the value of the
hedged net investment from spot rate changes are calculated and a
ratio is created. If this ratio is between 80 and 125 per cent,
the hedge is effective. The prospective effectiveness test is
performed based on matching of critical terms. As both the
nominal volumes and currencies of the hedged item and the hedging
instrument are identical, a highly effective hedging relationship
is expected.
F-156
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(c) Hedges of net investments in foreign operations (continued)
Gains or losses on remeasurement of our derivative instruments
designated as hedges of foreign investments are recognised in the
foreign currency translation reserve in equity to the extent they
are effective. The cumulative amount of the recognised gains or
losses included in equity are transferred to the income statement
when the foreign operation is sold.
Gains or losses on any portion of the hedge determined to be
ineffective are recognised in the income statement within other
expenses or other revenue. During the year there was no
material ineffectiveness attributable to our net investment
hedges.
During the year net gains of $50 million on our hedging
instruments were taken directly to equity in the foreign
currency translation reserve in the consolidated balance sheet.
Refer to Table J and Table L for the value of our derivatives
designated as hedges of net foreign investments at 30 June 2006.
In addition, included in the carrying value of other loans and
bills of exchange and commercial paper at 30 June 2006 are New
Zealand dollar denominated borrowings of $164 million (fair
value: $164 million) and New Zealand dollar denominated
commercial paper of $334 million (fair value: $334 million).
These were designated as a hedging instrument of our net
investment in TelstraClear. The loans are included within non
current financial liabilities and the commercial paper is
included within current financial liabilities of the Telstra
Group and the Telstra Entity. A foreign exchange gain of $58
million on translation of these borrowings and commercial paper
to Australian dollars was recognised in equity in the foreign
currency translation reserve in the consolidated balance sheet.
F-157
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(d) Hedging instruments
Derivative hedging instruments
Details of our derivative hedging instruments as at balance date are shown in Table J, Table K and
Table L below. The fair value of a hedging derivative is classified as a non-current asset or
liability if the remaining maturity of the hedged item is more than 12 months, and as a current
asset or liability if the remaining maturity of the hedged item is less than 12 months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table J |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Cross currency swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency
swaps designated
cash flow hedges of
other loans (i) |
|
|
11 |
|
|
|
|
|
|
|
11 |
|
|
|
|
|
Cross currency
swaps designated
fair value hedges
of other loans |
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
Cross currency
swaps designated
hedge of net
foreign investment |
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
Total |
|
|
20 |
|
|
|
6 |
|
|
|
20 |
|
|
|
6 |
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency
swaps designated
cash flow hedges of
other loans (i) |
|
|
53 |
|
|
|
350 |
|
|
|
53 |
|
|
|
350 |
|
Cross currency
swaps designated
fair value hedges
of other loans |
|
|
169 |
|
|
|
259 |
|
|
|
169 |
|
|
|
259 |
|
Cross currency
swaps designated
hedge of net
foreign investment |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
Total |
|
|
222 |
|
|
|
612 |
|
|
|
222 |
|
|
|
612 |
|
|
|
|
|
|
|
|
|
(i) |
|
Gains or losses recognised in the cash flow hedging reserve in equity (refer note 22) on cross
currency swap contracts as at 30 June 2006 will be continuously released to the income statement
until the underlying borrowings are repaid. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table K |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps designated cash flow hedges of other
loans (ii) |
|
|
106 |
|
|
|
107 |
|
|
|
106 |
|
|
|
107 |
|
Interest swaps designated fair value hedges of other loans |
|
|
63 |
|
|
|
49 |
|
|
|
63 |
|
|
|
49 |
|
|
|
|
|
|
Total |
|
|
169 |
|
|
|
156 |
|
|
|
169 |
|
|
|
156 |
|
|
|
|
|
|
|
|
|
(ii) |
|
Gains or losses recognised in the cash flow hedging reserve in equity (refer to note 22) on
interest rate swap contracts as at 30 June 2006 will be continuously released to the income
statement until the underlying borrowings are repaid. |
F-158
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
(d) Hedging instruments (continued)
Derivative hedging instruments (continued)
The fair value of our net Australian dollar amounts receivable/(payable), settlement dates and
average contractual forward exchange rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table L |
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at 30 June 2006 |
|
|
As at 30 June 2006 |
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
Forward foreign currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States (US) dollars
designated as cash flow hedges: highly
probable purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
less than 3 months, at
contractual forward exchange
rates averaging United States dollars 0.7328 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
3 to 12 months, at contractual
forward exchange rates averaging
United States dollars 0.7347 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
New Zealand (NZ) dollars
designated as hedge: net foreign
investment
3 than 12 months, at
contractual forward exchange
rates averaging New Zealand dollars 1.1946 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong (HK) dollars
designated as hedge: net foreign
investment
3 to 12 months, at contractual
forward exchange rates averaging
Hong
Kong dollars 5.7248 |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1 |
|
|
|
6 |
|
|
|
1 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
(i) |
|
Gains or losses recognised in the cash flow hedging reserve in equity (refer to note 22) on
forward foreign exchange contracts as at 30 June 2006 will be released to the income statement at
dates when the cash flow from the underlying forecast transactions will occur. However, where the
underlying forecast transaction is a purchase of a non-financial asset (for example, inventory or a
fixed asset) the gain or loss in the cash flow hedging reserve will be transferred and included in
the measurement of the initial cost of the asset at the date the asset is recognised. |
|
(ii) |
|
Other forward exchange contracts which are not included in the above designated hedging
relationships have been entered into to hedge exposure of other payables and receivables recognised
in the balance sheet. These balances are not significant. |
F-159
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
35. Financial and capital risk management (continued)
Derivative financial instruments and hedging activities (continued)
Breaches
During the year we have not breached any of our agreements with our lenders.
Capital Risk Management
Our objectives when managing capital are to safeguard the Groups ability to continue as a going
concern, so that it can continue to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, we may adjust the amount of dividends paid to
shareholders, return capital to shareholders or issue new shares.
We monitor capital on the basis of the gearing ratio. This ratio is calculated as net debt divided
by total capital. Net debt is calculated as total borrowings (including borrowings and
derivative financial instruments as shown in the consolidated balance sheet) less cash and cash
equivalents. Total capital is calculated as equity as shown in the consolidated balance sheet plus
net debt.
During 2006, our strategy was to maintain the net debt gearing ratio within 55 to 75 per cent, in
order to secure access to finance at a reasonable cost.
The gearing ratios at 30 June 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
As at |
|
|
As at |
|
|
|
30 June 2006 |
|
|
30 June 2006 |
|
|
|
$m |
|
|
$m |
|
|
|
|
|
|
Total borrowings |
|
|
13,746 |
|
|
|
14,642 |
|
less cash and cash equivalents |
|
|
(689 |
) |
|
|
(474 |
) |
Net debt |
|
|
13,057 |
|
|
|
14,168 |
|
Total equity |
|
|
12,832 |
|
|
|
12,115 |
|
Total capital |
|
|
25,889 |
|
|
|
26,283 |
|
|
|
|
|
|
|
|
Gearing ratio |
|
|
50.4 |
% |
|
|
53.9 |
% |
|
|
|
|
|
|
|
F-160
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards
We are required by the Corporations Act 2001 to prepare our financial reports for financial
years commencing on or after 1 January 2005 under the Australian equivalents of International
Financial Reporting Standards (A-IFRS) as adopted by the Australian Accounting Standards Board
(AASB). We implemented accounting policies in accordance with A-IFRS on 1 July 2004, except for
those relating to financial instruments, which were implemented on 1 July 2005.
The transitional rules for first time adoption of A-IFRS required that we restate our comparative
financial report using A-IFRS, except for AASB 132: Financial Instruments: Disclosure and
Presentation and AASB 139: Financial Instruments: Recognition and Measurement, where comparative
information was not required to be restated. In addition, we have elected to early adopt AASB 7:
Financial Instruments: Disclosures, which supersedes the disclosure requirements of AASB 132.
Comparatives were remeasured and restated for the year ended 30 June 2005. Most of the adjustments
on transition were required to be made to opening retained profits at the beginning of the first
comparative period (i.e. at 1 July 2004).
Amendments to A-IFRS transition adjustments disclosed at 31 December 2005
We have made certain amendments to the impacts of adopting A-IFRS on the Telstra Group disclosed at
31 December 2005. These amendments are set out below.
(i) 3G spectrum licence
Under previous Australian Generally Accepted Accounting Principles (AGAAP) we expensed the annual
payments made under our Hong Kong 3G spectrum licence as incurred, except for those incurred during
the construction of our 3G network in Hong Kong which were capitalised as part of the asset cost.
Based on the IFRS interpretation adopted by other 3G mobile operators in Hong Kong, on transition
we have recorded an intangible asset of $121 million (30 June 2005: $108 million) associated with
our Hong Kong 3G spectrum licence. This includes $25 million (30 June 2005: $24 million) previously
capitalised under AGAAP as part of property, plant and equipment. A corresponding accrual liability
has also been recorded.
This intangible asset is amortised over the term of the licence agreement. Net profit before tax
has increased by $4 million for the year ended 30 June 2005 due to this additional amortisation and
the unwinding of the present value discount on the accrual, partially offset by the elimination of
the licence expense. For further details refer to note 36(k).
The recognition of this spectrum licence has resulted in a reduction in the deferred tax liability
of the Telstra Group as at 1 July 2004 of $21 million (30 June 2005: $19 million).
(ii) Determination of tax bases
The tax base of our defined benefit asset changed as a result of an interpretation on the treatment
of the contribution tax adjustment made to the carrying value of the asset. As a result there was
an increase to the deferred tax liability associated with the defined benefit asset on transition
of $24 million (30 June 2005: $11 million).
In addition, we reduced the deferred tax asset of one of our controlled entities due to the
reassessment of the tax base of certain items of property, plant and equipment on transition by $28
million (30 June 2005: $29 million).
For further details refer to note 36(c).
(iii) Operating leases
Under A-IFRS operating lease rental expense is recognised on a straight line basis over the term of
the lease, even if the payments are not on that basis. Under previous AGAAP operating lease rentals
were expensed as incurred. This has resulted in the recognition of an additional non-current
liability on transition to A-IFRS of $37 million (30 June 2005: $48 million). Operating lease
expense increased by $11 million for the year ended 30 June 2005. Refer to note 36(e) for further
details.
A-IFRS adjustments with effect from 1 July 2004
(a) AASB 2: Share-Based Payment (AASB 2)
Under previous AGAAP we recognised an expense for all restricted shares, performance rights,
deferred shares and Telstra shares (consisting of directshares and ownshares) issued. This
expense was equal to the funding provided to the Telstra Growthshare Trust (Growthshare) to
purchase Telstra shares on market to underpin these equity instruments, and was recognised in full
in the income statement when the funding was provided. Under previous AGAAP, we did not recognise
an expense for options issued on the basis that instrument holders are required to pay the option
exercise price once the options vest and are exercised.
Under AASB 2, we recognise an expense for all share-based remuneration. This expense is based on
the fair value of the equity instruments issued, determined at the grant date. The fair value is
calculated using an appropriate valuation technique to estimate the price of those equity
instruments in an arms length transaction between knowledgeable, willing parties. The fair value
calculated is charged against profit over the relevant vesting period, adjusted to reflect actual
and expected levels of vesting.
F-161
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(a) AASB 2: Share-Based Payment (AASB 2) (continued)
Under the transitional exemptions of AASB 1: First-time Adoption of Australian Equivalents to
International Financial Reporting Standards (AASB 1), we elected not to apply AASB 2 to equity
instruments granted prior to 7 November 2002.
This approach gave rise to a net positive transitional adjustment to retained profits. If we had
not made this election, resulting in all equity instruments granted prior to 7 November 2002 being
subject to AASB 2, then opening retained profits on transition would decrease, with a corresponding
increase in share capital.
Furthermore, there would have been an increase in labour expense for the year ended 30 June 2005.
Equity instruments granted prior to 7 November 2002, for which we have elected not to apply AASB 2,
include those granted under Telstra Employee Share Ownership Plan Trust (TESOP97) and Telstra
Employee Share Ownership Plan Trust II (TESOP99), as well as certain Growthshare issues.
We own 100% of the equity of Telstra Growthshare Pty Ltd and the Telstra ESOP Trustee Pty Ltd, the
corporate trustees for the Telstra Growthshare Trust (Growthshare), TESOP97 and TESOP99, which
administer our share-based payment plans. Under previous AGAAP we did not control or significantly
influence these trusts, as beneficial ownership and control remained with the employees who
participate in the share plans, administered by the Trustee on their behalf.
Under A-IFRS, we have included the results, position and cash flows of Growthshare, TESOP97 and
TESOP99 within our financial statements.
(i) On transition as at 1 July 2004
To record the initial recognition of Growthshare within the Telstra Group and Telstra Entity, the
loan receivable from Growthshare was eliminated ($65 million), share capital reduced to reflect the
shares held by Growthshare in the Telstra Entity ($117 million), and the cash held by Growthshare
was recognised ($3 million).
Other assets and liabilities held by the trusts were considered insignificant to Telstra Group and
Telstra Entity.
Shares issued under TESOP97 and TESOP99, in conjunction with the non-recourse loans, have been
accounted for as options. As a result, the outstanding balance of the loans to employees under
TESOP97 and TESOP99 amounting to $174 million (comprising $24 million current receivables and $150
million non current receivables), was deducted from share capital of the Telstra Group and Telstra
Entity on transition to A-IFRS.
A transitional adjustment to increase Telstra Group and Telstra Entity opening retained profits by
$55 million represents the reversal of the expense previously recorded under AGAAP. We also
recognised a transitional expense in retained profits under AASB 2 of $4 million relating to the
amortisation over the vesting period of equity instruments issued subsequent to 7 November 2002.
This transitional expense increased share capital by $4 million.
(ii) At 30 June 2005
The cumulative effect on the Telstra Group and Telstra Entity at 30 June 2005 was to increase cash
assets by $8 million, decrease current receivables by $24 million, non current receivables by $175
million, and
share capital by $257 million. Labour expense decreased by $10 million, finance income decreased by
$2 million, and dividends decreased by $7 million for the year ended 30 June 2005.
(b) AASB 3: Business Combinations (AASB 3)
We previously amortised goodwill over the period of expected benefit, not exceeding 20 years. Under
A-IFRS goodwill acquired in a business combination is not amortised, but instead is subject to
impairment testing at each reporting date, or upon the occurrence of triggers that may indicate a
potential impairment. If there is an indication of impairment resulting in an impairment loss, it
is recognised immediately in the income statement.
Under the transitional arrangements of AASB 1 we had the option of applying AASB 3 prospectively
from the transition date to A-IFRS (from 1 July 2004). We chose this option rather than to restate
all previous business combinations. If this election had not been made, there would not have been a
significant impact on the balance sheet or income statement because our accounting for significant
business combinations under previous AGAAP was consistent with A-IFRS and USGAAP, whereby we
recognised all identifiable assets and liabilities upon acquisition, including intangible assets.
The impact of AASB 3 and associated transitional arrangements is as follows:
|
|
all prior business combination accounting was frozen as at 1 July 2004; and |
|
|
the value of goodwill was frozen as at transition date, with any amortisation that was reported under previous AGAAP
subsequent to transition date was reversed for A-IFRS restatements. |
(i) On transition as at 1 July 2004
There were no adjustments on transition as a result of AASB 3.
F-162
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(b) AASB 3: Business Combinations (AASB 3) (continued)
(ii) At 30 June 2005
The effect on the Telstra Group at 30 June 2005 of the cessation of amortisation of goodwill was to
increase goodwill and decrease amortisation expense by $145 million (Telstra Entity: $4 million).
Investments accounted for using the equity method increased by $2 million for the Telstra Group,
with a corresponding decrease in share of net loss from jointly controlled and associated entities.
(c) AASB 112: Income Taxes (AASB 112)
On transition to A-IFRS, a new method of accounting for income taxes, known as the balance sheet
approach, was adopted, replacing the income statement approach required by previous AGAAP. Under
the new method we generally recognise deferred tax balances in the balance sheet when there is a
difference between the carrying value of an asset or liability and its tax base.
The adoption of the balance sheet approach has resulted in a number of additional deferred tax
balances being recognised, as well as adjustments to existing deferred tax balances. Furthermore,
additional deferred tax liabilities have been recognised associated with fair value adjustments on
entities acquired by us. Where the acquisition has occurred after 1 July 2004 a corresponding
adjustment has been made to goodwill in accordance with AASB 3.
The Telstra Entity has formed a tax consolidated group with its Australian resident wholly owned
subsidiaries. Under previous AGAAP the Telstra Entity, as head entity of the tax consolidated
group, recognised tax balances for all entities in the group.
Under A-IFRS and in accordance with UIG 1052 Tax Consolidation Accounting (UIG 1052), the Telstra
Entity only accounts for its own tax balances, with the exception of the following:
|
|
the current tax liability for the tax consolidated group; and |
|
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|
the current and deferred tax
arising from unused tax losses and tax credits for all entities in the tax consolidated group. |
Under UIG 1052, the current tax liability of the tax consolidated group is required to be allocated
to each of the entities in the group. As there was no tax funding arrangement in place at 30 June
2005, this allocation was recorded as a contribution by or distribution to the Telstra Entity.
(i) On transition as at 1 July 2004
The Telstra Group and Telstra Entitys deferred tax liabilities decreased as a result of the
transition to other A-IFRS standards. The transition adjustment comprised:
|
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|
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|
|
|
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|
|
Telstra |
|
|
Telstra |
|
|
|
|
|
|
|
Group |
|
|
Entity |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
Operating leases |
|
|
36 |
(e) |
|
|
(11 |
) |
|
|
(11 |
) |
Defined benefit asset |
|
|
36 |
(f) |
|
|
159 |
|
|
|
158 |
|
Borrowing costs |
|
|
36 |
(h) |
|
|
(129 |
) |
|
|
(129 |
) |
3G spectrum licence |
|
|
36 |
(k) |
|
|
(21 |
) |
|
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|
|
Handset subsidies |
|
|
36 |
(k) |
|
|
(72 |
) |
|
|
(72 |
) |
|
|
|
|
|
|
|
Net decrease in deferred tax liabilities |
|
|
|
|
|
|
(74 |
) |
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|
(54 |
) |
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|
A
corresponding increase in opening retained profits was recorded as a result of these adjustments.
In addition, there was a transitional adjustment to deferred tax liabilities as a result of the
change in accounting for income taxes to the balance sheet approach, and the adoption of UIG 1052.
This adjustment consisted of:
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|
Telstra |
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|
Telstra |
|
|
|
Group |
|
|
Entity |
|
|
|
$m |
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|
$m |
|
|
Tax base differences on buildings |
|
|
77 |
|
|
|
77 |
|
Tax effect of fair value adjustments on entities
acquired by us |
|
|
66 |
|
|
|
|
|
Adoption of UIG 1052 |
|
|
|
|
|
|
329 |
|
Adjustments to plant and equipment and
other temporary differences |
|
|
(105 |
) |
|
|
(104 |
) |
|
|
|
Net increase in deferred tax liabilities |
|
|
38 |
|
|
|
302 |
|
|
|
|
For the Telstra Group opening retained profits decreased by $6 million (Telstra Entity: $142
million), and the asset revaluation reserve reduced by $32 million (Telstra Entity: $83 million) as
a result of these entries. Furthermore, the balance of investments recorded by the Telstra Entity
increased by $77 million.
F-163
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(c) AASB 112: Income Taxes (AASB 112) (continued)
(ii) At 30 June 2005
The Telstra Group and Telstra Entitys deferred tax liabilities decreased as a result of the impact
of other A-IFRS standards as at 30 June 2005. This adjustment consisted of:
|
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|
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|
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|
|
|
|
|
|
|
|
|
Telstra |
|
|
Telstra |
|
|
|
|
|
|
|
Group |
|
|
Entity |
|
|
|
Note |
|
|
$m |
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|
$m |
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Deferred payment for equipment |
|
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36(d |
) |
|
|
(8 |
) |
|
|
|
|
Operating leases |
|
|
36(e |
) |
|
|
(14 |
) |
|
|
(14 |
) |
Defined benefit asset |
|
|
36 (f |
) |
|
|
79 |
|
|
|
79 |
|
Borrowing costs |
|
|
36(h |
) |
|
|
(129 |
) |
|
|
(129 |
) |
3G spectrum licence |
|
|
36(k |
) |
|
|
(19 |
) |
|
|
|
|
Handset subsidies |
|
|
36(k |
) |
|
|
(91 |
) |
|
|
(91 |
) |
|
|
|
|
|
|
|
Net decrease in deferred tax liabilities |
|
|
|
|
|
|
(182 |
) |
|
|
(155 |
) |
|
|
|
|
|
|
|
The Telstra Group and Telstra Entity retained profits increased by $24 million due to the tax
effect of the defined benefit actuarial loss. Telstra Group tax expense for the year ended 30 June
2005 decreased by $84 million (Telstra Entity: $77 million).
In addition, an adjustment to deferred tax liabilities was attributable to the change in accounting
for income taxes to the balance sheet approach and the adoption of UIG 1052. This adjustment
consisted of:
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
Telstra |
|
|
|
Group |
|
|
Entity |
|
|
|
$m |
|
|
$m |
|
|
Tax base differences on buildings |
|
|
74 |
|
|
|
74 |
|
Tax effect of fair value adjustments on
entities acquired by us |
|
|
104 |
|
|
|
|
|
Adoption of UIG 1052 |
|
|
|
|
|
|
299 |
|
Adjustments to plant and equipment and
other temporary differences |
|
|
(77 |
) |
|
|
(83 |
) |
|
|
|
Net increase in deferred tax liabilities |
|
|
101 |
|
|
|
290 |
|
|
|
|
As a result of adjustments associated with the change to the balance sheet approach, Telstra Group
goodwill increased by $63 million and the FCTR increased by $9 million as at 30 June 2005. Income
tax expense for the Telstra Group for the year ended 30 June 2005 increased by $8 million.
For the Telstra Entity, investments increased by $107 million as at 30 June 2005. Dividend revenue
increased by $223 million and income tax expense increased by $182 million for the year ended 30
June 2005.
(d) AASB 116: Property, Plant and Equipment (AASB 116)
Under the transitional exemptions of AASB 1 we had the option to use an assets fair value, or
previously revalued amount, as its deemed cost from the date of transition. We elected to apply the
cost model under
AASB 116, and therefore the carrying value of our property, plant and equipment (some of which had
been previously revalued) and intangible assets on the date of transition were deemed to be cost
under A-IFRS. If this election had not been made, we would have had to restate these assets to
their original historical cost.
On transition to A-IFRS an entity is required to derecognise items where A-IFRS does not permit
such recognition. As we have adopted the cost model under AASB 116, the asset revaluation reserve
will be derecognised as it is not a valid reserve under the cost model. The balance, after taking
into consideration other A-IFRS adjustments, has been transferred to the general reserve.
Under previous AGAAP, we recognised the gross proceeds on sale of non current assets as revenue and
the cost in other expenses. A-IFRS requires the net gain on sale of non current assets to be
classified as other income, not separately treated as revenue and other expenses.
(i) On transition as at 1 July 2004
For the Telstra Entity, the balance of the asset revaluation reserve of $194 million was
transferred to the general reserve on transition to A-IFRS.
(ii) At 30 June 2005
On 6 December 2004, we acquired a 50% interest in the 3G Radio Access Network (RAN) assets of
Hutchison 3G Australia Pty Ltd (H3GA) for $450 million, payable over 2 years. Due to the deferred
payment terms, under previous AGAAP our property, plant and equipment balance increased by $428
million, representing the present value of the purchase price calculated using our incremental
borrowing rate. AASB 116 requires that a discount rate specific to the asset be used, rather than
our incremental borrowing rate.
Under previous AGAAP, the release of interest associated with the unwinding of the present value
discount was capitalised as part of property, plant and equipment until the assets were installed
ready for use. Under A-IFRS the release of interest associated with the unwinding of the present
value discount was expensed as incurred.
For the Telstra Group, the change in the discount rate and the cessation of interest capitalisation
resulted in a decrease in our property, plant and equipment of $37 million, and a decrease in
current and non current payables of $10 million (comprising $3 million current and $7 million non
current). Finance costs of the Telstra Group for the year ended 30 June 2005 increased by $27
million.
F-164
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(d) AASB 116: Property, Plant and Equipment (AASB 116) (continued)
For the Telstra Group we have reclassified revenue of $476 million (Telstra Entity: $336 million)
and other expenses of $215 million (Telstra Entity: $203 million) to other income associated with
the net gain on sale of non current assets for the year ended 30 June 2005.
(e) AASB 117: Leases (AASB 117)
Under previous AGAAP, operating lease payments were expensed in the periods in which they were
incurred. Under A-IFRS, operating lease payments are expensed on a straight line basis over the
term of the lease, even if the payments are not on that basis. Where the lease contains a fixed
rental increase each year, the total impact of the rental increase is expensed evenly over the
lease term.
(i) On transition as at 1 July 2004
For the Telstra Group and Telstra Entity, non-current trade and other payables increased by $37
million, representing an increase to previously recognised operating lease expense associated with
using the straight line method for A-IFRS, with a corresponding decrease in opening retained
profits.
(ii) At 30 June 2005
For the Telstra Group and Telstra Entity, non-current trade and other payables increased by $48
million. For the year ended 30 June 2005, operating lease expense increased by $11 million.
(f) AASB 119: Employee Benefits (AASB 119)
Under previous AGAAP, we did not recognise an asset or liability on our balance sheet for the net
position of the defined benefit plans we sponsor in Australia and Hong Kong.
On adoption of A-IFRS, we recognised the net position of each plan as a transitional adjustment to
the balance sheet, with a corresponding entry to retained profits. The transitional adjustment was
based on an actuarial valuation of each scheme at transition date determined in accordance with
AASB 119.
A revised AASB 119 was issued in December 2004 and applies to annual reporting periods beginning on
or after 1 January 2006. We have elected under s.334(5) of the Corporations Act 2001 to early adopt
this revised accounting standard for the financial year commencing 1 July 2004.
This revised standard is similar to the current accounting standard, with the exception of the
treatment of actuarial gains and losses. This revised standard enables us to either:
|
|
recognise actuarial gains and losses directly in the income statement; |
|
|
recognise actuarial gains and losses in the income statement using the corridor approach; or |
|
|
recognise actuarial gains and losses directly in retained profits. |
Under this revised standard, we have elected to recognise actuarial gains and losses directly in
retained profits. The actuarial gains and losses are based on an actuarial valuation of each plan
at reporting date. Other components of pension costs are recognised in the income statement as a
labour expense. Where appropriate, this additional labour cost is capitalised as part of our
constructed plant and equipment.
(i) On transition as at 1 July 2004
The Telstra Group adjustment on transition resulted in the recognition of a defined benefit asset
of $537 million (Telstra Entity: $529 million), with a corresponding increase in opening retained
profits.
(ii) At 30 June 2005
The cumulative effect on the Telstra Group balance sheet at 30 June 2005 was to recognise a defined
benefit asset of $247 million, increase property, plant and equipment by $24 million and decrease
retained profits for actuarial losses by $90 million. Telstra Group labour expense increased by
$175 million and depreciation expense increased by $1 million for the year ended 30 June 2005
The cumulative effect on the Telstra Entity balance sheet at 30 June 2005 was to recognise a
defined benefit asset of $242 million, increase property, plant and equipment by $24 million and
decrease retained profits for actuarial losses by $85 million. Telstra Group labour expense
increased by $176 million and depreciation expense increased by $1 million for the year ended 30
June 2005.
(g) AASB 121: The Effects of Changes in Foreign Exchange Rates (AASB 121)
AASB 121 requires goodwill and fair value adjustments arising on the acquisition of a foreign
controlled entity to be expressed in the functional currency of the foreign operation. Previously,
we fixed goodwill and certain fair value adjustments in Australian dollars based on the exchange
rate at the acquisition date.
F-165
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(g) AASB 121: The Effects of Changes in Foreign Exchange Rates (AASB 121) (continued)
Under the transitional rules of AASB 1 we have taken advantage of an exemption that permits
application of AASB 121 retrospectively to goodwill and fair value adjustments arising in all
business combinations that occurred before the date of transition to A-IFRS. This exemption allows
us to reset the goodwill and fair value adjustments to the functional currency of the foreign
operations at the original date of acquisition. This adjustment is primarily attributable to our
investments in the Telstra CSL Group (HKCSL) and TelstraClear Limited (TelstraClear).
Under AASB 1 we have also applied an exemption that permitted the resetting of the FCTR to nil as
at the date of transition to A-IFRS.
(i) On transition as at 1 July 2004
The Telstra Group transitional adjustments to reset goodwill and fair value adjustments of foreign
controlled entities resulted in a decrease to the FCTR of $297 million, corresponding with an
increase to property, plant and equipment of $3 million, an increase of $14 million to intangible
assets and a decrease in goodwill of $314 million. The A-IFRS FCTR following these and other A-IFRS
adjustments was $343 million. This FCTR balance was reset to nil with a corresponding decrease to
opening retained profits.
(ii) At 30 June 2005
The cumulative effect on the Telstra Group balance sheet at 30 June 2005 was to decrease goodwill
by $454 million, increase other intangibles by $9 million, increase property, plant and equipment
by $2 million and decrease FCTR by $111 million. The impact on the income statement for the year
ended 30 June 2005 was a decrease in other expenses of $11 million representing a change in the
functional currency of a foreign controlled entity.
(h) AASB 123: Borrowing Costs
In accordance with previous AGAAP, we previously capitalised borrowing costs incurred in respect of
internally constructed property, plant and equipment and software assets that met the criteria for
qualifying assets. The benchmark treatment required under A-IFRS is to expense borrowing costs.
AASB 123 does however permit the alternative treatment of capitalising these costs where they
relate to qualifying assets. We have elected to change our policy in line with the benchmark
treatment and expense our borrowing costs.
(i) On transition as at 1 July 2004
We transferred the unamortised balance of capitalised borrowing costs included in property, plant
and equipment and software assets to retained profits. This gave rise to a reduction in Telstra
Group property, plant and equipment of $399 million (Telstra Entity: $367 million) and a reduction
in software assets of $63 million (Telstra Entity: $63 million), with a corresponding decrease in
opening retained profits.
(ii) At 30 June 2005
For the Telstra Group the effect on the balance sheet at 30 June 2005 was to decrease property,
plant and equipment by $401 million (Telstra Entity: $374 million) and reduce software assets by
$57 million (Telstra Entity: $57 million). Telstra Group depreciation expense decreased by $94
million (Telstra Entity: $90 million) and finance costs increased by $90 million (Telstra Entity:
$90 million) for the year ended 30 June 2005.
(i) AASB 128: Investments in Associates (AASB 128) and AASB 131: Interests in Joint Ventures
(AASB 131)
AASB 128/131 requires amounts that are in substance part of the net investment in associates or
jointly controlled entities to be accounted for as part of the carrying value of the investment for
the purposes of equity accounting the results of the associate or jointly controlled entity.
Accordingly, we have reclassified amounts that are not currently recorded in the carrying value of
our investment in associates or jointly controlled entities to be treated as an extension of our
equity investment. This treatment gave rise to the continuation of equity accounting of our share
of the operating losses in respect of those associates and jointly controlled entities that are
incurring losses and have balances as described above.
(i) On transition as at 1 July 2004
On transition to AASB 128/131, there was a decrease to Telstra Group non current receivables of
$208 million representing the capacity prepayment with our joint venture entity Reach Ltd (Reach).
This non current asset was deemed to be an extension of our investment in Reach under A-IFRS and
was absorbed by the carried forward losses in Reach not previously recognised. The impact of this
change on the Telstra Group was to decrease opening retained profits by $348 million for our share
of the accumulated losses, offset by an increase of $140 million to the FCTR for the translation
differences on our investment in Reach. The FCTR attributable to Reach was reset to nil as detailed
in the adjustment outlined in note 36(g).
F-166
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(i) AASB 128: Investments in Associates (AASB 128) and AASB 131: Interests in Joint Ventures
(AASB 131) (continued)
(ii) At 30 June 2005
On 16 April 2005 we swapped our capacity prepayment with Reach for an Indefeasible Right of Use
(IRU). This IRU was recorded as a deferred expense under previous AGAAP and was being amortised
over the term of the IRU being 15 years. As part of this arrangement, we agreed to fund Reachs
committed capital expenditure together with our co-shareholder PCCW Limited for the period until
2022, up to a value of US$106 million each, if required. Our share was disclosed as a contingent
liability under previous AGAAP.
Under A-IFRS, the IRU was deemed to be an extension of our investment in Reach, similar to the
capacity prepayment. Furthermore, our commitment to Reach for the committed capital expenditure
required us to recognise additional equity accounted losses in Reach of $102 million for the year
ended 30 June 2005. This gave rise to a provision of $90 million ($32 million current and $58
million non current) as at 30 June 2005 for the net present value of our share of the committed
capital expenditure. Other assets current decreased by $1 million, intangibles decreased by $217
million and trade and other payables decreased by $1 million. For the year ended 30 June 2005,
finance costs increased by $2 million associated with the unwinding of the present value discount,
amortisation expense decreased by $3 million, finance income decreased by $18 million and exchange
losses decreased by $20 million.
The effect on the Telstra Entity for our commitment to Reach for the committed capital expenditure
was to recognise a provision of $90 million ($32 million current and $58 million non current) as at
30 June 2005. Other current assets decreased by $1 million, intangible assets increased by $87
million and trade and other payables decrease by $1 million. For the year ended 30 June 2005,
finance costs increased by $2 million and amortisation expense increased by $1 million.
Investments accounted for using the equity method decreased by $3 million as a result of the
adoption of A-IFRS by our jointly controlled and associated entities. For the year ended 30 June
2005, our share of equity accounted losses increased by $3 million.
(j) AASB 136: Impairment of Assets (AASB 136)
Our accounting policy under previous AGAAP was to assess our current and non current assets for
impairment by determining the recoverable amount of those assets. We wrote down the value of the
non current asset where the carrying amount exceeded recoverable amount. We assessed recoverable
amount for a group of non current assets where those assets were considered to work together as
one.
With the adoption of AASB 136, impairment of assets is assessed on the basis of individual cash
generating units. We have assessed our Australian telecommunications network to be a single cash
generating unit for the purpose of this standard with the exception of the HFC network. This
approach has been adopted as we consider that, in the generation of our revenue streams, the
delivery of our end products or services is heavily reliant on the use of one core of commonly
shared communication assets, encompassing the customer access network and the core network. This
ubiquitous network carries all our telecommunications traffic throughout Australia.
Under previous AGAAP, we assessed recoverable amount on this same ubiquitous network basis, and as
a result, there were no initial adjustments to the value of our network assets under A-IFRS.
Each of our controlled entities, jointly controlled entities and associated entities has also been
assessed, and generally each significant entity has at least one separate cash generating unit in
its own right. Under
AGAAP, we assessed recoverable amount on a similar basis, and there is no initial adjustment to the
value of our assets. In accordance with AASB 1, the carrying amount of goodwill at transition date
has been tested for impairment and no initial impairment losses were recognised on transition to
A-IFRS.
(k) AASB 138: Intangible Assets (AASB 138)
As part of the IFRS project, intangibles recognised under previous AGAAP, including software assets
developed for internal use and deferred expenditure, were reviewed to confirm that the criteria in
AASB 138 have been met. Software assets developed for internal use, and deferred expenditure were
reclassified from other current and non current assets to intangible assets on transition to AASB
138. We have also reclassified some software assets from property, plant and equipment to
intangible assets for software that is not an integral part of property, plant and equipment.
Under previous AGAAP, we capitalised the subsidised component of mobile handsets that were sold as
part of a service contract as a subscriber acquisition cost. This capitalised balance was then
amortised over the contract term.
UIG 1042 Subscriber Acquisition Costs in the Telecommunications Industry (UIG 1042) was released
by the AASB in December 2004 and prescribes the appropriate accounting treatment of subscriber
acquisition costs based on the requirements of AASB 138. Specifically, UIG 1042 requires the cost
of telephones provided to subscribers to be excluded from subscriber acquisition costs. As a
result, under A-IFRS we have elected to expense mobile handset subsidies as incurred.
F-167
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2004 (continued)
(k) AASB 138: Intangible Assets (AASB 138) (continued)
Our subsidiary in Hong Kong, HKCSL, has a licence to utilise 3G spectrum in Hong Kong until 2016.
As part of this licence agreement, HKCSL are required to make annual payments for the right to use
this spectrum. Under previous AGAAP we expensed these payments as incurred, except for those
incurred during the construction of our 3G network in Hong Kong which were capitalised as part of
the asset cost.
On adoption of AASB 138 and consistent with other 3G mobile operators in Hong Kong, the Telstra
Group has recorded an intangible asset for this 3G spectrum licence, based on the present value of
our expected future payments. This intangible asset is amortised over the term of the agreement. A
corresponding accrual has also been recorded for our future obligations.
(i) On transition as at 1 July 2004
On transition, other current and non current assets of the Telstra Group and Telstra Entity
decreased by $205 million and $34 million respectively for the write-off of deferred mobile handset
subsidies, with a corresponding decrease in opening retained profits.
The intangible asset associated with our Hong Kong 3G spectrum licence amounted to $121 million on
transition in the Telstra Group, representing the present value of our expected future payments
under the licence. Under previous AGAAP these payments were expensed as incurred, with certain
payments capitalised as part of the cost of our Hong Kong 3G network. Of the balance of the
intangible asset, $25 million has been reclassified from property, plant and equipment that was
capitalised under previous AGAAP. Trade and other payables have increased by $96 million ($3
million current and $93 million non current).
Software assets developed for internal use and deferred expenditure were reclassified from other
assets and property, plant and equipment to intangible assets on transition to A-IFRS. This
reclassification adjustment for the Telstra Group amounted to $2,601 million (Telstra Entity:
$2,375 million) as at transition date. This comprised $286 million (Telstra Entity: $249 million)
from other current assets, $2,292 million (Telstra Entity: $2,126 million) from other non current
assets and $23 million from property, plant and equipment.
(ii) At 30 June 2005
The write-off of deferred mobile handset subsidies decreased other current and non current assets
of the Telstra Group and Telstra Entity by $241 million and $62 million respectively. Goods and
services purchased for the year ended 30 June 2005 increased by $64 million.
The recognition of the Hong Kong 3G spectrum licence increased intangibles by $108 million,
decreased property, plant and equipment by $24 million and increased trade and other payables by
$89 million ($2 million current and $87 million non current) for the Telstra Group as at 30 June 2005. Other
expenses decreased by $5 million, amortisation increased by $4 million and finance costs increased
by $5 million for the year ended 30 June 2005.
The cumulative effect on the Telstra Group balance sheet at 30 June 2005 for the reclassification
of software and deferred expenditure was to increase intangibles by $2,875 million (Telstra Entity:
$2,534 million). This comprised $305 million (Telstra Entity: $264 million) from other current
assets, $2,546 million (Telstra Entity: $2,270 million) from other non current assets and $24
million from property, plant and equipment.
(l) Nature of A-IFRS adjustments with effect from 1 July 2004
In the following tables, presentation adjustments reflect the reclassification of previously
recognised amounts into their A-IFRS categories.
Accounting adjustments reflect the remeasurement of previously recognised amounts, or the
recognition of additional amounts required under A-IFRS.
F-168
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of profit under previous AGAAP to A-IFRS for the year ended 30 June 2005 for
the consolidated Telstra Group.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
Year ended 30 June 2005 |
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
Previous |
|
Presentation |
|
Accounting |
|
|
|
|
|
|
|
|
AGAAP |
|
adjustments |
|
adjustments |
|
A-IFRS |
|
|
Note |
|
$m |
|
$m |
|
$m |
|
$m |
|
Income |
Revenue (excluding finance income) |
|
|
36 |
(d) |
|
|
22,657 |
|
|
|
(476 |
) |
|
|
|
|
|
|
22,181 |
|
Other income |
|
|
36 |
(d) |
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,657 |
|
|
|
(215 |
) |
|
|
|
|
|
|
22,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
36(a), |
(f) |
|
|
3,693 |
|
|
|
|
|
|
|
165 |
|
|
|
3,858 |
|
Goods and services purchased |
|
|
36 |
(k) |
|
|
4,147 |
|
|
|
|
|
|
|
64 |
|
|
|
4,211 |
|
Other expenses |
|
|
36(d),(e),(g),(i), |
(k) |
|
|
4,055 |
|
|
|
(215 |
) |
|
|
(25 |
) |
|
|
3,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,895 |
|
|
|
(215 |
) |
|
|
204 |
|
|
|
11,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net (gain)/loss from jointly controlled and
associated entities |
|
|
36(b), |
(i) |
|
|
(9 |
) |
|
|
|
|
|
|
103 |
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,886 |
|
|
|
(215 |
) |
|
|
307 |
|
|
|
11,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income
tax expense, depreciation and
amortisation (EBITDA) |
|
|
|
|
|
|
10,771 |
|
|
|
|
|
|
|
(307 |
) |
|
|
10,464 |
|
Depreciation and amortisation |
|
|
36(b),(f),(h),(i), |
(k) |
|
|
3,766 |
|
|
|
|
|
|
|
(237 |
) |
|
|
3,529 |
|
|
|
|
|
|
|
|
Earnings before interest and
income tax expense (EBIT) |
|
|
|
|
|
|
7,005 |
|
|
|
|
|
|
|
(70 |
) |
|
|
6,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
36(a), |
(i) |
|
|
103 |
|
|
|
|
|
|
|
(20 |
) |
|
|
83 |
|
Finance costs |
|
|
36(d),(h),(i), |
(k) |
|
|
839 |
|
|
|
|
|
|
|
124 |
|
|
|
963 |
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
736 |
|
|
|
|
|
|
|
144 |
|
|
|
880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
6,269 |
|
|
|
|
|
|
|
(214 |
) |
|
|
6,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
36 |
(c) |
|
|
1,822 |
|
|
|
|
|
|
|
(76 |
) |
|
|
1,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
4,447 |
|
|
|
|
|
|
|
(138 |
) |
|
|
4,309 |
|
|
|
|
|
|
|
|
F-169
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of profit under previous AGAAP to A-IFRS for the year ended 30 June 2005 for
the Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
Year ended 30 June 2005 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Income |
Revenue (excluding finance income) |
|
|
36(c), |
(d) |
|
|
19,944 |
|
|
|
(336 |
) |
|
|
223 |
|
|
|
19,831 |
|
Other income |
|
|
36 |
(d) |
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,944 |
|
|
|
(203 |
) |
|
|
223 |
|
|
|
19,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
36(a), |
(f) |
|
|
2,916 |
|
|
|
|
|
|
|
166 |
|
|
|
3,082 |
|
Goods and services purchased |
|
|
37 |
(k) |
|
|
2,894 |
|
|
|
|
|
|
|
64 |
|
|
|
2,958 |
|
Other expenses. |
|
|
36(d),(e), |
(i) |
|
|
3,666 |
|
|
|
(203 |
) |
|
|
15 |
|
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,476 |
|
|
|
(203 |
) |
|
|
245 |
|
|
|
9,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, income
tax expense, depreciation and
amortisation (EBITDA) |
|
|
|
|
|
|
10,468 |
|
|
|
|
|
|
|
(22 |
) |
|
|
10,446 |
|
Depreciation and amortisation |
|
|
36(b),(f),(h), |
(i) |
|
|
3,298 |
|
|
|
|
|
|
|
(92 |
) |
|
|
3,206 |
|
|
|
|
|
|
|
|
Earnings before interest and
income tax expense (EBIT) |
|
|
|
|
|
|
7,170 |
|
|
|
|
|
|
|
70 |
|
|
|
7,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
36 |
(a) |
|
|
103 |
|
|
|
|
|
|
|
(2 |
) |
|
|
101 |
|
Finance costs |
|
|
36(h), |
(i) |
|
|
851 |
|
|
|
|
|
|
|
92 |
|
|
|
943 |
|
|
|
|
|
|
|
|
Net finance costs |
|
|
|
|
|
|
748 |
|
|
|
|
|
|
|
94 |
|
|
|
842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expense |
|
|
|
|
|
|
6,422 |
|
|
|
|
|
|
|
(24 |
) |
|
|
6,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
36 |
(c) |
|
|
1,777 |
|
|
|
|
|
|
|
105 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
|
|
4,645 |
|
|
|
|
|
|
|
(129 |
) |
|
|
4,516 |
|
|
|
|
|
|
|
|
F-170
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation
of balance sheet under previous AGAAP to A-IFRS as at transition date, 1 july 2004, for the
consolidated Telstra Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
1 July 2004 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
36(a) |
|
|
687 |
|
|
|
|
|
|
|
3 |
|
|
|
690 |
|
Trade and other receivables |
|
36(a),(m) |
|
|
3,608 |
|
|
|
(192 |
) |
|
|
|
|
|
|
3,416 |
|
Inventories |
|
|
|
|
|
|
229 |
|
|
|
|
|
|
|
|
|
|
|
229 |
|
Derivative financial assets |
|
36(m) |
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
169 |
|
Other assets |
|
36(k) |
|
|
803 |
|
|
|
(286 |
) |
|
|
(205 |
) |
|
|
312 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,327 |
|
|
|
(309 |
) |
|
|
(202 |
) |
|
|
4,816 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
36(a),(i)(m) |
|
|
740 |
|
|
|
(387 |
) |
|
|
(273 |
) |
|
|
80 |
|
Inventories |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
40 |
|
Available for sale investments |
|
|
|
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
80 |
|
Property, plant and equipment |
|
36(g),(h),(k) |
|
|
22,863 |
|
|
|
(23 |
) |
|
|
(421 |
) |
|
|
22,419 |
|
Intangibles |
|
36(g),(h),(k),(m) |
|
|
3,605 |
|
|
|
2,580 |
|
|
|
(242 |
) |
|
|
5,943 |
|
Deferred tax assets |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Derivative financial assets |
|
36(m) |
|
|
|
|
|
|
238 |
|
|
|
|
|
|
|
238 |
|
Other assets |
|
36(f),(k) |
|
|
2,326 |
|
|
|
(2,292 |
) |
|
|
503 |
|
|
|
537 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
29,666 |
|
|
|
116 |
|
|
|
(433 |
) |
|
|
29,349 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
34,993 |
|
|
|
(193 |
) |
|
|
(635 |
) |
|
|
34,165 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
36(k) |
|
|
2,338 |
|
|
|
|
|
|
|
3 |
|
|
|
2,341 |
|
Borrowings |
|
|
|
|
|
|
3,246 |
|
|
|
|
|
|
|
|
|
|
|
3,246 |
|
Current tax liabilities |
|
|
|
|
|
|
539 |
|
|
|
|
|
|
|
|
|
|
|
539 |
|
Provisions |
|
|
|
|
|
|
358 |
|
|
|
|
|
|
|
|
|
|
|
358 |
|
Revenue received in advance |
|
|
|
|
|
|
1,095 |
|
|
|
|
|
|
|
|
|
|
|
1,095 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,576 |
|
|
|
|
|
|
|
3 |
|
|
|
7,579 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
36(e),(k) |
|
|
49 |
|
|
|
|
|
|
|
130 |
|
|
|
179 |
|
Borrowings |
|
36(m) |
|
|
9,014 |
|
|
|
(429 |
) |
|
|
|
|
|
|
8,585 |
|
Deferred tax liabilities |
|
36(c) |
|
|
1,807 |
|
|
|
|
|
|
|
(36 |
) |
|
|
1,771 |
|
Provisions |
|
|
|
|
|
|
778 |
|
|
|
|
|
|
|
|
|
|
|
778 |
|
Derivative financial liabilities |
|
36(m) |
|
|
|
|
|
|
410 |
|
|
|
|
|
|
|
410 |
|
Revenue received in advance |
|
|
|
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
408 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
12,056 |
|
|
|
(19 |
) |
|
|
94 |
|
|
|
12,131 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
19,632 |
|
|
|
(19 |
) |
|
|
97 |
|
|
|
19,710 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
15,361 |
|
|
|
(174 |
) |
|
|
(732 |
) |
|
|
14,455 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
36(a) |
|
|
6,073 |
|
|
|
(174 |
) |
|
|
(113 |
) |
|
|
5,786 |
|
Reserves |
|
36(c),(g),(i) |
|
|
(105 |
) |
|
|
|
|
|
|
154 |
|
|
|
49 |
|
Retained profits |
|
|
|
|
|
|
9,391 |
|
|
|
|
|
|
|
(773 |
) |
|
|
8,618 |
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
15,359 |
|
|
|
(174 |
) |
|
|
(732 |
) |
|
|
14,453 |
|
Minority interests |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
15,361 |
|
|
|
(174 |
) |
|
|
(732 |
) |
|
|
14,455 |
|
|
|
|
|
|
|
|
F-171
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of balance sheet under previous AGAAP to A-IFRS as at transition date, 1 july 2004, for the
Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
|
|
|
|
1 July 2004 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
36(a) |
|
|
543 |
|
|
|
|
|
|
|
3 |
|
|
|
546 |
|
Trade and other receivables |
|
36(a),(m) |
|
|
3,258 |
|
|
|
(192 |
) |
|
|
|
|
|
|
3,066 |
|
Inventories |
|
|
|
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
206 |
|
Derivative financial assets |
|
36(m) |
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
169 |
|
Other assets |
|
36(k) |
|
|
687 |
|
|
|
(249 |
) |
|
|
(205 |
) |
|
|
233 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
4,694 |
|
|
|
(272 |
) |
|
|
(202 |
) |
|
|
4,220 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
36(a),(m) |
|
|
1,047 |
|
|
|
(387 |
) |
|
|
(65 |
) |
|
|
595 |
|
Inventories |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Investments accounted for using
the equity method |
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
32 |
|
Investments other |
|
|
36 |
(c) |
|
|
5,435 |
|
|
|
|
|
|
|
77 |
|
|
|
5,512 |
|
Property, plant and equipment |
|
|
36 |
(h) |
|
|
21,600 |
|
|
|
|
|
|
|
(367 |
) |
|
|
21,233 |
|
Intangibles |
|
36(h),(k),(m) |
|
|
236 |
|
|
|
2,354 |
|
|
|
(63 |
) |
|
|
2,527 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
238 |
|
|
|
|
|
|
|
238 |
|
Other assets |
|
36(f),(k) |
|
|
2,160 |
|
|
|
(2,126 |
) |
|
|
495 |
|
|
|
529 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,520 |
|
|
|
79 |
|
|
|
77 |
|
|
|
30,676 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,214 |
|
|
|
(193 |
) |
|
|
(125 |
) |
|
|
34,896 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
1,891 |
|
|
|
|
|
|
|
|
|
|
|
1,891 |
|
Borrowings |
|
|
|
|
|
|
5,527 |
|
|
|
|
|
|
|
|
|
|
|
5,527 |
|
Current tax liabilities |
|
|
|
|
|
|
512 |
|
|
|
|
|
|
|
|
|
|
|
512 |
|
Provisions |
|
|
|
|
|
|
331 |
|
|
|
|
|
|
|
|
|
|
|
331 |
|
Revenue received in advance |
|
|
|
|
|
|
885 |
|
|
|
|
|
|
|
|
|
|
|
885 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
9,146 |
|
|
|
|
|
|
|
|
|
|
|
9,146 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
36(e) |
|
|
46 |
|
|
|
|
|
|
|
37 |
|
|
|
83 |
|
Borrowings |
|
36(m) |
|
|
9,014 |
|
|
|
(429 |
) |
|
|
|
|
|
|
8,585 |
|
Deferred tax liabilities |
|
36(c) |
|
|
1,748 |
|
|
|
|
|
|
|
248 |
|
|
|
1,996 |
|
Provisions |
|
|
|
|
|
|
740 |
|
|
|
|
|
|
|
|
|
|
|
740 |
|
Derivative financial liabilities |
|
36(m) |
|
|
|
|
|
|
410 |
|
|
|
|
|
|
|
410 |
|
Revenue received in advance |
|
|
|
|
|
|
398 |
|
|
|
|
|
|
|
|
|
|
|
398 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
11,946 |
|
|
|
(19 |
) |
|
|
285 |
|
|
|
12,212 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
21,092 |
|
|
|
(19 |
) |
|
|
285 |
|
|
|
21,358 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
14,122 |
|
|
|
(174 |
) |
|
|
(410 |
) |
|
|
13,538 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
36(a) |
|
|
6,073 |
|
|
|
(174 |
) |
|
|
(113 |
) |
|
|
5,786 |
|
Reserves |
|
36(c) |
|
|
277 |
|
|
|
|
|
|
|
(83 |
) |
|
|
194 |
|
Retained profits |
|
|
|
|
|
|
7,772 |
|
|
|
|
|
|
|
(214 |
) |
|
|
7,558 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
14,122 |
|
|
|
(174 |
) |
|
|
(410 |
) |
|
|
13,538 |
|
|
|
|
|
|
|
|
F-172
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of balance sheet under previous AGAAP to A-IFRS as at 30 June 2005 for the
consolidated Telstra Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
30 June 2005 |
|
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
36(a) |
|
|
1,540 |
|
|
|
|
|
|
|
8 |
|
|
|
1,548 |
|
Trade and other receivables |
|
36(a),(m) |
|
|
3,577 |
|
|
|
(28 |
) |
|
|
|
|
|
|
3,549 |
|
Inventories |
|
|
|
|
|
|
232 |
|
|
|
|
|
|
|
|
|
|
|
232 |
|
Derivative financial assets |
|
36(m) |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
Other assets |
|
36(i),(k) |
|
|
796 |
|
|
|
(305 |
) |
|
|
(242 |
) |
|
|
249 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
6,145 |
|
|
|
(329 |
) |
|
|
(234 |
) |
|
|
5,582 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
36(a) |
|
|
272 |
|
|
|
(131 |
) |
|
|
(44 |
) |
|
|
97 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
Investments accounted for using the equity method |
|
36(b),(i) |
|
|
49 |
|
|
|
|
|
|
|
(1 |
) |
|
|
48 |
|
Property, plant and equipment |
|
36(d),(f),(g),(h),(k) |
|
|
23,351 |
|
|
|
(24 |
) |
|
|
(436 |
) |
|
|
22,891 |
|
Intangibles |
|
36(b),(c),(g),(h),(i),(k),(m) |
|
|
3,868 |
|
|
|
2,864 |
|
|
|
(403 |
) |
|
|
6,329 |
|
Deferred tax assets |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Other assets |
|
36(f),(k) |
|
|
2,608 |
|
|
|
(2,546 |
) |
|
|
185 |
|
|
|
247 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,165 |
|
|
|
163 |
|
|
|
(699 |
) |
|
|
29,629 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
36,310 |
|
|
|
(166 |
) |
|
|
(933 |
) |
|
|
35,211 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
36(d),(i),(k) |
|
|
2,809 |
|
|
|
|
|
|
|
(2 |
) |
|
|
2,807 |
|
Borrowings |
|
36(m) |
|
|
1,518 |
|
|
|
(11 |
) |
|
|
|
|
|
|
1,507 |
|
Current tax liabilities |
|
|
|
|
|
|
534 |
|
|
|
|
|
|
|
|
|
|
|
534 |
|
Provisions |
|
36(i) |
|
|
389 |
|
|
|
|
|
|
|
32 |
|
|
|
421 |
|
Derivative financial liabilities |
|
36(m) |
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
Revenue received in advance |
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
6,382 |
|
|
|
|
|
|
|
30 |
|
|
|
6,412 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
36(d),(e),(k) |
|
|
122 |
|
|
|
|
|
|
|
128 |
|
|
|
250 |
|
Borrowings |
|
36(m) |
|
|
11,816 |
|
|
|
(875 |
) |
|
|
|
|
|
|
10,941 |
|
Deferred tax liabilities |
|
36(c) |
|
|
1,885 |
|
|
|
|
|
|
|
(81 |
) |
|
|
1,804 |
|
Provisions |
|
36(i) |
|
|
836 |
|
|
|
|
|
|
|
58 |
|
|
|
894 |
|
Derivative financial liabilities |
|
36(m) |
|
|
|
|
|
|
864 |
|
|
|
|
|
|
|
864 |
|
Revenue received in advance |
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,047 |
|
|
|
(11 |
) |
|
|
105 |
|
|
|
15,141 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
21,429 |
|
|
|
(11 |
) |
|
|
135 |
|
|
|
21,553 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
14,881 |
|
|
|
(155 |
) |
|
|
(1,068 |
) |
|
|
13,658 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
36(a) |
|
|
5,793 |
|
|
|
(155 |
) |
|
|
(102 |
) |
|
|
5,536 |
|
Reserves |
|
36(c),(g),(i) |
|
|
(157 |
) |
|
|
|
|
|
|
4 |
|
|
|
(153 |
) |
Retained profits |
|
|
|
|
|
|
9,243 |
|
|
|
|
|
|
|
(970 |
) |
|
|
8,273 |
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
14,879 |
|
|
|
(155 |
) |
|
|
(1,068 |
) |
|
|
13,656 |
|
Minority interests |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
14,881 |
|
|
|
(155 |
) |
|
|
(1,068 |
) |
|
|
13,658 |
|
|
|
|
|
|
|
|
F-173
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of balance sheet under previous AGAAP to A-IFRS as at 30 June 2005 for the
Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
|
|
|
30 June 2005 |
|
|
|
|
|
|
|
|
|
|
Effect of transition to A-IFRS |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
Presentation |
|
|
Accounting |
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
adjustments |
|
|
adjustments |
|
|
A-IFRS |
|
|
|
Note |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
36 |
(a) |
|
|
1,360 |
|
|
|
|
|
|
|
8 |
|
|
|
1,368 |
|
Trade and other receivables |
|
|
36(a), |
(m) |
|
|
3,566 |
|
|
|
(28 |
) |
|
|
|
|
|
|
3,538 |
|
Inventories |
|
|
|
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
194 |
|
Derivative financial assets |
|
|
36 |
(m) |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
Other assets |
|
|
36(i), |
(k) |
|
|
679 |
|
|
|
(264 |
) |
|
|
(242 |
) |
|
|
173 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,799 |
|
|
|
(288 |
) |
|
|
(234 |
) |
|
|
5,277 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
36 |
(a) |
|
|
290 |
|
|
|
(131 |
) |
|
|
(44 |
) |
|
|
115 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
Investments accounted for
using the equity method |
|
|
36 |
(i) |
|
|
44 |
|
|
|
|
|
|
|
(3 |
) |
|
|
41 |
|
Investments other |
|
|
36 |
(c) |
|
|
6,029 |
|
|
|
|
|
|
|
107 |
|
|
|
6,136 |
|
Property, plant and equipment |
|
|
36(f), |
(h) |
|
|
21,573 |
|
|
|
|
|
|
|
(350 |
) |
|
|
21,223 |
|
Intangibles |
|
|
36(b),(h),(i),(k), |
(m) |
|
|
194 |
|
|
|
2,523 |
|
|
|
34 |
|
|
|
2,751 |
|
Other assets |
|
|
36(f), |
(k) |
|
|
2,332 |
|
|
|
(2,270 |
) |
|
|
180 |
|
|
|
242 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,477 |
|
|
|
122 |
|
|
|
(76 |
) |
|
|
30,523 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
36,276 |
|
|
|
(166 |
) |
|
|
(310 |
) |
|
|
35,800 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36 |
(i) |
|
|
1,957 |
|
|
|
|
|
|
|
(1 |
) |
|
|
1,956 |
|
Borrowings |
|
|
36 |
(m) |
|
|
3,903 |
|
|
|
(11 |
) |
|
|
|
|
|
|
3,892 |
|
Current tax liabilities |
|
|
|
|
|
|
519 |
|
|
|
|
|
|
|
|
|
|
|
519 |
|
Provisions |
|
|
36 |
(i) |
|
|
324 |
|
|
|
|
|
|
|
32 |
|
|
|
356 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
Revenue received in advance |
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,615 |
|
|
|
|
|
|
|
31 |
|
|
|
7,646 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
36 |
(e) |
|
|
13 |
|
|
|
|
|
|
|
48 |
|
|
|
61 |
|
Borrowings |
|
|
36 |
(m) |
|
|
11,782 |
|
|
|
(875 |
) |
|
|
|
|
|
|
10,907 |
|
Deferred tax liabilities |
|
|
36 |
(c) |
|
|
1,826 |
|
|
|
|
|
|
|
135 |
|
|
|
1,961 |
|
Provisions |
|
|
36 |
(i) |
|
|
779 |
|
|
|
|
|
|
|
58 |
|
|
|
837 |
|
Derivative financial liabilities |
|
|
36 |
(m) |
|
|
|
|
|
|
864 |
|
|
|
|
|
|
|
864 |
|
Revenue received in advance |
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
14,781 |
|
|
|
(11 |
) |
|
|
241 |
|
|
|
15,011 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
22,396 |
|
|
|
(11 |
) |
|
|
272 |
|
|
|
22,657 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
13,880 |
|
|
|
(155 |
) |
|
|
(582 |
) |
|
|
13,143 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
36 |
(a) |
|
|
5,793 |
|
|
|
(155 |
) |
|
|
(102 |
) |
|
|
5,536 |
|
Reserves |
|
|
36 |
(c) |
|
|
277 |
|
|
|
|
|
|
|
(83 |
) |
|
|
194 |
|
Retained profits |
|
|
|
|
|
|
7,810 |
|
|
|
|
|
|
|
(397 |
) |
|
|
7,413 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
13,880 |
|
|
|
(155 |
) |
|
|
(582 |
) |
|
|
13,143 |
|
|
|
|
|
|
|
|
F-174
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation of equity under previous AGAAP to A-IFRS for the consolidated Telstra Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
Consoli- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Asset |
|
|
currency |
|
|
|
|
|
|
dation |
|
|
Retained |
|
|
Minority |
|
|
|
|
|
|
|
|
|
|
capital |
|
|
revaluation |
|
|
translation |
|
|
General |
|
|
fair value |
|
|
profits |
|
|
interests |
|
|
Total |
|
|
|
|
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Balance at 1 July 2004 under AGAAP |
|
|
|
|
|
|
6,073 |
|
|
|
32 |
|
|
|
(186 |
) |
|
|
5 |
|
|
|
44 |
|
|
|
9,391 |
|
|
|
2 |
|
|
|
15,361 |
|
Share-based payments |
|
|
36 |
(a) |
|
|
(287 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
(236 |
) |
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
36 |
|
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
(37 |
) |
Net defined benefit asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
537 |
|
|
|
|
|
|
|
537 |
|
Foreign currency |
|
|
36 |
(g) |
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
(343 |
) |
|
|
|
|
|
|
(297 |
) |
Expensing of borrowing costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(462 |
) |
|
|
|
|
|
|
(462 |
) |
Equity accounting for Reach Ltd |
|
|
36 |
(i) |
|
|
|
|
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
(348 |
) |
|
|
|
|
|
|
(208 |
) |
Expensing handset subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(239 |
) |
|
|
|
|
|
|
(239 |
) |
|
|
|
|
|
|
|
Balance at 1 July 2004 under A-IFRS |
|
|
|
|
|
|
5,786 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
44 |
|
|
|
8,618 |
|
|
|
2 |
|
|
|
14,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2005 under AGAAP |
|
|
|
|
|
|
5,793 |
|
|
|
32 |
|
|
|
(231 |
) |
|
|
4 |
|
|
|
38 |
|
|
|
9,243 |
|
|
|
2 |
|
|
|
14,881 |
|
Share-based payments |
|
|
36 |
(a) |
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
(191 |
) |
Cease amortisation of goodwill |
|
|
36 |
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
147 |
|
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(32 |
) |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
167 |
|
|
|
|
|
|
|
144 |
|
Deferred payment for equipment |
|
|
36 |
(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
|
|
|
|
(27 |
) |
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
|
|
|
|
(48 |
) |
Net defined benefit asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271 |
|
|
|
|
|
|
|
271 |
|
Foreign currency |
|
|
36 |
(g) |
|
|
|
|
|
|
|
|
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
(332 |
) |
|
|
|
|
|
|
(443 |
) |
Expensing of borrowing costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(458 |
) |
|
|
|
|
|
|
(458 |
) |
Equity accounting for Reach Ltd |
|
|
36 |
(i) |
|
|
|
|
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
(450 |
) |
|
|
|
|
|
|
(310 |
) |
Recognition of Hong Kong 3G spectrum
licence |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(5 |
) |
Expensing handset subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(303 |
) |
|
|
|
|
|
|
(303 |
) |
|
|
|
|
|
|
|
Balance at 30 June 2005 under A-IFRS |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
(195 |
) |
|
|
4 |
|
|
|
38 |
|
|
|
8,273 |
|
|
|
2 |
|
|
|
13,658 |
|
|
|
|
|
|
|
|
F-175
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation
of equity under previous AGAAP to A-IFRS for the Telstra Entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
Asset |
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
capital |
|
|
revaluation |
|
|
General |
|
|
profits |
|
|
Total |
|
|
|
|
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Balance at 1 July 2004 under AGAAP |
|
|
|
|
|
|
6,073 |
|
|
|
277 |
|
|
|
|
|
|
|
7,772 |
|
|
|
14,122 |
|
Share-based payments |
|
|
36 |
(a) |
|
|
(287 |
) |
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
(236 |
) |
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(83 |
) |
|
|
|
|
|
|
(88 |
) |
|
|
(171 |
) |
Property, plant and equipment |
|
|
36 |
(d) |
|
|
|
|
|
|
(194 |
) |
|
|
194 |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
(37 |
) |
Net defined benefit asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
529 |
|
|
|
529 |
|
Expensing of borrowing costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(430 |
) |
|
|
(430 |
) |
Expensing handset subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(239 |
) |
|
|
(239 |
) |
|
|
|
|
|
|
|
Balance at 1 July 2004 under A-IFRS |
|
|
|
|
|
|
5,786 |
|
|
|
|
|
|
|
194 |
|
|
|
7,558 |
|
|
|
13,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2005 under AGAAP |
|
|
|
|
|
|
5,793 |
|
|
|
277 |
|
|
|
|
|
|
|
7,810 |
|
|
|
13,880 |
|
Share-based payments |
|
|
36 |
(a) |
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
(191 |
) |
Cease amortisation of goodwill |
|
|
36 |
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
Income taxes |
|
|
36 |
(c) |
|
|
|
|
|
|
(83 |
) |
|
|
|
|
|
|
55 |
|
|
|
(28 |
) |
Property, plant and equipment |
|
|
36 |
(d) |
|
|
|
|
|
|
(194 |
) |
|
|
194 |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
36 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
(48 |
) |
Net defined benefit asset |
|
|
36 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266 |
|
|
|
266 |
|
Expensing of borrowing costs previously
capitalised |
|
|
36 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(431 |
) |
|
|
(431 |
) |
Accounting for investments |
|
|
36 |
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
(6 |
) |
Expensing handset subsidies previously
deferred |
|
|
36 |
(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(303 |
) |
|
|
(303 |
) |
|
|
|
|
|
|
|
Balance at 30 June 2005 under A-IFRS |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
194 |
|
|
|
7,413 |
|
|
|
13,143 |
|
|
|
|
|
|
|
|
F-176
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(l) Reconciliation
of the statement of cash flows under previous AGAAP to A-IFRS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2005 |
|
|
|
|
|
|
|
Telstra Group |
|
|
Telstra Entity |
|
|
|
|
|
|
|
Previous |
|
|
|
|
|
|
|
|
|
|
Previous |
|
|
|
|
|
|
|
|
|
|
|
|
|
AGAAP |
|
|
Adjustments |
|
|
A-IFRS |
|
|
AGAAP |
|
|
Adjustments |
|
|
A-IFRS |
|
|
|
|
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
|
|
|
|
|
Cash flows from operating activities |
|
(i),(ii),(iii) |
|
|
8,163 |
|
|
|
797 |
|
|
|
8,960 |
|
|
|
7,742 |
|
|
|
810 |
|
|
|
8,552 |
|
Cash flows from investing activities |
|
(i),(iii),(iv),(v) |
|
|
(3,809 |
) |
|
|
43 |
|
|
|
(3,766 |
) |
|
|
(2,890 |
) |
|
|
80 |
|
|
|
(2,810 |
) |
Cash flows from financing activities |
|
(ii),(iv),(v) |
|
|
(3,512 |
) |
|
|
(835 |
) |
|
|
(4,347 |
) |
|
|
(4,035 |
) |
|
|
(885 |
) |
|
|
(4,920 |
) |
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
|
(v) |
|
|
842 |
|
|
|
5 |
|
|
|
847 |
|
|
|
817 |
|
|
|
5 |
|
|
|
822 |
|
|
|
|
|
|
|
|
|
|
As a result of the adoption of A-IFRS, the following
reclassifications have been made to the statement of
cash flows:
(i) Interest received has been reclassified from
operating activities to investing activities (Telstra
Group: $80 million, Telstra Entity: $81 million);
(ii) Borrowing costs paid has been reclassified from
operating activities to cash flows from financing
activities and renamed finance costs (Telstra Group:
$879 million, Telstra Entity: $892 million);
(iii) Dividends received are classified as cash flows
from investing activities after previously being
included in cash flows from operating activities
(Telstra Group: $2 million, Telstra Entity: $1 million);
(iv) Loans to jointly controlled and associated entities
was reclassified from financing activities to investing
activities (Telstra Group: $37 million, Telstra Entity:
nil); and
(v) Adjustments required as a result of the
consolidation of Growthshare. For further
information refer to note 36(a).
F-177
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
A-IFRS adjustments with effect from 1 July 2005
(m) AASB 132: Financial Instruments: Disclosure and
Presentation (AASB 132), AASB 139: Financial
Instruments: Recognition and Measurement (AASB 139) and
AASB 7: Financial Instruments: Disclosures (AASB 7)
We have elected to apply the exemption available under
AASB 1 to apply AASB 132: Financial Instruments:
Disclosure and Presentation and AASB 139: Financial
Instruments: Recognition and Measurement from 1 July
2005. Accordingly, we have changed our accounting
policies for financial instruments from 1 July 2005.
In addition, we have elected to early adopt AASB 7 from
1 July 2005. AASB 7 supersedes the disclosure
requirements, but not the presentation requirements of
AASB 132.
The transitional rules for first time adoption of A-IFRS
required that we restate our comparative financial
report using A-IFRS, except for financial instruments
within the scope of AASB 132 and AASB 139 where
comparative information was not required to be restated.
The early adoption of AASB 7 did not require comparative
information for fiscal 2005 to be restated and
disclosed. Accordingly, we have applied previous AGAAP
in the comparative information on
financial instruments within the scope of AASB 132 and
AASB 139.
Under previous AGAAP disclosures, derivative financial
instruments were classified within other assets and
other liabilities. For comparative purposes these
previous AGAAP amounts have been reclassified to
derivative financial assets or liabilities on the
balance sheet on transition to A-IFRS. The effect of
changes in the accounting policies for financial
instruments including derivatives, as a result of the
adoption of AASB 132 and AASB 139 as at 1 July 2005 is
shown below.
F-178
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(m) Reconciliation of balance sheet under A-IFRS for AASB 132/139 adoption as at 1 July 2005
for the consolidated Telstra Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
A-IFRS |
|
|
AASB 132/139 |
|
|
A-IFRS |
|
|
|
|
|
|
|
30 June 2005 |
|
|
adjustments |
|
|
1 July 2005 |
|
|
|
Note |
|
$m |
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
1,548 |
|
|
|
|
|
|
|
1,548 |
|
Trade and other receivables |
|
|
|
|
|
|
3,549 |
|
|
|
|
|
|
|
3,549 |
|
Inventories |
|
|
|
|
|
|
232 |
|
|
|
|
|
|
|
232 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
4 |
|
|
|
6 |
|
|
|
10 |
|
Prepayments |
|
|
|
|
|
|
249 |
|
|
|
|
|
|
|
249 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,582 |
|
|
|
6 |
|
|
|
5,588 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
|
|
97 |
|
|
|
|
|
|
|
97 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
48 |
|
Property, plant and equipment |
|
|
|
|
|
|
22,891 |
|
|
|
|
|
|
|
22,891 |
|
Intangibles |
|
|
|
|
|
|
6,329 |
|
|
|
|
|
|
|
6,329 |
|
Deferred tax assets |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
|
|
|
|
512 |
|
|
|
512 |
|
Defined benefit assets |
|
|
|
|
|
|
247 |
|
|
|
|
|
|
|
247 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
29,629 |
|
|
|
512 |
|
|
|
30,141 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,211 |
|
|
|
518 |
|
|
|
35,729 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
2,807 |
|
|
|
|
|
|
|
2,807 |
|
Borrowings |
|
(ii) |
|
|
1,507 |
|
|
|
3 |
|
|
|
1,510 |
|
Current tax liabilities |
|
|
|
|
|
|
534 |
|
|
|
|
|
|
|
534 |
|
Provisions |
|
|
|
|
|
|
421 |
|
|
|
|
|
|
|
421 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
11 |
|
|
|
5 |
|
|
|
16 |
|
Revenue received in advance |
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
1,132 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
6,412 |
|
|
|
8 |
|
|
|
6,420 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
250 |
|
|
|
|
|
|
|
250 |
|
Borrowings |
|
(ii) |
|
|
10,941 |
|
|
|
219 |
|
|
|
11,160 |
|
Deferred tax liabilities |
|
(iii) |
|
|
1,804 |
|
|
|
32 |
|
|
|
1,836 |
|
Provisions |
|
|
|
|
|
|
894 |
|
|
|
|
|
|
|
894 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
864 |
|
|
|
185 |
|
|
|
1,049 |
|
Revenue received in advance |
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,141 |
|
|
|
436 |
|
|
|
15,577 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
21,553 |
|
|
|
444 |
|
|
|
21,997 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
13,658 |
|
|
|
74 |
|
|
|
13,732 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
5,536 |
|
Reserves |
|
(iv) |
|
|
(153 |
) |
|
|
79 |
|
|
|
(74 |
) |
Retained profits |
|
|
(v |
) |
|
|
8,273 |
|
|
|
(5 |
) |
|
|
8,268 |
|
|
|
|
|
|
|
|
Equity available to Telstra Entity shareholders |
|
|
|
|
|
|
13,656 |
|
|
|
74 |
|
|
|
13,730 |
|
|
|
|
|
|
|
|
Minority interests |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
13,658 |
|
|
|
74 |
|
|
|
13,732 |
|
|
|
|
|
|
|
|
F-179
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(m) Reconciliation of balance sheet under A-IFRS for AASB 132/139 adoption as at 1 July 2005
for the Telstra Entity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Entity |
|
|
|
|
|
|
|
A-IFRS |
|
|
AASB 132/139 |
|
|
A-IFRS |
|
|
|
|
|
|
|
30 June 2005 |
|
|
adjustments |
|
|
1 July 2005 |
|
|
|
Note |
|
$m |
|
|
$m |
|
|
$m |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
1,368 |
|
|
|
|
|
|
|
1,368 |
|
Trade and other receivables |
|
|
|
|
|
|
3,538 |
|
|
|
3 |
|
|
|
3,541 |
|
Inventories |
|
|
|
|
|
|
194 |
|
|
|
|
|
|
|
194 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
4 |
|
|
|
6 |
|
|
|
10 |
|
Prepayments |
|
|
|
|
|
|
173 |
|
|
|
|
|
|
|
173 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,277 |
|
|
|
9 |
|
|
|
5,286 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
|
|
115 |
|
|
|
1 |
|
|
|
116 |
|
Inventories |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
41 |
|
Investments other |
|
|
|
|
|
|
6,136 |
|
|
|
|
|
|
|
6,136 |
|
Property, plant and equipment |
|
|
|
|
|
|
21,223 |
|
|
|
|
|
|
|
21,223 |
|
Intangibles |
|
|
|
|
|
|
2,751 |
|
|
|
|
|
|
|
2,751 |
|
Derivative financial assets |
|
|
(i |
) |
|
|
|
|
|
|
512 |
|
|
|
512 |
|
Defined benefit assets |
|
|
|
|
|
|
242 |
|
|
|
|
|
|
|
242 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,523 |
|
|
|
513 |
|
|
|
31,036 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,800 |
|
|
|
522 |
|
|
|
36,322 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
1,956 |
|
|
|
|
|
|
|
1,956 |
|
Borrowings |
|
(ii) |
|
|
3,892 |
|
|
|
3 |
|
|
|
3,895 |
|
Current tax liabilities |
|
|
|
|
|
|
519 |
|
|
|
|
|
|
|
519 |
|
Provisions |
|
|
|
|
|
|
356 |
|
|
|
|
|
|
|
356 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
11 |
|
|
|
5 |
|
|
|
16 |
|
Revenue received in advance |
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
912 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,646 |
|
|
|
8 |
|
|
|
7,654 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
61 |
|
|
|
1 |
|
|
|
62 |
|
Borrowings |
|
(ii) |
|
|
10,907 |
|
|
|
219 |
|
|
|
11,126 |
|
Deferred tax liabilities |
|
(iii) |
|
|
1,961 |
|
|
|
32 |
|
|
|
1,993 |
|
Provisions |
|
|
|
|
|
|
837 |
|
|
|
|
|
|
|
837 |
|
Derivative financial liabilities |
|
|
(i |
) |
|
|
864 |
|
|
|
185 |
|
|
|
1,049 |
|
Revenue received in advance |
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
381 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,011 |
|
|
|
437 |
|
|
|
15,448 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
22,657 |
|
|
|
445 |
|
|
|
23,102 |
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
13,143 |
|
|
|
77 |
|
|
|
13,220 |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
|
5,536 |
|
|
|
|
|
|
|
5,536 |
|
Reserves |
|
(iv) |
|
|
194 |
|
|
|
82 |
|
|
|
276 |
|
Retained profits |
|
|
(v |
) |
|
|
7,413 |
|
|
|
(5 |
) |
|
|
7,408 |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
13,143 |
|
|
|
77 |
|
|
|
13,220 |
|
|
|
|
|
|
|
|
F-180
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
36. Adoption of International Financial Reporting Standards (continued)
(m) AASB 132: Financial Instruments: Disclosure and
Presentation (AASB 132), AASB 139: Financial
Instruments: Recognition and Measurement (AASB 139) and
AASB 7: Financial Instruments: Disclosures (AASB 7)
(continued)
Adjustments were made at the date of transition (1 July
2005) to restate the opening balance sheet of the
Telstra Group to a position consistent with the
accounting policies specified in note 2. These are
listed below. Also included is where the transitional
provisions will have an effect on future periods.
(i) From 1 July 2005, the recognition and measurement of
all derivatives (including any embedded derivatives) is
at fair value. Changes in fair value are either taken to
the income statement or an equity reserve. At 1 July
2005, a $328 million increase in net assets for the
Telstra Group and Telstra Entity was recognised
representing:
|
|
a gain of $333 million on the remeasurement of our
interest rate swaps and cross currency swaps to fair
value; and |
|
|
|
a loss of $5 million on the remeasurement
of forward foreign exchange contracts to fair value. |
These adjustments are reflected in the previous table as:
|
|
an increase in current assets (derivative financial
assets) of $6 million for the Telstra Group and the
Telstra Entity; |
|
|
|
an increase in non current assets
(derivative financial assets) of $512 million for the
Telstra Group and Telstra Entity; |
|
|
|
offset by an increase
in current liabilities (derivative financial liabilities)
of $5 million for the Telstra Group and Telstra Entity;
and |
|
|
|
an increase in non current liabilities (derivative
financial liabilities) of $185 million for the Telstra
Group and Telstra Entity. |
At 1 July 2005, there were no material embedded
derivatives which required separate measurement and
reporting.
(ii) From 1 July 2005, the carrying value of the hedged
item in fair value hedges is adjusted for fair value
movements attributable to the hedged risk. At 1 July
2005 a loss of $222 million was recognised for the
Telstra Group and Telstra Entity on the remeasurement of
our foreign currency borrowings in fair value hedges.
This loss is capped such that the adjustment is the
lower of:
|
|
the remeasurement to fair value of the hedged
item for the designated hedged risk; and |
|
|
|
the
remeasurement to fair value of the hedging
instrument. |
At 1 July 2005, the impact of capping the fair value
movement on our foreign currency borrowings in fair
value hedges was $70 million for both the Telstra Group
and Telstra Entity. This capping amount will be
amortised to the income statement on an effective yield
to maturity basis over the term of the underlying
borrowing.
This adjustment is reflected in the above table as an
increase in current borrowings of $3 million and an
increase in non current borrowings of $219 million
for both the Telstra Group and Telstra Entity.
(iii) At 1 July 2005, a $32 million increase in non
current deferred tax liabilities was recognised for
both the Telstra Group and Telstra Entity, representing
the tax effect of the above adjustments.
(iv) From 1 July 2005, the effective portion of the
movement in fair value of derivatives accounted for as
cash flow hedges is deferred in equity until such time
as the hedged item affects profit or loss. The
ineffective portion is recognised immediately in the
income statement. At 1 July 2005 a post tax net increase
in reserves of $79 million for the Telstra Group and $82
million for the Telstra Entity was recognised
representing:
|
|
an increase of $81 million for both the Telstra Group
and Telstra Entity to the cash flow hedging reserve,
comprising the deferred portion of the fair value of our
interest rate swaps and cross currency swaps in cash
flow hedges relating to our foreign currency borrowings;
and |
|
|
|
a decrease of $2 million (Telstra Entity: an
increase of $1 million) to the cash flow hedging
reserve, comprising the deferred portion of the fair
value of our forward foreign exchange contracts in cash
flow hedges of highly probable forecast transactions. |
(v) At
1 July 2005, the reduction to retained earnings of $5 million for both the Telstra Group and Telstra Entity comprised:
|
|
a decrease of $222 million on the remeasurement of our
foreign currency borrowings in fair value hedges; |
|
|
|
an
increase of $215 million on the remeasurement of our
derivatives, excluding the portion deferred in equity
relating to our cash flow hedges; and |
|
|
|
an increase of
$2 million for the tax effect. |
(vi) From 1 July 2005, movement in the fair value of derivatives
accounted for as fair value hedges, together with the
gain or loss on the related hedged item attributable to
the hedged risk will be recognised in the income
statement.
F-181
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures
Reconciliations to financial reports prepared using USGAAP
Our consolidated financial report is prepared in
accordance with the
Australian equivalents of International Financial
Reporting Standards (A-IFRS), which differs in certain
respects from the accounting principles generally
accepted in the United States (USGAAP). The significant
differences between A-IFRS and USGAAP are presented
throughout note 37.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
$m |
|
|
US$m |
|
|
$m |
|
|
Reconciliation of net income to USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A-IFRS net income reported in income statement |
|
|
|
|
|
|
3,181 |
|
|
|
2,362 |
|
|
|
4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments required to agree with USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
37 |
(c) |
|
|
(26 |
) |
|
|
(19 |
) |
|
|
(61 |
) |
Borrowing costs |
|
|
37 |
(d) |
|
|
(27 |
) |
|
|
(20 |
) |
|
|
(18 |
) |
Investments |
|
|
37 |
(e) |
|
|
|
|
|
|
|
|
|
|
17 |
|
Retirement benefit (expense)/gain |
|
|
37 |
(f) |
|
|
(44 |
) |
|
|
(33 |
) |
|
|
1 |
|
Income tax expense |
|
|
37 |
(g) |
|
|
(85 |
) |
|
|
(63 |
) |
|
|
(10 |
) |
Employee compensation expense |
|
|
37 |
(h) |
|
|
|
|
|
|
|
|
|
|
(7 |
) |
Derivative financial instruments and hedging activities |
|
|
37 |
(i) |
|
|
192 |
|
|
|
144 |
|
|
|
(96 |
) |
CSL New World Mobility Limited (formerly Telstra CSL Limited) |
|
|
37 |
(j) |
|
|
(634 |
) |
|
|
(471 |
) |
|
|
|
|
Fair value / general reserve adjustments |
|
|
37 |
(k) |
|
|
|
|
|
|
|
|
|
|
5 |
|
Redundancy and restructuring provision |
|
|
37 |
(m) |
|
|
161 |
|
|
|
119 |
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(n) |
|
|
|
|
|
|
|
|
|
|
64 |
|
Cumulative effect of changes in accounting principles, net of tax |
|
|
37 |
(b) |
|
|
(245 |
) |
|
|
(181 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income per USGAAP |
|
|
|
|
|
|
2,473 |
|
|
|
1,838 |
|
|
|
4,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement measured and classified per USGAAP(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
|
22,779 |
|
|
|
16,909 |
|
|
|
22,167 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour |
|
|
|
|
|
|
4,381 |
|
|
|
3,252 |
|
|
|
3,865 |
|
Goods and services purchased (ii) |
|
|
|
|
|
|
4,235 |
|
|
|
3,144 |
|
|
|
3,442 |
|
Depreciation and amortisation |
|
|
|
|
|
|
4,871 |
|
|
|
3,616 |
|
|
|
3,715 |
|
Other operating expenses |
|
|
|
|
|
|
4,829 |
|
|
|
3,585 |
|
|
|
4,556 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
18,316 |
|
|
|
13,597 |
|
|
|
15,578 |
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
4,463 |
|
|
|
3,312 |
|
|
|
6,589 |
|
Net interest expense |
|
|
|
|
|
|
(672 |
) |
|
|
(499 |
) |
|
|
(767 |
) |
Share of net gain/(loss) of jointly controlled and associated entities |
|
|
|
|
|
|
5 |
|
|
|
4 |
|
|
|
(94 |
) |
Other income |
|
|
|
|
|
|
387 |
|
|
|
288 |
|
|
|
232 |
|
|
|
|
|
|
|
|
Net income before income tax expense and minority interests |
|
|
|
|
|
|
4,183 |
|
|
|
3,105 |
|
|
|
5,960 |
|
Income tax expense |
|
|
37 |
(g) |
|
|
1,465 |
|
|
|
1,086 |
|
|
|
1,756 |
|
|
|
|
|
|
|
|
Net income before cumulative effect adjustments |
|
|
|
|
|
|
2,718 |
|
|
|
2,019 |
|
|
|
4,204 |
|
Cumulative effect of changes in accounting principles, net of tax |
|
|
37 |
(b) |
|
|
(245 |
) |
|
|
(181 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income per USGAAP |
|
|
|
|
|
|
2,473 |
|
|
|
1,838 |
|
|
|
4,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¢ |
|
|
US¢ |
|
|
¢ |
|
|
|
|
|
|
|
|
Dividends paid per share per USGAAP(iii) |
|
|
|
|
|
|
40.0 |
|
|
|
29.7 |
|
|
|
33.0 |
|
|
|
|
|
|
|
|
F-182
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures
(continued)
Reconciliations to financial reports prepared
using USGAAP (continued)
USGAAP earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
Year ended 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
¢ |
|
|
US¢ |
|
|
¢ |
|
|
Basic earnings per share before cumulative effect of change in accounting principles |
|
|
|
|
|
|
22.0 |
|
|
|
16.3 |
|
|
|
33.8 |
|
Cumulative effect of change in accounting principles (net of tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(b) |
|
|
(1.7 |
) |
|
|
(1.3 |
) |
|
|
|
|
Capitalisation of pension cost |
|
|
37 |
(b) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share per USGAAP (cents) |
|
|
|
|
|
|
20.0 |
|
|
|
14.8 |
|
|
|
33.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive earnings per share before cumulative effect of change in accounting principles |
|
|
|
|
|
|
21.9 |
|
|
|
16.3 |
|
|
|
33.7 |
|
Cumulative effect of change in accounting principles (net of tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(b) |
|
|
(1.7 |
) |
|
|
(1.3 |
) |
|
|
|
|
Capitalisation of pension cost |
|
|
37 |
(b) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share per USGAAP (cents) |
|
|
|
|
|
|
19.9 |
|
|
|
14.8 |
|
|
|
33.7 |
|
|
|
|
|
|
|
|
F-183
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Total comprehensive income disclosure
Total comprehensive income is calculated by adding net
income and other comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Net income per USGAAP |
|
|
2,473 |
|
|
|
4,204 |
|
USGAAP other comprehensive income/(loss) |
|
|
125 |
|
|
|
(273 |
) |
|
|
|
USGAAP total comprehensive income |
|
|
2,598 |
|
|
|
3,931 |
|
|
|
|
Other comprehensive income/(loss) represents
movements in shareholders equity that are not
related to contributions from owners or payments to
owners.
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Foreign currency translation reserve |
|
|
125 |
|
|
|
(241 |
) |
Unrealised gain on available-for-sale securities,
after tax of $nil (2005: $4 million decrease) |
|
|
|
|
|
|
14 |
|
Realised gain on sale of available-for-sale
securities transferred to net income, after tax of
$nil (2005: $10 million decrease) |
|
|
|
|
|
|
(46 |
) |
|
|
|
USGAAP other comprehensive income/(loss) |
|
|
125 |
|
|
|
(273 |
) |
|
|
|
The reclassification from accumulated other
comprehensive income/ (loss) to net income was
determined on the basis of specific identification.
Included within other comprehensive income for the year
ended 30 June 2006 is the reclassification of $132
million from the foreign currency translation reserve to
the dilution loss recognised as part of the merger
between CSL and New World PCS Holdings Limited (New
World Mobility). Refer to note 37(j) for further
details.
In fiscal 2006, the proceeds from sales of
available-for-sale equity securities was $nil (2005:
$141 million).
The gain recorded as part of other comprehensive
income/(loss) in relation to derivative and non
derivative instruments that have been designated as
hedges of the foreign currency exposure of our net
investments in foreign operations for fiscal 2006 was
$50 million (2005: $31 million gain).
(i) Income statement reclassifications
Various income statement items under A-IFRS have been
reclassified to comply with USGAAP presentation rules.
These include:
|
|
net gain on disposal of non current assets of $85
million (2005: $88 million) is recorded as other
operating income under A-IFRS but other non-operating
income for USGAAP; |
|
|
|
rent from property and motor
vehicles of $22 million (2005: $20 million) is recorded
as other operating revenue under A-IFRS but other
non-operating income for USGAAP; |
|
|
|
loss on foreign
currency transactions of $2 million (2005: $40 million
gain) is recorded as other operating expenses under
A-IFRS but other non-operating income for USGAAP; |
|
|
|
miscellaneous income of $243 million (2005: $173
million) is recorded in other operating income under
A-IFRS but other non-operating income for USGAAP; and |
|
|
|
under A-IFRS, dealer commissions and bonuses of $493
million (2005: $711 million) are included in goods and
services purchased as they are
directly related to our sales revenue. Under USGAAP they
are classified as other operating expenses. |
(ii) Goods and services purchased
Cost of sales includes both direct and indirect costs
involved in the sale of the Companys goods and
services. For a service company this would commonly
include depreciation and other indirect costs associated
with the provision of services. However, we do not
report our costs according to this description and
classify all of our expenses according to the nature of
the expense, referred to as goods and services
purchased in relation to the sale of goods and
services.
Goods and services purchased mainly comprises:
|
|
network service capacity from external communication
service providers; |
|
|
|
mobile handsets sold to
customers; |
|
|
|
cost of goods sold (other than mobile
handsets); and |
|
|
|
directory paper costs. |
Goods and services purchased does not equate to cost of
sales due to the non inclusion of depreciation and other
indirect costs associated with the provision of our
telecommunications services.
(iii) Dividends paid per share
Dividends paid per share for USGAAP includes TESOP97 and
TESOP99 options outstanding as issued shares. Refer to
note 37(h).
F-184
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared
using USGAAP (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
As at 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
$m |
|
|
US$m |
|
|
$m |
|
|
Reconciliation of shareholders equity to USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A-IFRS shareholders equity per balance sheet |
|
|
|
|
|
|
12,832 |
|
|
|
9,525 |
|
|
|
13,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative adjustments required to agree with USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
37 |
(c) |
|
|
(203 |
) |
|
|
(151 |
) |
|
|
(177 |
) |
Borrowing costs |
|
|
37 |
(d) |
|
|
543 |
|
|
|
403 |
|
|
|
570 |
|
Investments |
|
|
37 |
(e) |
|
|
(63 |
) |
|
|
(47 |
) |
|
|
(63 |
) |
Minority interests(iii) |
|
|
|
|
|
|
(246 |
) |
|
|
(183 |
) |
|
|
(2 |
) |
Retirement benefits |
|
|
37 |
(f) |
|
|
(1,242 |
) |
|
|
(921 |
) |
|
|
(193 |
) |
Income tax |
|
|
37 |
(g) |
|
|
255 |
|
|
|
189 |
|
|
|
(59 |
) |
Derivative financial instruments and hedging activities |
|
|
37 |
(i) |
|
|
(195 |
) |
|
|
(145 |
) |
|
|
(370 |
) |
CSL New World Mobility Limited (formerly Telstra CSL Limited) |
|
|
37 |
(j) |
|
|
(56 |
) |
|
|
(42 |
) |
|
|
542 |
|
Fair value / general reserve adjustments |
|
|
37 |
(k) |
|
|
(54 |
) |
|
|
(40 |
) |
|
|
(54 |
) |
Goodwill and other intangible asset adjustments |
|
|
37 |
(l) |
|
|
71 |
|
|
|
53 |
|
|
|
41 |
|
Redundancy and restructuring provision |
|
|
37 |
(m) |
|
|
161 |
|
|
|
120 |
|
|
|
|
|
Mobile handset subsidies |
|
|
37 |
(n) |
|
|
|
|
|
|
|
|
|
|
303 |
|
|
|
|
|
|
|
|
Shareholders equity per USGAAP |
|
|
|
|
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet measured and classified per USGAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
10 |
|
|
|
689 |
|
|
|
511 |
|
|
|
1,548 |
|
Receivables |
|
|
|
|
|
|
3,701 |
|
|
|
2,747 |
|
|
|
3,515 |
|
Inventories |
|
|
12 |
|
|
|
224 |
|
|
|
166 |
|
|
|
232 |
|
Deferred tax asset |
|
|
37 |
(g) |
|
|
376 |
|
|
|
279 |
|
|
|
294 |
|
Other assets |
|
|
|
|
|
|
243 |
|
|
|
181 |
|
|
|
249 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
5,233 |
|
|
|
3,884 |
|
|
|
5,838 |
|
|
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
121 |
|
|
|
90 |
|
|
|
65 |
|
Derivative financial instruments |
|
|
|
|
|
|
214 |
|
|
|
159 |
|
|
|
369 |
|
Inventories |
|
|
12 |
|
|
|
20 |
|
|
|
15 |
|
|
|
15 |
|
Investments accounted for using the equity method |
|
|
|
|
|
|
27 |
|
|
|
20 |
|
|
|
52 |
|
Property, plant and equipment |
|
|
|
|
|
|
50,632 |
|
|
|
37,584 |
|
|
|
48,380 |
|
Accumulated depreciation of property, plant and equipment |
|
|
|
|
|
|
(26,663 |
) |
|
|
(19,792 |
) |
|
|
(25,037 |
) |
Goodwill, net |
|
|
|
|
|
|
2,087 |
|
|
|
1,549 |
|
|
|
2,618 |
|
Other intangible assets, net |
|
|
|
|
|
|
4,101 |
|
|
|
3,044 |
|
|
|
4,662 |
|
Prepaid pension assets |
|
|
37 |
(f) |
|
|
5 |
|
|
|
4 |
|
|
|
78 |
|
|
|
|
|
|
|
|
Total non current assets |
|
|
|
|
|
|
30,544 |
|
|
|
22,673 |
|
|
|
31,202 |
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
35,777 |
|
|
|
26,557 |
|
|
|
37,040 |
|
|
|
|
|
|
|
|
F-185
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared
using USGAAP (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
As at 30 June |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
Note |
|
$m |
|
|
US$m |
|
|
$m |
|
|
Balance sheet measured and classified per USGAAP (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables |
|
|
|
|
|
|
3,570 |
|
|
|
2,650 |
|
|
|
2,766 |
|
Borrowings short term debt |
|
|
|
|
|
|
1,583 |
|
|
|
1,175 |
|
|
|
463 |
|
Borrowings long term debt due within one year |
|
|
|
|
|
|
401 |
|
|
|
298 |
|
|
|
1,061 |
|
Income tax payable |
|
|
|
|
|
|
428 |
|
|
|
318 |
|
|
|
534 |
|
Provisions |
|
|
19 |
|
|
|
662 |
|
|
|
491 |
|
|
|
421 |
|
Other
current liabilities |
|
|
|
|
|
|
1,187 |
|
|
|
881 |
|
|
|
1,150 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
7,831 |
|
|
|
5,813 |
|
|
|
6,395 |
|
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables |
|
|
|
|
|
|
112 |
|
|
|
83 |
|
|
|
257 |
|
Derivative financial instruments |
|
|
|
|
|
|
525 |
|
|
|
390 |
|
|
|
859 |
|
Borrowings long term debt |
|
|
|
|
|
|
11,734 |
|
|
|
8,710 |
|
|
|
11,641 |
|
Deferred tax liability |
|
|
37(g) |
|
|
|
1,971 |
|
|
|
1,463 |
|
|
|
2,300 |
|
Provisions |
|
|
|
|
|
|
888 |
|
|
|
659 |
|
|
|
894 |
|
Accrued pension liability |
|
|
37(f) |
|
|
|
172 |
|
|
|
128 |
|
|
|
|
|
Other non
current liabilities |
|
|
|
|
|
|
495 |
|
|
|
367 |
|
|
|
496 |
|
|
|
|
|
|
|
|
Total non current liabilities |
|
|
|
|
|
|
15,897 |
|
|
|
11,800 |
|
|
|
16,447 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
23,728 |
|
|
|
17,613 |
|
|
|
22,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests(iii) |
|
|
23 |
|
|
|
246 |
|
|
|
183 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital 12,443,074,357 shares issued at 30 June 2006 (2005: 12,443,074,357 shares) (i) |
|
|
21 |
|
|
|
5,793 |
|
|
|
4,300 |
|
|
|
5,793 |
|
Share loan to employees - 55,104,025 shares at 30 June 2006 (2005: 60,378,525 shares) |
|
|
21 |
|
|
|
(130 |
) |
|
|
(96 |
) |
|
|
(154 |
) |
Shares held by employee share plan trusts - 17,931,918 shares at 30 June 2006 (2005: 20,216,091 shares) |
|
|
|
|
|
|
(99 |
) |
|
|
(73 |
) |
|
|
(113 |
) |
Additional paid in capital from employee share plans |
|
|
|
|
|
|
390 |
|
|
|
289 |
|
|
|
395 |
|
|
|
|
|
|
|
|
Total share capital |
|
|
|
|
|
|
5,954 |
|
|
|
4,420 |
|
|
|
5,921 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss (ii) |
|
|
|
|
|
|
(604 |
) |
|
|
(448 |
) |
|
|
(729 |
) |
Retained earnings |
|
|
|
|
|
|
6,453 |
|
|
|
4,789 |
|
|
|
9,004 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
|
|
|
|
11,803 |
|
|
|
8,761 |
|
|
|
14,196 |
|
|
|
|
|
|
|
|
F-186
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared
using USGAAP (continued)
(i) Share capital
Number of shares issued includes shares issued to
employees under share loans and shares held by employee
share plan trusts. Net balance of shares issued and
outstanding at 30 June 2006 is 12,370,038,414 shares
(2005: 12,362,479,741 shares).
(ii) Accumulated other comprehensive loss
Accumulated other comprehensive loss, net of
related tax, for USGAAP consists of the following
components:
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
Foreign currency translation reserve |
|
|
(591 |
) |
|
|
(716 |
) |
|
|
|
|
Derivative financial instruments |
|
|
(19 |
) |
|
|
(19 |
) |
(tax effect) |
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
(13 |
) |
|
|
(13 |
) |
|
|
|
Accumulated other comprehensive loss (net of
tax) |
|
|
(604 |
) |
|
|
(729 |
) |
|
|
|
As part of the merger between CSL and New World
Mobility, $132 million was reclassified from accumulated
other comprehensive loss to the dilution loss recognised
on the merger. Refer to note 37(j) for further details.
(iii) Minority interest
Under A-IFRS, minority interests are presented within
equity, but separate from the parent shareholders
equity. Under USGAAP, minority interests are presented
outside equity, in between liabilities and equity. The
effect of this adjustment has been disclosed in the
reconciliation of shareholders equity to USGAAP.
37(a) Immaterial adjustments to previously reported
USGAAP amounts
As discussed in note 36, we have adopted A-IFRS from 1
July 2005. This adoption required us to restate our
financial information for the year ended 30 June 2005 to
comply with A-IFRS. As part of this process, a number of
immaterial adjustments have been made to our previously
reported USGAAP amounts. As such we have restated
certain USGAAP financial measures for the year ended 30
June 2005. The impact of these adjustments is as
follows:
|
|
|
|
|
|
|
Telstra Group |
|
|
|
30 June 2005 |
|
|
|
$m |
|
Reconciliation of net income |
|
|
|
|
Net income per USGAAP as previously reported |
|
|
4,172 |
|
Adjustments: |
|
|
|
|
- Hong Kong 3G spectrum licence |
|
|
(5 |
) |
- Reach committed capex liability |
|
|
(90 |
) |
- Operating leases |
|
|
(11 |
) |
- Functional currency |
|
|
11 |
|
- Income taxes |
|
|
123 |
|
- Tax effect of above adjustments |
|
|
4 |
|
|
|
|
|
Net income per USGAAP restated |
|
|
4,204 |
|
|
|
|
|
|
|
|
|
|
|
|
cents per |
|
|
|
share |
|
Basic earnings per share per USGAAP as previously
reported |
|
|
33.6 |
|
Basic earnings per share per USGAAP restated |
|
|
33.8 |
|
Diluted earnings per share per USGAAP as previously
reported |
|
|
33.5 |
|
Diluted earnings per share per USGAAP restated |
|
|
33.7 |
|
|
|
|
|
|
|
|
$m |
|
Reconciliation of shareholders equity |
|
|
|
Shareholders equity per USGAAP as previously
reported |
|
|
14,367 |
|
Adjustments: |
|
|
|
|
- Hong Kong 3G spectrum licence |
|
|
14 |
|
- Reach committed capex liability |
|
|
(93 |
) |
- Operating leases |
|
|
(34 |
) |
- Income taxes |
|
|
(58 |
) |
|
|
|
|
Shareholders equity per USGAAP restated |
|
|
14,196 |
|
|
|
|
|
Hong
Kong 3G spectrum licence
Our subsidiary in Hong Kong, HKCSL, has a licence to
utilise 3G spectrum in Hong Kong until 2016. As part of
this licence agreement, HKCSL are required to make
annual payments for the right to use this spectrum.
Under previous AGAAP we expensed these payments as
incurred and historically we have not recorded a USGAAP
adjustment for this licence.
F-187
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared
using USGAAP (continued)
Hong
Kong 3G spectrum licence (continued)
However, under USGAAP this licence should have been
capitalised as an intangible asset on acquisition, based
on the present value of the expected future payments,
with a corresponding liability also recorded.
The adjustment to decrease net income per USGAAP for the
year ended 30 June 2005 of $5 million is a result of
additional amortisation of $5 million and an increase in
net interest expense of $4 million associated with the
unwinding of the present value discount, offset by a
decrease in other operating expenses of $4 million due
to the reversal of the licence payments expense.
The increase in shareholders equity per USGAAP as at 30
June 2005 of $14 million represents an increase in
intangible assets ($108 million), a decrease in
property, plant and equipment ($24 million), an increase
in current and non-current payables ($2 million and $87
million respectively) and a decrease in deferred tax
liabilities ($19 million).
Due to the adoption of A-IFRS there is no longer a
USGAAP adjustment for this 3G spectrum licence. Refer to
note 36(k).
Reach committed capex liability
During fiscal 2005, we agreed to fund the committed
capital expenditure of our jointly controlled entity
Reach, together with our co-shareholder PCCW Limited,
for the period until 2022. Our share of this commitment
was disclosed as a contingent liability under previous
AGAAP and a USGAAP adjustment was recorded in our 30
June 2005 financial statements to recognise additional
equity accounted losses only to the extent of our actual
payments under the commitment to 30 June 2005.
However, under USGAAP we were required to recognise
additional equity accounted losses in Reach for our
entire capital expenditure commitment, not just the
amount paid. This adjustment has given rise to an
additional $88 million of equity accounted losses and
an additional $2 million of interest expense for the
year ended 30 June 2005.
The decrease in shareholders equity per USGAAP as at 30
June 2005 of $93 million represents an increase in
current and non-current provisions of $32 million and
$58 million respectively and a decrease in investments
accounted for using the equity method of $3 million.
Due to the adoption of A-IFRS there is no longer a
USGAAP adjustment for our commitment to Reach. Refer to
note 36(i).
Operating leases
Under previous AGAAP we expensed our operating lease
payments
as incurred and in our previously published financial
statements we did not record a USGAAP adjustment to
recognise operating lease expenses on a straight line
basis. The impact of this adjustment is an increase to
other operating expenses of $11 million for the year
ended 30 June 2005. Non-current payables increased by
$48 million and deferred tax liability decreased by $14
million as at 30 June 2005.
Due to the adoption of A-IFRS there is no longer a
USGAAP adjustment for operating leases. Refer to note
36(e).
Functional currency
During the assessment of the functional currency for
each of our overseas operations as part of our adoption
of A-IFRS, we discovered that the functional currency of
Telstra Global Limited under USGAAP was incorrect. This
restatement has resulted in a decrease in other
operating expenses of $11 million for the year ended 30
June 2005, with a corresponding increase in other
comprehensive income.
Due to the adoption of A-IFRS there is no longer a
USGAAP adjustment for the functional currency of our
overseas operations. Refer to note 36(g).
Income taxes
In our 30 June 2005 financial statements, the USGAAP
adjustment to net income for income taxes has been
adjusted by $123 million due to the following:
|
|
adjusting the tax effect of our USGAAP adjustments for
property, plant and equipment, resulting in a decrease
in tax expense of $44 million; |
|
|
|
adjustment to the
deferred tax on our investments accounted for using the
equity method, resulting in a decrease in tax expense of
$93 million; and |
|
|
|
not appropriately recognising
deferred taxes for various balances, including
intangible assets recognised on acquisitions, resulting
in a $14 million increase in tax expense. |
The majority of these adjustments to tax expense have
arisen as a result of the related deferred tax balances
being written off under USGAAP during the year ended 30
June 2005. However, with the adoption of A-IFRS these
adjustments were recorded in the A-IFRS opening
transition balance sheet at 1 July 2004. As such, the
different timing of recording these adjustments for
A-IFRS and USGAAP purposes has resulted in the majority
of these adjustments. The decrease in shareholders
equity for USGAAP as at 30 June 2005 of $58 million
represents a decrease in goodwill of $6 million and an
increase in deferred tax liability of $52 million.
Accumulated other comprehensive income was also reduced
by $26 million.
F-188
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Reconciliations to financial reports prepared
using
USGAAP (continued)
37(b) Changes in accounting principles under USGAAP
Mobile handset subsidies
We previously deferred subsidies on mobile handset sold
as part of a bundled arrangement under USGAAP. This was
based on the fact that the revenue allocated to
subsidised handsets in accordance with EITF 00-21
Revenue Arrangements with Multiple Deliverables (EITF
00-21), is contingent upon the delivery of the contracted
services and is therefore recognised over the expected
customer contract life. As such we previously recognised
the subsidised cost of the handsets on a similar basis.
From 1 July 2005, we have changed our accounting
principle to expense handset subsidies as incurred. This
change was adopted in order to ensure consistency with
the accounting principle we have elected to adopt under
A-IFRS. Furthermore, this change in principle treats the
handset as a separate deliverable from a cost viewpoint
which is consistent with the principles of EITF 00-21.
This change in accounting principle has resulted in the
write off of $303 million of previously deferred handset
subsidies as at 1 July 2005, with an adjustment to
deferred tax liability of $91 million.
Capitalisation of pension cost
Historically we have recorded a USGAAP adjustment to
recognise an expense (or benefit) for the defined benefit
plans that we sponsor (refer to note 37(f)). From 1 July
2005 we have changed our accounting principle to
capitalise a portion of our pension cost/benefit under
USGAAP, where that cost/benefit is attributable to
employees who are directly engaged in the construction of
our property, plant and equipment, for the period of time
that those employees spend on the construction work.
Previously we have not capitalised a portion of this
cost/benefit.
This change in accounting principle is preferable as the
pension cost/benefit is considered an additional labour
cost and this change would ensure consistency with how we
treat other labour costs. It is also consistent with our
accounting principle under A-IFRS.
This change has resulted in a decrease to property,
plant and equipment on 1 July 2005 of $47 million, with
an associated increase in deferred tax liability of $14
million.
F-189
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP
37(c) Property, plant and equipment
Revaluations
Certain items of property, plant and equipment had been
previously revalued under A-IFRS. Revaluations of
property, plant and equipment are not allowed under
USGAAP, except for permanent impairments. As such we
have reversed previously revalued property, plant and
equipment to historical cost for USGAAP purposes.
Under A-IFRS, we have deemed the carrying value of our
property, plant and equipment to be cost and as such
we no longer revalue property, plant and equipment.
Depreciation expense and disposal gains or losses under
A-IFRS are based on the recorded amount of the asset and
are therefore higher (or lower for disposal losses) for
assets that had been previously revalued upwards.
Depreciation expense and disposal gains and losses have
been adjusted to reflect amounts based on the original
cost of the asset for USGAAP.
Impairment loss reversal Hybrid Fibre Coaxial (HFC) cable network
In fiscal 1997, we wrote down the value of our HFC cable
network by $587 million. This writedown continues to be
reflected in the HFC networks carrying value under
A-IFRS. Under USGAAP, the initial future undiscounted
cash flows derived from our HFC network were greater
than the recorded value and continue to be as at 30 June
2006. As a result, the writedown has been reversed for
USGAAP.
Depreciation expense has also been increased under
USGAAP due to the higher asset value.
Indirect costs
Before 1 July 1996, we expensed all indirect costs as
incurred. Under USGAAP, those indirect costs associated
with operations and management personnel directly
involved in the construction of our communication assets
have been systematically allocated and recorded as part
of the cost of those assets and depreciated accordingly.
From 1 July 1996, we changed our accounting policy in
relation to indirect cost capitalisation to be
consistent with USGAAP.
Sale of property sold as part of a sale and lease back transaction
In fiscal 2003, we sold certain land and buildings
under a sale and leaseback arrangement. The net gain on
the sale was recognised in net income.
Under USGAAP, the gains made on the sale of land and
buildings as part of the sale and leaseback transaction
were deferred and are currently being recognised over
the period of the underlying leases. The original gain
deferred for USGAAP was $177 million.
Purchase of radio access network (RAN) assets
In fiscal 2005, we entered into an arrangement with
Hutchison 3G Australia Pty Ltd (H3GA) to jointly own and
operate H3GAs existing third generation RAN assets and
fund future network
development. The purchase consideration for our share of
the RAN assets was $447 million, payable over 2 years.
Under A-IFRS, the purchase consideration was discounted
using an asset specific discount rate. Under USGAAP, an
incremental borrowing rate was used to discount the
purchase consideration. The difference in the discount
rate has resulted in a higher asset value and
depreciation expense under USGAAP, offset by lower
borrowing costs associated with the unwinding of the
discount.
Refer to note 37(e) for further information on the 3G Partnership.
Summary of property, plant and equipment adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Revaluations |
|
|
6 |
|
|
|
6 |
|
|
|
(593 |
) |
|
|
(599 |
) |
HFC cable network |
|
|
(23 |
) |
|
|
(25 |
) |
|
|
144 |
|
|
|
167 |
|
Indirect costs |
|
|
(39 |
) |
|
|
(60 |
) |
|
|
342 |
|
|
|
381 |
|
Sale and leaseback |
|
|
18 |
|
|
|
18 |
|
|
|
(108 |
) |
|
|
(126 |
) |
RAN assets |
|
|
12 |
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
(26 |
) |
|
|
(61 |
) |
|
|
(203 |
) |
|
|
(177 |
) |
|
|
|
37(d) Borrowing costs
Under A-IFRS, we expense all borrowing costs when
incurred. Under USGAAP, borrowing costs relating to the
construction of property, plant and equipment and
software developed for internal use are recorded as part
of the asset cost. The capitalised borrowing costs also
result in higher depreciation expense under USGAAP.
For USGAAP purposes, we have capitalised borrowing costs
with a net book value of $543 million as at 30 June 2006
(2005: $570 million). Additional depreciation and
disposals of $108 million (2005: $108 million) have been
recorded for the year ended 30 June 2006, offset by a
decrease in interest expense of $81 million (2005: $90
million).
F-190
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(e) Investments
3GIS Partnership
The 3GIS Partnership was established to operate the
third generation radio access network (RAN) as discussed in note 37(c).
The partners each made an initial investment of $1 but
provide additional capital as required in the form of
interest-free loans.
Under A-IFRS, we recognise our share of the RAN assets
held by the partnership within property, plant and
equipment. Expenses incurred by the partnership are
on-charged to the partners in equal proportion.
Under USGAAP, we account for the 3GIS Partnership using
the equity method. As such, the interest-free loans are
considered to form part of the investment in the
partnership, and we record our share of the
partnerships results against this investment.
PCCW Limited (PCCW) Converting Note
Under A-IFRS, our converting note issued by PCCW was
carried at face value, with adjustments for accrued
interest and foreign exchange movements recorded in the
income statement in operating expenses. Under USGAAP,
the instrument was classified as an available-for-sale
security with changes in fair value being recorded in
other comprehensive income.
On 30 June 2005, the note expired and was redeemed for
$76 million. Under USGAAP, the balance recorded in other
comprehensive income was transferred to net income on
redemption.
Reach Ltd (Reach)
In fiscal 2001, as a part of the strategic alliance with
PCCW, a jointly controlled entity, Reach, was formed
through the combination of our international wholesale
business and certain other wholesale assets together
with certain PCCW assets.
Under USGAAP, this investment was recorded at the net
book value of the assets and liabilities transferred,
reduced by the amount of cash received. This resulted in
a negative carrying value, with the excess credit being
recognised as an adjustment to the amount of goodwill on
other components of the interdependent transactions in
this case a reduction in the goodwill of CSL (refer to
note 37(l)).
As at 31 December 2002, we wrote down the entire
carrying amount of our investment in Reach under both
A-IFRS and USGAAP, which eliminated most of the USGAAP
difference previously reported for Reach.
For both A-IFRS and USGAAP we ceased equity accounting
our investment in Reach in fiscal 2003 due to the
investment, including other non-participating
interests in Reach, being written down to zero.
Summary of investment adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
3GIS partnership |
|
|
|
|
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
PCCW converting note |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
Reach Ltd |
|
|
|
|
|
|
|
|
|
|
(90 |
) |
|
|
(90 |
) |
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
(63 |
) |
|
|
(63 |
) |
|
|
|
F-191
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(f) Retirement benefits
Under USGAAP, our defined benefit plans are accounted
for under Statement of Financial Accounting Standards
No. 87 (SFAS 87) Employers Accounting for Pensions.
While the requirements of this standard are broadly
consistent with our policy under A-IFRS (refer note
2.24), there are a number of key differences.
Under A-IFRS, actuarial gains and losses are recognised
directly in retained earnings. Under USGAAP, the
recognition of certain gains and losses is delayed.
Aggregated unrecorded gains and losses exceeding 10% of
the greater of the aggregated projected benefit
obligation or the market value of the plan assets are
amortised over the average expected service period of
active employees expected to receive benefits under the
plan.
Under USGAAP, future investment and contribution taxes
of the fund are not taken into account, with only
current taxes reflected in the measurement of the net
periodic pension cost and prepaid pension asset.
Based on industry practice in Australia, under A-IFRS
the defined benefit asset is adjusted for the estimated
impact of future investment and contribution taxes of
the fund, which are considered part of the ultimate cost
to settle the obligation. Future investment tax is taken
into account through an adjustment to the discount rate,
while a separate tax reserve is created to take into
account future contribution tax benefits.
Due to a change in accounting principle we now
capitalise a portion of the net period pension cost
under USGAAP (refer to note 37(b)), consistent with our
policy under A-IFRS. However, under A-IFRS we have only
applied this policy from 1 July 2004, our transition
date to A-IFRS. Under USGAAP, we have adjusted our
property, plant and equipment to reflect this policy as
if it had always been applied. Furthermore, differences
in the pension cost have lead to differences in amounts
capitalised. These differences between A-IFRS and USGAAP
have an ongoing impact on depreciation and amortisation.
Presented below are the disclosures required by USGAAP
that are different from A-IFRS. These disclosures have
been prepared with respect to only the defined benefit
components of our pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
Net periodic pension cost |
|
|
|
|
|
|
|
|
|
|
|
|
The components of net periodic pension cost for our defined
benefit plans are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost on benefits earned |
|
|
214 |
|
|
|
159 |
|
|
|
200 |
|
Interest cost on projected benefit obligation |
|
|
226 |
|
|
|
168 |
|
|
|
223 |
|
Expected return on assets |
|
|
(333 |
) |
|
|
(247 |
) |
|
|
(317 |
) |
Expenses and taxation |
|
|
16 |
|
|
|
12 |
|
|
|
16 |
|
Member contributions for defined benefits |
|
|
(20 |
) |
|
|
(15 |
) |
|
|
(21 |
) |
Transfer of funds to defined contribution plan (i) |
|
|
93 |
|
|
|
69 |
|
|
|
78 |
|
Curtailment loss |
|
|
58 |
|
|
|
43 |
|
|
|
|
|
Settlement gain |
|
|
(7 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
|
Net periodic pension cost per USGAAP |
|
|
247 |
|
|
|
184 |
|
|
|
175 |
|
Net periodic pension cost per A-IFRS |
|
|
182 |
|
|
|
136 |
|
|
|
201 |
|
Net impact on net income due to different pension cost capitalised |
|
|
21 |
|
|
|
15 |
|
|
|
(25 |
) |
|
|
|
Total USGAAP adjustment |
|
|
44 |
|
|
|
33 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We used the
following major assumptions to determine net periodic pension cost/(benefit) under USGAAP : |
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.98 |
% |
|
|
5.98 |
% |
|
|
5.99 |
% |
Expected rate of increase in future salaries |
|
|
3.02 |
% |
|
|
3.02 |
% |
|
|
3.97 |
% |
Expected long-term rate of return on assets |
|
|
7.00 |
% |
|
|
7.00 |
% |
|
|
7.50 |
% |
|
|
|
F-192
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(f) Retirement benefits (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
Projected benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of change in projected benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year |
|
|
3,964 |
|
|
|
2,942 |
|
|
|
3,540 |
|
Service cost |
|
|
214 |
|
|
|
159 |
|
|
|
200 |
|
Interest cost |
|
|
226 |
|
|
|
168 |
|
|
|
223 |
|
Member contributions |
|
|
7 |
|
|
|
5 |
|
|
|
4 |
|
Benefit payments (i) |
|
|
(715 |
) |
|
|
(531 |
) |
|
|
(69 |
) |
Curtailment loss |
|
|
58 |
|
|
|
43 |
|
|
|
|
|
Foreign currency exchange rate changes |
|
|
2 |
|
|
|
1 |
|
|
|
(7 |
) |
Actuarial (gain)/loss |
|
|
(379 |
) |
|
|
(281 |
) |
|
|
73 |
|
|
|
|
Projected benefit obligation at end of year per USGAAP |
|
|
3,377 |
|
|
|
2,506 |
|
|
|
3,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We used the following major assumptions to determine benefit obligations under USGAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.98 |
% |
|
|
5.98 |
% |
|
|
5.48 |
% |
Expected rate of increase in future salaries |
|
|
3.02 |
% |
|
|
3.02 |
% |
|
|
3.99 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation at end of year |
|
|
2,374 |
|
|
|
1,762 |
|
|
|
2,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of change in fair value of plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
|
4,519 |
|
|
|
3,354 |
|
|
|
4,302 |
|
Actual return on plan assets |
|
|
825 |
|
|
|
612 |
|
|
|
360 |
|
Transfer of funds to defined contribution plan (i) |
|
|
(93 |
) |
|
|
(69 |
) |
|
|
(78 |
) |
Employer contributions |
|
|
3 |
|
|
|
2 |
|
|
|
3 |
|
Member contributions for defined benefits |
|
|
20 |
|
|
|
15 |
|
|
|
21 |
|
Transfers/member contributions for accumulation benefits |
|
|
7 |
|
|
|
5 |
|
|
|
4 |
|
Benefit payments (i) |
|
|
(715 |
) |
|
|
(531 |
) |
|
|
(69 |
) |
Plan expenses |
|
|
(16 |
) |
|
|
(12 |
) |
|
|
(17 |
) |
Foreign currency exchange rate changes |
|
|
2 |
|
|
|
1 |
|
|
|
(7 |
) |
|
|
|
Fair value of plan assets at end of year per USGAAP |
|
|
4,552 |
|
|
|
3,377 |
|
|
|
4,519 |
|
|
|
|
F-193
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(f) Retirement benefits (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
|
Reconciliation of funded status of plan |
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation |
|
|
(3,377 |
) |
|
|
(2,506 |
) |
|
|
(3,964 |
) |
Plan assets at fair value |
|
|
4,552 |
|
|
|
3,377 |
|
|
|
4,519 |
|
|
|
|
Funded status |
|
|
1,175 |
|
|
|
871 |
|
|
|
555 |
|
Unrecognised net transition liability |
|
|
4 |
|
|
|
3 |
|
|
|
4 |
|
Unrecognised net actuarial gain |
|
|
(1,346 |
) |
|
|
(998 |
) |
|
|
(481 |
) |
|
|
|
Pension (liability)/asset per USGAAP |
|
|
(167 |
) |
|
|
(124 |
) |
|
|
78 |
|
Prepaid pension asset per A-IFRS |
|
|
1,029 |
|
|
|
764 |
|
|
|
247 |
|
Differences in pension cost capitalised |
|
|
46 |
|
|
|
33 |
|
|
|
24 |
|
|
|
|
Total USGAAP adjustment |
|
|
(1,242 |
) |
|
|
(921 |
) |
|
|
(193 |
) |
|
|
|
(i) Benefits payments include payments out of the
defined benefit plan into the defined contribution
plan.
F-194
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(g) Income tax
Under A-IFRS, we apply the balance sheet liability
method of accounting for deferred taxes, which is
broadly consistent with Statement of Financial
Accounting Standards No. 109 (SFAS 109) Accounting
for Income Taxes.
Our other USGAAP adjustments disclosed in note 37 have
amended the carrying values of certain assets and
liabilities under USGAAP and has resulted in an
adjustment to the deferred tax balances.
Under A-IFRS, deferred taxes that arise on the initial
recognition of an asset or liability are not recognised
where the transaction is not a business combination and
affects neither accounting profit nor taxable profit at
the time of the transaction. USGAAP contains no such
exemption and as such additional deferred tax balances
have been recognised for USGAAP.
We have a number of intangible assets with an indefinite
life, most notably our Trading Post mastheads. Under
A-IFRS, the tax base used in the deferred tax calculation
is the assets disposal value. It is assumed that the
accounting carrying value will only be consumed upon
disposal due to the fact that these intangible assets are
not being amortised for accounting purposes.
However, under USGAAP the tax base used in the deferred
tax calculation is the depreciable tax value, which is
generally nil for these assets. This is because the
intangible assets are not being specifically held for
disposal and therefore the disposal value cannot be used
for USGAAP purposes. This has resulted in an increase in
deferred tax liability for USGAAP, with a corresponding
increase in goodwill.
For A-IFRS, we classify all deferred tax balances as non
current. For USGAAP, the classification between current
and non current is based on the balance sheet
classification of the underlying net current and non
current asset or liability. Where there is no underlying
asset or liability the classification is based on when
the temporary difference is expected to reverse. The
effect of this has been disclosed in the balance sheet
measured and classified per USGAAP.
Summary of income tax adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
Initial recognition exemption |
|
|
(7 |
) |
|
|
1 |
|
|
|
(43 |
) |
|
|
(35 |
) |
Indefinite life intangibles |
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
8 |
|
Property, plant and
equipment (note 37(c)) |
|
|
10 |
|
|
|
18 |
|
|
|
68 |
|
|
|
58 |
|
Borrowing costs (note 37(d)) |
|
|
7 |
|
|
|
4 |
|
|
|
(157 |
) |
|
|
(164 |
) |
Investments (note 37(e)) |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(2 |
) |
Retirement benefits (note
37(f)) |
|
|
14 |
|
|
|
(2 |
) |
|
|
373 |
|
|
|
56 |
|
Derivatives and hedging
(note 37(i)) |
|
|
(58 |
) |
|
|
29 |
|
|
|
59 |
|
|
|
111 |
|
CSL New World Mobility (note
37(j)) |
|
|
|
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
General reserve (note 37(k)) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
Redundancy and
restructuring (note 37(m)) |
|
|
(48 |
) |
|
|
|
|
|
|
(48 |
) |
|
|
|
|
Mobile handset subsidies
(note 37(n)) |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
(91 |
) |
|
|
|
|
|
|
(85 |
) |
|
|
(10 |
) |
|
|
255 |
|
|
|
(59 |
) |
|
|
|
F-195
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(g) Income tax (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation, hedge and other finance costs |
|
|
58 |
|
|
|
43 |
|
|
|
117 |
|
Employee entitlements |
|
|
268 |
|
|
|
199 |
|
|
|
281 |
|
Revenue received in advance |
|
|
148 |
|
|
|
110 |
|
|
|
130 |
|
Provisions |
|
|
164 |
|
|
|
122 |
|
|
|
64 |
|
Trade and other payables |
|
|
57 |
|
|
|
42 |
|
|
|
38 |
|
Accrued pension liability |
|
|
68 |
|
|
|
50 |
|
|
|
|
|
Tax losses |
|
|
291 |
|
|
|
216 |
|
|
|
230 |
|
Other |
|
|
78 |
|
|
|
58 |
|
|
|
23 |
|
|
|
|
Total gross deferred tax assets under USGAAP |
|
|
1,132 |
|
|
|
840 |
|
|
|
883 |
|
Valuation allowance |
|
|
(185 |
) |
|
|
(137 |
) |
|
|
(161 |
) |
|
|
|
Total net deferred tax assets under USGAAP |
|
|
947 |
|
|
|
703 |
|
|
|
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
2,047 |
|
|
|
1,520 |
|
|
|
2,003 |
|
Prepaid pension asset |
|
|
|
|
|
|
|
|
|
|
23 |
|
Intangible assets |
|
|
495 |
|
|
|
367 |
|
|
|
611 |
|
Mobile handset subsidies |
|
|
|
|
|
|
|
|
|
|
91 |
|
|
|
|
Total deferred tax liabilities under USGAAP |
|
|
2,542 |
|
|
|
1,887 |
|
|
|
2,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability under USGAAP |
|
|
(1,595 |
) |
|
|
(1,184 |
) |
|
|
(2,006 |
) |
Net deferred tax liability under A-IFRS |
|
|
1,703 |
|
|
|
1,264 |
|
|
|
1,802 |
|
|
|
|
Difference |
|
|
108 |
|
|
|
80 |
|
|
|
(204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported as follows for the USGAAP balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
Net current deferred tax asset |
|
|
376 |
|
|
|
279 |
|
|
|
294 |
|
Net non current deferred tax liability |
|
|
(1,971 |
) |
|
|
(1,463 |
) |
|
|
(2,300 |
) |
|
|
|
|
|
|
(1,595 |
) |
|
|
(1,184 |
) |
|
|
(2,006 |
) |
|
|
|
As at 30 June 2006, our foreign operations have operating
loss carryforwards of $291 million of which $9 million will
expire in 2027. The remaining balance does not have an
expiration date. We have established a valuation allowance
of $185 million to provide for the operating loss
carryforward due to our uncertainty over our ability to
utilise these operating loss carryforwards.
As at 30 June 2005, our foreign operations have operating
loss carryforwards of $230 million of which $13 million will
expire in fiscal year 2027. We have established a valuation
allowance of $161 million to provide for the operating loss
carryforward due to our uncertainty over our ability to
utilise these operating loss carryforwards
F-196
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(g) Income tax (continued)
The following table represents the domestic and foreign
components of net income before income tax expense and
minority interests and income tax expense/(benefit),
calculated in accordance with USGAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
Net income before income tax expense and minority interests consists of: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
4,829 |
|
|
|
3,586 |
|
|
|
5,940 |
|
Foreign |
|
|
(646 |
) |
|
|
(481 |
) |
|
|
20 |
|
|
|
|
Net income before income tax expense and minority interest |
|
|
4,183 |
|
|
|
3,105 |
|
|
|
5,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit) consists of: |
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
1,785 |
|
|
|
1,325 |
|
|
|
1,718 |
|
Foreign |
|
|
15 |
|
|
|
11 |
|
|
|
22 |
|
|
|
|
Total current income tax expense |
|
|
1,800 |
|
|
|
1,336 |
|
|
|
1,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
(326 |
) |
|
|
(243 |
) |
|
|
22 |
|
Foreign |
|
|
(9 |
) |
|
|
(7 |
) |
|
|
(6 |
) |
|
|
|
Total deferred income tax expense/(benefit) |
|
|
(335 |
) |
|
|
(250 |
) |
|
|
16 |
|
|
|
|
Income tax expense, net |
|
|
1,465 |
|
|
|
1,086 |
|
|
|
1,756 |
|
|
|
|
Actual income tax expense differs from the amounts computed
by applying the statutory Australian income tax rate of 30%
to net income before income tax expense and minority
interests. The following table represents the
reconciliation of the expected income tax expense to actual
income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
US$m |
|
|
$m |
|
Expected income tax expense |
|
|
1,255 |
|
|
|
931 |
|
|
|
1,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)/increase in income taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of different rates of tax on overseas income |
|
|
(19 |
) |
|
|
(14 |
) |
|
|
(11 |
) |
Non assessable and non deductible items |
|
|
88 |
|
|
|
64 |
|
|
|
(23 |
) |
Cumulative effect of changes in accounting principles |
|
|
105 |
|
|
|
78 |
|
|
|
|
|
Under/(over) provision of tax in prior years |
|
|
36 |
|
|
|
27 |
|
|
|
2 |
|
|
|
|
Actual income tax expense for USGAAP |
|
|
1,465 |
|
|
|
1,086 |
|
|
|
1,756 |
|
|
|
|
F-197
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(h) Employee share plans and compensation expenses
Our employee and executive share plans are described in note 31.
As at 1 July 2005 for USGAAP purposes, we have adopted
Statement of Financial Accounting Standards No. 123 Revised
(SFAS 123R), Share-Based Payment using the modified
prospective application method. This standard requires
entities to recognise an expense for the issue of employee
stock options and similar awards based on their fair value
on the grant date and recognised over the associated service
period, which is usually the vesting period. However there
is no financial statement effect for us upon adoption of
SFAS 123R, as we previously adopted the fair value method of
valuing employee stock options and similar awards under SFAS
No. 123, Accounting for Stock Based Compensation.
Under A-IFRS, we have adopted AASB 2 Share-based Payment
which is broadly consistent with SFAS 123R. As permitted
under A-IFRS and described in note 31, we have elected to
apply AASB 2 only to equity instruments granted after 7
November 2002, which have not vested as at 1 January 2005.
Therefore a USGAAP adjustment is still required to record
the compensation expense for equity instruments issued prior
to 7 November 2002.
As a result of this adjustment, we have recorded nil
compensation expense for the year ended 30 June 2006 in the
reconciliation of net income to USGAAP (2005: $7 million).
37(i) Derivative financial instruments and hedging activities
Our risk management policies and objectives of entering
into derivative financial instruments have been
disclosed in note 35, Financial and capital risk
management.
As permitted on the first-time adoption of A-IFRS, the
Company elected to not restate comparative information for
financial instruments within
the scope of AASB 139: Financial Instruments: Recognition
and Measurement (AASB 139). Therefore, for the year end 30
June 2005 the fair value of derivatives were not recorded
under A-IFRS. Beginning 1 July 2005, derivative financial
instruments are recognised and measured at fair value.
Under USGAAP, certain derivative instruments are designated
as fair value hedges. The gain or loss on the derivative
instrument, as well as the offsetting loss or gain on the
hedged item attributable to the hedged risk, is recognised
in other income expense as part of net income during the
period of the change in fair values.
Under A-IFRS, the same derivative instruments are designated
as cash flow hedges. The effective portion of the gain or
loss on the derivative instrument is reported as a component
of accumulated other comprehensive income and reclassified
into net income in the same period or periods during which
the hedged transaction affects net income. The remaining
gain or loss on the derivative instrument in excess of the
cumulative change in the present value of future cash flows
of the hedged item, if any, is recognised in other income/expense as part of net income during the period of change.
We enter into forward foreign exchange contracts to hedge
certain firm commitments denominated in foreign currencies
relating to our capital expenditure programs. Under A-IFRS,
realised gains and losses on termination of these hedges are
recognised as a net cost of the equipment acquired.
We do not designate specific forward foreign exchange
contracts as hedges under USGAAP. As a result, changes in
fair value of the forward foreign exchange contracts are
required to be recognised in net income for USGAAP
purposes. We have recorded a marked to market adjustment in
other income per USGAAP for the forward foreign exchange
contracts outstanding at 30 June 2006.
As a result of the change in the capital expenditure foreign
exchange contract rates, we also recorded an adjustment to
increase fixed assets and depreciation expense.
Additionally, another adjustment to other income per USGAAP
was recorded to reverse net realised foreign exchange
gains/losses capitalised in property, plant and equipment
under A-IFRS.
We enter into interest rate swaps to manage our exposure to
interest rate risk relating to our outstanding short-term
commercial paper. We do not designate the interest rate
swaps used to manage our interest rate exposure as hedges
under USGAAP. As a result, changes in the fair values of
these interest rate swaps are required to be included in the
reconciliation of net income to USGAAP. We have recorded a
marked to market adjustment in other income under USGAAP for
changes in fair value of interest rate swap contracts
outstanding at the fiscal year end.
We enter into cross currency interest rate swaps to hedge
our exposure to the risk of overall changes in fair value
relating to interest rate and foreign currency risk of our
foreign currency borrowings. The ineffective portion of our
hedging instruments (inclusive of the time value of money)
is taken to other income/expense.
Under USGAAP we record our derivative instruments on a net
basis by counterparty where a master netting agreement is in
place. Under A-IFRS we are precluded from netting our
derivative instruments by counterparty in the balance sheet.
F-198
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(i) Derivative financial instruments and hedging
activities (continued)
Summary of derivative financial instruments and hedging
activities adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Forward foreign exchange
contracts |
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
Interest rate swaps |
|
|
21 |
|
|
|
(85 |
) |
|
|
|
|
|
|
(163 |
) |
Cross currency interest rate
swaps |
|
|
(214 |
) |
|
|
(13 |
) |
|
|
(198 |
) |
|
|
(209 |
) |
|
|
|
|
|
|
192 |
|
|
|
(96 |
) |
|
|
(195 |
) |
|
|
(370 |
) |
|
|
|
37(j) CSL New World Mobility Limited (formerly Telstra CSL
Limited (CSL))
Original acquisition
Under previous AGAAP, acquisition costs of $999 million were
written off on acquisition of CSL in January 2001. USGAAP
did not allow such a write-off, as it could not be supported
by an analysis of the undiscounted cash flows of the entity.
Accordingly, the goodwill write-off
was reversed and is carried forward as a difference in the
reconciliation of shareholders equity to USGAAP.
USGAAP adjustments were also recorded on the acquisition of
CSL for the following:
|
|
losses of $30 million on the hedge of the purchase of CSL were included in the cost of
acquisition under previous AGAAP, but were recognised in net income under USGAAP; and |
|
|
|
recognition of a deferred tax asset of $33 million under USGAAP associated with fair value acquisition
adjustments, with a corresponding decrease to goodwill. This deferred tax asset was realised in
fiscal 2005. |
Goodwill impairment
On 31 March 2006, we merged the CSL Group with the mobile
operations of New World PCS Holdings Limited and its
controlled entities (New World Mobility Group) to form the
CSL New World Mobility Group. Our carrying value of goodwill
under USGAAP for CSL has historically been higher than under
A-IFRS due to the USGAAP adjustments on original
acquisition, and the merger transaction indicated that a
pre-existing impairment under USGAAP existed in CSL.
We performed an impairment test on our goodwill balance in
CSL prior to recording the merger and as a result we
recognised an impairment loss in our net income per USGAAP.
The fair value of CSL for the purposes of the impairment
test was calculated using a discounted cash flow technique.
Historically under USGAAP, we have recorded impairment
losses of $394 million. These impairment losses were based
on a discounted cash flow technique used to calculate the
fair value of CSL.
New
World Mobility merger
Under the merger agreement, CSL issued new shares to New
World Mobility Holdings Limited for 100% of the issued
capital of the New World Mobility Group and $44 million
cash. The issue of new shares diluted our ownership
interest in the merged group to 76.4%.
Under A-IFRS, a dilution gain was recognised directly in
equity, being the difference between the fair value of the
interest acquired in the New World Mobility Group and the
carrying value of the diluted interest in the merged group,
including any foreign currency translation reserve balance.
Due to the USGAAP impairment recorded in CSL goodwill just
prior to the merger transaction, the carrying value of CSL
at the date of the merger was lower under USGAAP compared to
A-IFRS. Furthermore, the foreign currency translation
reserve balance associated with CSL under USGAAP at the date
of the merger was significantly higher than the balance
under A-IFRS due to the USGAAP adjustments described in note
37(l). This lead to us recording a dilution loss on the
merger under USGAAP primarily due to the reclassification of
$132 million from accumulated other comprehensive loss. This
dilution has been recorded directly in equity for USGAAP
purposes.
F-199
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(j) CSL New World Mobility Limited (continued)
Summary of CSL New World Mobility adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Original acquisition |
|
|
|
|
|
|
|
|
|
|
936 |
|
|
|
936 |
|
Goodwill impairment |
|
|
(634 |
) |
|
|
|
|
|
|
(1,028 |
) |
|
|
(394 |
) |
New World Mobility merger |
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
(634 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
542 |
|
|
|
|
37(k) Fair value and general reserve adjustments
Under A-IFRS, we recorded a reserve of $54 million on the
acquisition of a controlling interest in TelstraClear
Limited in December 2001, representing our share of the fair
value adjustments attributed to our previous equity
accounted ownership interest. Under USGAAP this reserve
adjustment was offset against goodwill.
Under A-IFRS, the effect of dilutions of ownership due to
equity transactions conducted by third parties are recorded
in a reserve. Under USGAAP, this is treated as a sale of
ownership interest and taken to net income. For the year
ended 30 June 2006, the adjustment to net income was $nil
(2005: $5 million gain).
37(l) Goodwill and other intangible asset adjustments
Under both A-IFRS and USGAAP, goodwill is not amortised but
reviewed for impairment annually, or more frequently if
certain indicators or triggers arise. However, we ceased
amortising goodwill under USGAAP from 1 July 2002 but did
not cease amortisation under A-IFRS until 1 July 2004. As
such we continue to record a historical USGAAP adjustment.
Under both A-IFRS and USGAAP, goodwill in foreign controlled
entities is denominated in the functional currency of the
foreign operation, with translation adjustments recorded in
equity. Where there is a difference between the A-IFRS and
USGAAP balance of goodwill, an adjustment is also made to
the translation effect. Furthermore, on transition to A-IFRS
we reset our foreign currency translation reserve to zero,
which has been reversed for USGAAP purposes.
Summary
of goodwill and other intangible asset adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
|
|
|
|
|
|
|
|
Shareholders' |
|
|
|
Net Income |
|
|
Equity |
|
|
|
Year ended / As at 30 June |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Amortisation difference |
|
|
|
|
|
|
|
|
|
|
229 |
|
|
|
229 |
|
Translation differences of goodwill in
foreign operations |
|
|
|
|
|
|
|
|
|
|
(158 |
) |
|
|
(188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71 |
|
|
|
41 |
|
|
|
|
Intangible
assets subject to amortisation
Our intangible assets still subject to amortisation are
brandnames, customer bases, patents, trademarks and
licences. The carrying amount of these intangibles are
disclosed in note 15. The following table represents the
estimated aggregate amortisation expense for these
intangible assets which are still amortised under USGAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Group |
|
|
|
Year ended 30 June |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
|
$m |
|
Estimated aggregate
amortisation expense |
|
|
169 |
|
|
|
141 |
|
|
|
107 |
|
|
|
104 |
|
|
|
102 |
|
|
|
|
F-200
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(l) Goodwill and other intangible asset adjustments (continued)
The following table is a reconciliation of the carrying
amount of our goodwill under USGAAP by reportable segment:
Telstra Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra |
|
|
|
|
|
|
|
|
|
|
Enterprise & |
|
Telstra |
|
|
|
|
|
|
|
|
Government |
|
International |
|
Sensis |
|
Other |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
Carrying amount of goodwill (USGAAP) at 30 June 2004 |
|
|
83 |
|
|
|
1,962 |
|
|
|
235 |
|
|
|
1 |
|
|
|
2,281 |
|
Additional goodwill recognised |
|
|
360 |
|
|
|
2 |
|
|
|
153 |
|
|
|
4 |
|
|
|
519 |
|
Foreign currency translation adjustment |
|
|
(6 |
) |
|
|
(176 |
) |
|
|
|
|
|
|
|
|
|
|
(182 |
) |
|
|
|
Carrying amount of goodwill (USGAAP) at 30 June 2005 |
|
|
437 |
|
|
|
1,788 |
|
|
|
388 |
|
|
|
5 |
|
|
|
2,618 |
|
Additional goodwill recognised |
|
|
4 |
|
|
|
287 |
|
|
|
33 |
|
|
|
|
|
|
|
324 |
|
Disposals |
|
|
(4 |
) |
|
|
(272 |
) |
|
|
|
|
|
|
|
|
|
|
(276 |
) |
Foreign currency translation adjustment |
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
55 |
|
Impairment losses |
|
|
|
|
|
|
(634 |
) |
|
|
|
|
|
|
|
|
|
|
(634 |
) |
|
|
|
Carrying amount of goodwill (USGAAP) at 30 June 2006 |
|
|
437 |
|
|
|
1,224 |
|
|
|
421 |
|
|
|
5 |
|
|
|
2,087 |
|
|
|
|
37(m) Redundancy and restructuring
The principal difference between A-IFRS and USGAAP with
respect to accruing for restructuring costs is that A-IFRS
places emphasis on the recognition of the costs of the exit
plan as a whole whereas USGAAP requires that each type of
cost be examined individually to determine
when it may be accrued. The differences are primarily
related to the timing of the recognition of restructuring
costs.
As a result we have recorded an adjustment of $46 million
to reduce the provision related to contractual obligations.
Under USGAAP, a liability is incurred for contractual
obligations when the Company ceases using the right
conveyed by the contract. As of 30 June 2006, the Company
has not ceased using the rights conveyed by these
contracts.
An adjustment of $115 million is recorded to reduce the
provision for other exit costs. Under USGAAP, a liability is
incurred for other exit costs if the Company has already
incurred the cost. As of 30 June 2006, the Company has not
incurred these expenses.
There is no significant GAAP difference between A-IFRS and
USGAAP in relation to the redundancy provision we have
recognised at 30 June 2006.
37(n) Mobile handset subsidies
In fiscal 2005 under USGAAP, we deferred our mobile handset
subsidies and recognised them over the expected customer
life. Under A-IFRS we expense handset subsidies as incurred.
On 1 July 2005, we changed our accounting principle under
USGAAP to expense handset subsidies as incurred, consistent
with our policy under A-IFRS. As such there is no longer a
USGAAP adjustment. Refer to note 37(b) for further details.
The impact of this adjustment on net income for the year
ended 30 June 2005 was an increase of $64 million.
Shareholders equity under USGAAP at 30 June 2005 increased
by $303 million.
F-201
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(o) Consolidation of variable interest entities
A-IFRS requires consolidation of an entity where we are able
to dominate decision making, directly or indirectly,
relating to the financial and operating policies of that
entity to enable it to operate with us in achieving our
objectives. Ownership percentage as a single factor does not
determine consolidation under A-IFRS.
USGAAP requires a beneficiary to consolidate a variable
interest entity if it is the primary beneficiary of that
entity. The primary beneficiary is defined as having a
variable interest in a variable interest entity that will
absorb a majority of the entitys expected losses, receive a
majority of the entitys expected residual returns (if no
party absorbs a majority of the entitys expected losses),
or both. A variable interest entity is any legal structure
used to conduct activities or hold assets that either:
|
|
has an insufficient amount of equity to carry out its principal activities without additional
subordinated financial support; |
|
|
|
has a group of equity owners that are unable to make significant
decisions about its activities; or |
|
|
|
has a group of equity owners that do not have the obligation
to absorb losses or the right to receive returns generated by its operations. |
We have identified the following variable interest entities
for which we are considered to be the primary beneficiary:
|
|
Telstra Employee Share Ownership Plan Trust (TESOP97); |
|
|
|
Telstra Employee Share Ownership Plan Trust II (TESOP99); and |
|
|
|
Telstra Growthshare Trust. |
These entities have been consolidated under both A-IFRS and USGAAP.
We have also identified the 3GIS Partnership to be a
variable interest entity, of which we have a significant
variable interest, but we are not the primary beneficiary.
As such, we have not consolidated the 3GIS Partnership. For
further information, refer to notes 30 and 37(c).
37(p) Arrangements that contain leases
Based on the requirements of Emerging Issues Task Force
Issue No. 01-8 (EITF 01-8), Determining Whether an
Arrangement Contains a Lease, an arrangement contains a
lease if fulfilment of that arrangement is dependent upon
the use of specific property, plant and equipment and it
conveys the right to control the use of the specific
property, plant and equipment to the purchaser.
If an arrangement is considered to contain a lease under
EITF 01-8 then it is split into its lease and non-lease
components using the relative fair value method, with
each component accounted for separately. EITF 01-8 is
only applicable to arrangements that we entered into or
modified after 1 July 2003.
Currently under A-IFRS, and for arrangements entered into
prior to 1 July 2003 for USGAAP, we account for these types
of arrangements as service agreements. There is no material
impact on the reconciliations of net income and
shareholders equity to USGAAP of this difference in
accounting for embedded leases.
37(q) Recently issued United States accounting standards
In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes An
Interpretation of FASB Statement No. 109 (FIN 48), which
clarifies the accounting for uncertainty in income taxes
recognised in an enterprises financial statements in
accordance with FASB Statement No. 109, Accounting for
Income Taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement
recognition and measurement of a tax position taken or
expected to be taken in a tax return. This Interpretation
also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods,
disclosure, and transition requirements. The Company is
currently evaluating the impact of this new Interpretation.
In April 2006, the FASB issued FASB Staff Position FIN
46(R)-6, Determining the Variability to Be Considered in
Applying FASB Interpretation No. 46(R) (FSP 46(R)-6),
which provides additional guidance to consider when
determining:
|
|
whether an entity is a variable interest entity; |
|
|
|
which interests are considered to be variable interests in the entity; and |
|
|
|
which party, if any, is the primary beneficiary of a variable interest entity. |
The Company is currently evaluating the impact of
this new interpretation.
F-202
Telstra Corporation Limited and controlled entities
Notes to the Financial Statements (continued)
37. United States generally accepted accounting principles disclosures (continued)
Notes to the reconciliations to financial reports
prepared using USGAAP (continued)
37(q) Recently issued United States accounting
standards (continued)
In March 2006, the FASB issued Statement No. 156,
Accounting for Servicing of Financial Assets (SFAS 156),
which amends SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS 156 requires recognition of a servicing
asset or liability at fair value each time an obligation is
undertaken to service a financial asset by entering into a
servicing contract. SFAS 156 also provides guidance on
subsequent measurement methods for each class of servicing
assets and liabilities and specifies financial statement
presentation and disclosure requirements. SFAS 156 is
effective for fiscal years beginning after September 15,
2006 and is required to be adopted by us in the first
quarter of fiscal year 2008. The Company is currently
evaluating the impact this new Standard but believes that it
will not have a material impact on the Companys balance
sheet, income statement or cash flows.
In February 2006, the FASB issued SFAS No. 155, Accounting
for Certain Hybrid Financial Instruments (SFAS No. 155),
which amends SFAS No. 133, Accounting for Derivatives
Instruments and Hedging Activities and SFAS No. 140, SFAS
No.155 amends SFAS No. 133 to narrow the scope exception for
interest-only and principal-only strips on debt instruments
to include only such strips representing rights to receive a
specified portion of the contractual interest or principle
cash flows. SFAS No. 155 also amends SFAS No.140 to allow
qualifying special-purpose entities to hold a passive
derivative financial instrument pertaining to beneficial
interests that itself is a derivative instrument. SFAS No.
155 is effective for fiscal years beginning after 15
September 2006. The Company is currently evaluating the
impact this new Standard but believes that it will not have
a material impact on the Companys balance sheet, income
statement or cash flows.
In November 2005, the FASB issued FASB Staff Position SFAS
123(R)-3, Transition Election Related to Accounting for the
Tax Effects of
Share-Based Payment Awards (FSP 123(R)-3). FSP 123(R)-3
provides an elective alternative method that establishes a
computational component to arrive at the beginning balance
of the accumulated paid-in capital pool related to employee
compensation and a simplified method to determine the
subsequent impact on the accumulated paid-in capital pool of
employee awards that are fully vested and outstanding upon
the adoption of SFAS 123(R). The Company does not believe
that this FSP will have a material impact on the income
statement or balance sheet.
In November 2005, the Financial Accounting Standards Board
(FASB) issued FASB Staff Position (FSP) Nos. SFAS 115-1
and SFAS 124-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments. This
FSP addresses the determination as to when an investment is
considered impaired, whether that impairment is other than
temporary and the measurement of an impairment loss. This
FSP also includes accounting considerations subsequent to
the recognition of other-than-temporary impairments. The
adoption of the FSP did not have a material impact on the
income statement and balance sheet.
In October 2005, the FASB issued FASB Staff Position SFAS
123(R)-2, Practical Accommodation to the Application of
Grant Date as Defined in SFAS 123(R) (FSP 123(R)-2). FSP
123(R)-2 provides guidance on the application of grant date
as defined in SFAS 123(R). In accordance with this standard
a grant date of an award exists if:
|
|
the award is a unilateral grant; and |
|
|
|
the key terms and conditions of the award are expected to
be communicated to an individual recipient within a
relatively short time period from the date of approval |
The Company does not believe that this FSP will have a
material impact on the income statement or balance
sheet.
In May 2005, the FASB issued FASB Statement No. 154,
Accounting Changes and Error Corrections a replacement
of APB Opinion No. 20 and FASB Statement No. 3 (SFAS
154). SFAS 154 replaces APB Opinion No. 20, Accounting
Changes, and FASB Statement No. 3, Reporting Accounting
Changes in Interim Financial Statements and changes the
requirements for the accounting for and reporting of a
change in accounting principle. This statement applies to
all voluntary changes in accounting principle. It also
applies to changes required by an accounting pronouncement
in the unusual instance that the pronouncement does not
include specific transition provisions. When a pronouncement
includes specific transition provisions, those provisions
should be followed. SFAS 154 is effective for accounting
changes and corrections of errors made in fiscal years
beginning after 15 December 2005 and requires prospective
application. The Company is currently evaluating the impact
of this new Standard.
F-203
Telstra Corporation Limited and controlled entities
Directors Declaration
This directors declaration is required by the
Corporations Act 2001 of Australia.
The directors of Telstra Corporation Limited have made a
resolution that declared:
(a) |
|
the financial statements and notes, set out on pages F-3
to F-203 of Telstra Corporation Limited and the Telstra Group: |
|
|
|
(i) comply with the Accounting Standards and
Corporations Regulations; |
|
|
|
|
(ii) give a true and fair view of the financial position
as at 30 June 2006 and performance, as represented by the
results of the operations and cash flows, for the year
ended 30 June 2006; and |
|
|
|
|
(iii) in the directors opinion, have been made out in
accordance with the Corporations Act 2001. |
(b) |
|
they have received declarations as required by
S.295A of the Corporations Act 2001; |
|
(c) |
|
at the date of this declaration, in the directors
opinion, there are reasonable grounds to believe that
Telstra Corporation Limited will be able to pay its debts as
and when they become due and payable in Australia; and |
|
(d) |
|
at the date of this declaration there are reasonable
grounds to believe that the members of the extended closed
group identified in note 29(a) to the full financial
statements, as parties to a Deed of Cross Guarantee, will be
able to meet any obligations or liabilities to which they
are, or may become subject to, under the Deed of Cross
Guarantee described in note 29(a). |
In accordance with subsection 334(5) of the Corporations
Act 2001, the directors have elected to adopt the
following Australian accounting standards early for the
year ended 30 June 2006:
|
|
|
AASB 119: Employee Benefits (issued in December 2004); |
|
|
|
|
AASB 7: Financial Instruments: Disclosures; |
|
|
|
|
AASB 2005-3: Amendments to Australian Accounting Standards; and |
|
|
|
|
AASB 2005-10: Amendments to Australian Accounting Standards. |
For and on behalf of the board
|
|
|
|
|
|
|
|
|
Donald G McGauchie
|
|
Solomon D Trujillo |
Chairman
|
|
Chief Executive Officer and
Executive Director |
|
|
|
Date: 10 August 2006 |
|
|
Melbourne, Australia |
|
|
F-204
Annex A
Remuneration Report
from Telstras 2006 Annual Report
(This page intentionally left blank)
Remuneration report
Remuneration report
The Remuneration Report forms part of the Directors Report and is set out under the
following headings:
REMUNERATION AT TELSTRA
The Remuneration Committee
Remuneration policy
Changes to the remuneration strategy
CEO AND SENIOR EXECUTIVES
Remuneration strategy
Remuneration structure
Linking the remuneration structure to the business strategy
Remuneration mix
Fixed remuneration
Short term incentive (STI)
Long term incentive (LTI)
RELATIONSHIP BETWEEN REMUNERATION AND TELSTRAS PERFORMANCE
Defining company performance
Remuneration vs company performance
DETAILS
OF SENIOR EXECUTIVES REMUNERATION
Contract arrangements
Relocation costs associated with overseas senior executives
NON-EXECUTIVE DIRECTORS
Remuneration policy and strategy
Remuneration structure
Retirement benefits
Other benefits
Details of non-executive directors remuneration
This report for the year ended 30 June 2006 was prepared by the directors in accordance with
the Corporations Act 2001. Under AASB 124 Related Party
Disclosures(AASB 124), we are
required to disclose remuneration details for our key management personnel (KMP). In
addition to the directors, our KMP also includes the Chief Operating Officer and the Group
Managing Directors listed in Figure 17. For the remainder of this report the KMP (other than
the directors) will collectively be referred to as senior executives.
REMUNERATION AT TELSTRA
Telstra proactively manages executive and director remuneration arrangements to ensure
that their remuneration is a key element supporting our business strategy by aligning reward
to the achievement of strategic objectives. We also ensure that it is competitive in the
markets we draw our talent from and that the needs of all stakeholders are taken into
consideration when remuneration decisions are made.
THE REMUNERATION COMMITTEE
The policy, strategy and structure for the Board, CEO and senior executive remuneration
is overseen and regularly reviewed by the Boards Remuneration Committee.
The Telstra Board Remuneration Committee (Committee) is responsible for reviewing and
recommending to the Board the remuneration policy, strategy and structure for Telstras
Board, the CEO and senior executives. The Committees roles and responsibilities,
composition and membership is detailed on our website. The Committee also has a
responsibility to ensure that our remuneration
strategy considers corporate governance principles and expectations of stakeholder bodies.
Any decision made by the Committee concerning an individual executives remuneration is made
without that executive being present.
REMUNERATION POLICY
The remuneration policy consists of principles that guide the
Committee in its deliberations, and which should be taken into
consideration when formulating the strategy and structure of
remuneration.
The Committee is guided by the following principles when formulating remuneration strategy
and structure.
|
|
|
|
|
|
|
Senior executive |
|
Non-executive director |
remuneration should: |
|
remuneration should: |
|
|
reflect the size and scope of the role and
be market competitive
in order to attract and retain talent
|
|
|
|
be distinguished from executive remuneration
be fee based, not performance based |
|
|
|
|
|
|
|
|
|
be competitive in domestic and global
markets
motivate executives to deliver short and
long term business objectives
|
|
|
|
be partly remunerated in the form
of equity in order
to align with the
returns to
shareholders |
|
|
|
|
|
|
|
|
|
be aligned with shareholder value
creation |
|
|
|
|
|
|
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|
|
|
|
|
|
be differentiated based on individual
performance |
|
|
|
|
CHANGES TO THE REMUNERATION STRATEGY
In line
with major changes to Telstras business strategy this fiscal year, we have reviewed and updated our remuneration structure.
During fiscal 2006 the Board approved a new business strategy for Telstra. The new strategy will
transform the company over several years in order to meet the challenges of a competitive global
market.
With the new business strategy significantly changing the companys commercial and operational
focus, it was important to update the metrics used to determine incentive outcomes to give
appropriate weight to Telstras new priorities. In parallel with the development of the business
strategy, the Committee commissioned an extensive review of the remuneration strategy.
The focus of the remuneration review was to advise on contemporary market practice, the
relationship between fixed and variable remuneration and the measures which would drive
remuneration outcomes in the context of a significant strategic
realignment of the business. The aim
was to reward the CEO and senior executives on the delivery of transformational and operational
outcomes in line with the key elements of the new business strategy. An additional objective of the
review was to link the successful delivery of the transformation to future shareholder wealth
creation. Management, with input from an external remuneration consultant, formally presented the
results of the review to the Committee in December 2005.
The review concluded that the CEO and senior executive remuneration strategy would need to have
increased flexibility in order to:
A-1
Remuneration report
|
|
focus on achieving long term transformation of the company while
delivering on short term performance; |
|
|
|
reinforce and reward performance measures that will evolve with
the companys changing objectives; |
|
|
|
attract and retain world-class executive talent; and |
|
|
|
support a variety of employment arrangements and durations. |
Introduction of new performance measures
The three elements of Telstras remuneration structurefixed remuneration, short term incentives
(STI) and long term incentives (LTI) complement each other and will support the execution of
business strategy in both the short and long term. These elements are consistent with previous
years incentive plans. However, new performance measures (which are discussed in detail later in
this report) have been introduced to encourage executives to focus on key business outcomes and to
ensure that reward payouts occur when the company and the individual achieve the transformational
and operational goals set by the Board.
Figure 1 below illustrates how the remuneration strategy and structure are aligned to, and support,
the business strategy through the use of performance measures.
CEO AND SENIOR EXECUTIVES
REMUNERATION
STRATEGY
Our remuneration strategy for the CEO and senior executives includes performance measures that
are aligned to the key elements of Telstras new business strategy.
The senior executive remuneration strategy has been repositioned to drive the delivery of the
transformation milestones that have been outlined in Telstras business strategy. Over the next 35 years, the remuneration strategy will be based on performance measures that are strongly aligned
to those transformation outcomes as well as on other traditional business measures. The weighting
of performance measures is expected to evolve over time from initial weighting on transformation
measures to:
|
|
operational measures for the STI; and |
|
|
|
growth and return measures for the LTI. |
Figure 2 below shows the proportion of the STI and LTI that depends on transformation measures for
fiscal 2006. It is also indicative of how the emphasis on the transformation measures will diminish
progressively as our transformation milestones are achieved. (However, it is not intended to
represent future weightings of remuneration elements.)
Figure 1: Alignment of the business and remuneration strategies
Figure 2: Remuneration structure that supports Telstras transformational goals
A-2
Remuneration report
REMUNERATION
STRUCTURE
The remuneration structure ensures that rewards are linked to strategic
outcomes.
When reviewing the structure and mix of the remuneration packages of the CEO and senior
executives, the Committee takes into account:
|
|
remuneration practices in other major corporations in Australia (in
terms of both salary levels and the ratio between fixed and at risk
components); |
|
|
|
remuneration practices of global corporations within our
comparative peer group; and |
|
|
|
a range of macro-economic indicators used to determine likely
movements in broad salary rates. |
For fiscal 2006, the remuneration structure for the CEO and senior executives consisted of:
|
|
fixed remuneration; |
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|
|
short term incentive (at risk); and |
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|
|
long term incentive (at risk). |
LINKING THE REMUNERATION STRUCTURE TO THE BUSINESS STRATEGY
The
main benefits of linking senior executives rewards to specific performance measures are to
increase focus and understanding by senior executives of the key strategic objectives of the
business and provide motivation by rewarding employees on strategy execution.
Figure 3 below shows in detail how the remuneration structure is designed to satisfy the
requirements of the new business strategy, by setting and monitoring specific performance measures
for the various elements of remuneration.
Ordinarily, the Committee considers, and recommends to the Board, the measures and targets for the
incentive plans during the annual budget setting process. However, for fiscal 2006, the Committee
considered the remuneration strategy in parallel with the strategic review of the company. The
Committee recommended that the incentive measures should focus on the transformation through to
fiscal 2010.The fiscal 2010 strategic targets outlined to shareholders in November 2005 were used
as a starting point to determine the fiscal 2006 STI and LTI performance measures.
Figure 3: Performance measures selected to ensure a focus on key business strategies
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Remuneration element |
|
Performance measures |
|
How is it measured? |
|
Link to business strategy |
STI
(Cash)
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Company Financial
|
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EBITDA Earnings before interest, tax,
depreciation, amortisation.
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|
To achieve earnings objective. |
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Cost Reduction
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Amount of accelerated cost savings.
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To identify and deliver near term
operating cost saving benefits that
enable investment in transformation
initiatives. |
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3G 850 Network
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The number of sites that are 3G
equipped and receiving transmission.
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To deliver on the wireless
strategy that enables mobile revenue
growth, reduces cost and optimises the
mobile business. |
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Broadband marketshare
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The increase in Telstras share of
retail broadband customers.
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To achieve an increase in
Telstras retail broadband
marketshare. |
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Individual
accountabilities
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The achievement of personal goals which
include business unit specific
targets.
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To align the individuals personal
goals with the business goals. |
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LTI
(Performance Rights)
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Revenue Growth
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The year over year revenue growth rate
over the periods 3 and 5 years.
|
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To drive the development of new
revenue and overall growth. |
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Operating Expense
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The total operating expense growth rate
over the periods 3 and 5 years.
|
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To drive cost control and
restructure the cost base of the
company. |
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IT Transformation
milestones
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The time taken to achieve a targeted
reduction of Business Support Systems (BSS)
and Operational Support Systems (OSS).
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To reduce complexity, reduce cost
and provide an enhanced customer
experience by reducing the number of
systems. |
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Network Transformation
milestones
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The time taken to achieve network
simplification and build a new
platform.
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To simplify the network to reduce
complexity and cost, while providing a
new platform for revenue growth. |
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Return on Investment
(ROI) over 3 years
|
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EBIT over Average Investment (Average
of Net Debt plus Shareholder Funds).
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To measure the return gained from
the financial investment in the
transformational goals. |
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Total Shareholder Return
(TSR) Growth over 5 years
|
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Absolute growth in share price and
accumulated dividends from 19 August
2005.
|
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To measure the value derived from
execution of the business
strategy. |
A-3
Remuneration report
To link the remuneration structure to business strategy, the Committee
prioritised the business strategic objectives by considering:
|
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what could be measured; |
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what objectives would have the greatest impact; and |
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what aggregate of measures would best support the key themes of
the strategy. |
At the end of each financial year, the Committee reviews the companys audited financial results
and the results of the other performance measures, and assesses performance against each measure to
determine the percentage of STI and LTI that is payable. Measures are tracked by an internal
project office and, where appropriate, the achievement against targets will be independently
audited.
In the case of Bruce Akhurst the STI is measured against specific financial metrics for Sensis in
lieu of the Telstra financial and transformational measures detailed above. Sensis EBIT
contribution and Cashflow make up 80% of his STI and the remaining 20% is based on individual
accountabilities.
To ensure the continued alignment of transformation objectives, the creation of value and executive
reward, the Committee initiated a review of the linkage between the remuneration strategy and
business strategy. Any changes to the remuneration strategy as a result of this review will be
reported to shareholders.
REMUNERATION
MIX
Executive remuneration is composed of both fixed and at risk
elements.
The remuneration mix describes the ratio of the different components of an executives pay. To
strengthen the link to company performance, the Board has determined that a significant proportion
of the total remuneration for the CEO and senior executives should be at risk representing
components that are awarded based on performance. This means senior executives can only earn
significant rewards if pre-determined company measures and targets are achieved. The at risk
components of a senior executives remuneration package are calculated by reference to that
individuals fixed remuneration.
Figure 4 below shows the remuneration mix based on the maximum level of reward for the CEO and
senior executives.
Figure 4: Telstras remuneration mix
|
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(1) |
|
The value of LTI granted. Performance
targets must be met before any of this
value vests to the executive over 3 and
5 years. |
|
(2) |
|
The maximum amount that could be
payable should all STI targets be met. |
If the minimum performance level is not achieved, no STI or LTI will be awarded and the
executive receives 100% of fixed remuneration and 0% of their at risk remuneration. The
percentage of at risk pay increases with the increase in accountability.
FIXED
REMUNERATION
Fixed
remuneration is in line with similar roles in the applicable market
Fixed remuneration is made up of:
|
|
base salary including salary sacrifice benefits and applicable fringe
benefits tax; and |
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|
|
superannuation. |
Fixed remuneration is influenced by the scope of the role and the knowledge, skills and experience
required of the position holder. To ensure remuneration is market competitive, the Committee takes
into account local, home country and global market rates. In determining what market rates to use
for comparison purposes the Committee assesses a range of factors including company size (based on
market capitalisation), industry in which the comparative company operates and global footprint.
For superannuation, in addition to mandatory contributions, the CEO and senior executives may
contribute additional amounts, subject to legislative requirements.
Fixed remuneration is reviewed annually as part of the companys overall remuneration review
process and is assessed against the companys and the individuals performance.
For fiscal 2006, the CEO was responsible for reviewing and determining the remuneration of the
company secretary. However, the remuneration policy described in this report in relation to the
senior executives and the discussion of the relationship between that policy and our performance
applies to the company secretary.The company secretary participates in the STI plan and the LTI
plan on the terms set out in this report.
SHORT
TERM INCENTIVE (STI)
The STI component delivers reward on achievement of annual
performance targets.
The STI is an annual at risk component of remuneration for the CEO and senior executives. During
fiscal 2006, the Committee ceased the Short Term Incentive Equity (STIE) Plan. As such the annual
STI payment for fiscal 2006 is delivered in cash, compared with fiscal 2005 when the STI was
delivered half in cash and half in equity instruments. The objective of the STI plan is to
encourage executives to meet annual business objectives and their own individual performance
targets.
How STI is calculated
The CEO and senior executives STI payment is based on their fixed remuneration, individual STI
opportunity (explained on page 48) and achievements against performance measures.This is
illustrated in Figure 5.
Figure 5: Calculating the STI payment
A-4
Remuneration report
Figure 6: STI opportunity for differing levels of performance
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|
Level of performance |
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|
CEO |
|
Senior Executives |
(% of STI opportunity) |
|
Description |
|
(% of fixed remuneration) |
|
Gateway (25%)
|
|
The gateway level must be reached before any value can be attributed to each
measure.
|
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|
25 |
% |
|
25% 35% |
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Target (50%)
|
|
The target level represents challenging but achievable levels of performance.
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50 |
% |
|
50% 70% |
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Maximum (100%)
|
|
Achievement of the maximum level requires significant performance above and beyond
normal expectations and will result in significant improvement in key operational
areas.
|
|
|
100 |
% |
|
100% 140% |
STI opportunity and performance levels required
Depending on the role they perform, each senior executive has an STI opportunity ranging from 100%140% of fixed remuneration where maximum performance is met.The maximum STI opportunity varies
according to the role. As illustrated in Figure 6 above, each of the performance measures has three
different levels of performance.
The level of performance determines the level of payment against each weighted measure. Achieving
the target level of performance on each measure therefore equates to 50% of an individuals maximum
STI payment.
The STI performance measures
Performance against specific measures is assessed before any individuals STI payment can be
determined. The individual accountabilities for the CEO are determined by the Board and that of the
senior executives are determined by the CEO. All individual measures are strongly aligned to the
individuals contribution towards corporate and business unit objectives.
STI payment for the CEO
The CEOs contract provides for an STI payment for fiscal 2006 of up to a maximum of $3 million, of
which $1.5 million was paid on commencement of employment. The initial $1.5 million was paid subject
to the successful delivery of the new business strategy and transformation plan for the
company. This payment was disclosed in the 2005 Remuneration Report.
The remaining maximum potential payment of $1.5 million will be paid subject to the CEO
satisfying the performance measures described in Figure 3 on page 46.
LONG
TERM INCENTIVE (LTI)
The LTI is the second at risk component of remuneration and it is delivered in the form of
performance rights for fiscal 2006. Performance rights are the right to acquire a Telstra share at
minimal cost to the employee ($1 exercise price per parcel of shares exercised on any single day)
when specified performance measures are achieved. The performance rights are administered through
the Telstra Growthshare Trust.
In prior years the equity instruments allocated as part of the LTI plans included restricted
shares, options, deferred shares and performance rights.
The LTI plan supports the business strategy by aligning executive compensation with key performance
measures and targets that support the transformation. The LTI is limited to the 220 most senior
employees, as this group is responsible for leading the transformation and will drive the success
of the business.
How performance rights are allocated
The CEO and senior executives receive an allocation of performance rights that is calculated as a
percentage of their fixed remuneration.
Figure 7: Calculating the allocation of performance rights
|
|
|
* |
|
The full market value of a Telstra share is used when we allocate performance rights (5 day
volume weighted average share price). This differs from the accounting value under the
executive remuneration table in Figure 17 on page 52, which reflects the amortised accounting
valuation of these rights and any other LTI equity granted in previous years. |
Vesting
The performance rights that the CEO and senior executives receive will vest depending upon the
companys achievement of the relevant performance measures. Performance rights that have vested
means that the executive has a full interest in the right and is free to exercise the right at any
time until the expiry date. The allocation, test and expiry dates are illustrated in Figure 8 below.
Figure 8: Performance right timeline
The value of the LTI at vesting
The actual value to the executive of the LTI at vesting can be calculated using the formula
in Figure 9 below.
Figure 9: Determining the market value of performance rights at vesting dates
|
|
|
* |
|
This value is likely to be different from the values at allocation and the accounting values
disclosed in the remuneration table in Figure 17 on page 52. |
A-5
Remuneration report
Figure 10: LTI vesting arrangements for fiscal 2006
|
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|
|
Year 3 |
|
Year 5 |
|
Target not
achieved
|
|
|
|
25% of performance rights for Year 3 tranche lapses.
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|
|
All unvested performance rights will lapse. |
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|
The remaining 75% of performance rights will be added to
the Year 5 tranche and may vest based on performance against
the Year 5 performance scale. |
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|
Target achieved
but below
Maximum
|
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|
|
The number of performance rights vest on a scale between
Target and Maximum.
|
|
|
|
For the Year 5 tranche the number of
performance rights vest on a scale between Target and
Maximum. |
|
|
|
Any performance rights that do not vest will be
discounted by 25% and the balance added to the Year 5 tranche
and may vest on the Year 5 performance scale for each
measure.
|
|
|
|
The carried forward Year 3 balance will be
added to the Year 5 tranche and assessed against the
Year 5 performance targets. |
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|
Any performance rights that do not vest as a
result of not reaching the Maximum of the Year 5
hurdle will lapse. |
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|
Maximum
achieved
|
|
|
|
All performance rights for the Year 3 tranche (up to 60%
of the 2005 allocation) will vest if all maximum targets are
achieved.
|
|
|
|
All performance rights for the Year 5 tranche
(up to 40% of the 2005 allocation), and any remaining
Year 3 tranche, will vest if all maximum targets are
achieved. |
The LTI performance measures
Similar to the STI plan, the LTI performance measures are also linked to the business strategy and
transformation of the company. This approach ensures that any rewards derived from the LTI plan by
the senior executives are consistent with the successful execution of the initiatives over a number
of years. Successful execution of the initiatives should, in turn, drive sustainable increases in
shareholder wealth.
The measures will be assessed based on a scale of performance at 30 June 2008 and 30 June 2010.The
vesting arrangements are explained in Figure 10 above.
Exercising performance rights
A performance right can only be exercised (that is, a share can only be acquired by the executive)
if the performance right vests. Once vested, the performance right can be exercised by the
executive at any time up to 7 years from the grant date. Once the performance rights have been
exercised the participant becomes the beneficial owner and is entitled to any dividend, bonus
issue, return of capital or other distribution in respect of those shares.
Restrictions on hedging
The CEO and senior executives are restricted from entering into arrangements which effectively
operate to limit the economic risk of their security holdings in shares allocated under the LTI
plan during the period the shares are held in trust.
Lapsed performance rights
Where a performance right does not vest by year 5, because the performance measures have not been
achieved, the right will lapse and no benefit will accrue to the executive.
If the CEO or a senior executive:
|
|
resigns and their performance rights are not yet exercisable, those
rights will lapse; |
|
|
|
retires or ceases employment due to death or total permanent
incapacity, and their performance rights are not yet exercisable,
those rights will be exercisable if the relevant performance
measure is met in accordance with the prescribed schedule; |
|
|
|
is made redundant, and their performance rights are not yet
exercisable, the number of unvested rights is adjusted to reflect
the executives service period and will be exercisable if the relevant
performance measure is met in accordance with the prescribed
schedule; or |
|
|
|
ceases employment with Telstra for any other reason and their
performance rights are not yet exercisable, the Board will decide
whether those rights should lapse or remain available for exercise
if the relevant performance measure is met. |
RELATIONSHIP BETWEEN REMUNERATION AND TELSTRAS PERFORMANCE
The payment levels of the at risk components of remuneration should reflect Telstras
corporate performance.
DEFINING
COMPANY PERFORMANCE
Telstra ultimately assesses its company performance by reference to
increases in shareholder wealth and earnings.
Shareholder wealth
Shareholder wealth is the total return to an investor over a given period. It consists of three
components: dividends paid, the movement in the market value of shares over that period, and any
return of capital to shareholders, excluding buy-backs.
Dividends paid
Over the five years to 30 June 2006 we have increased the total amount returned to shareholders
through dividends and special dividends each year. Our total dividends paid per share each fiscal
year for the last five years is shown in Figure 11 on page 50.
Market value of shares
During fiscal 2006 Telstras daily closing share price has fluctuated between a low of $3.63 and a
high of $5.14. Figure 11 on page 50 shows the share price on 30 June for the last five years.
A-6
Remuneration report
Figure 11: Share price at year end and dividends paid per share for the last 5 years
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Year ended |
|
|
Year ended |
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|
Year ended |
|
|
Year ended |
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|
Year ended |
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|
|
30 June 2006 |
|
|
30 June 2005 |
|
|
30 June 2004 |
|
|
30 June 2003 |
|
|
30 June 2002 |
|
|
Share Price ($) |
|
|
3.68 |
|
|
|
5.06 |
|
|
|
5.03 |
|
|
|
4.40 |
|
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|
4.66 |
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|
|
Total dividends paid/declared per share (c) |
|
|
34.0 |
|
|
|
40.0 |
|
|
|
26.0 |
|
|
|
27.0 |
|
|
|
22.0 |
|
Return of capital
During the five years to 30 June 2006 we undertook two off-market share buy-backs as
part of our capital management strategy, returning $1,751 million (excluding associated
costs) to shareholders. All ordinary shares bought back were subsequently cancelled.
Figure 12: Share buy back
|
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Cost |
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|
|
Franked dividend |
|
|
Capital |
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|
|
Number of |
|
|
Purchase |
|
|
Transaction |
|
|
Buy-back price |
|
|
component |
|
|
component |
|
|
|
ordinary shares |
|
|
consideration |
|
|
costs |
|
|
per share |
|
|
per share |
|
|
per share |
|
Date |
|
bought back |
|
|
$m |
|
|
$m |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
24 Nov 2003 |
|
|
238,241,174 |
|
|
|
1,001 |
|
|
|
8 |
|
|
|
4.20 |
|
|
|
2.70 |
|
|
|
1.50 |
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
15 Nov 2004 |
|
|
185,284,669 |
|
|
|
750 |
|
|
|
6 |
|
|
|
4.05 |
|
|
|
2.55 |
|
|
|
1.50 |
|
EARNINGS
Our companys earnings over the five years to 30 June 2006 are summarised in Figure 13
below.
Figure 13: Our 5 year earnings history
|
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Year ended 30 |
|
|
Year ended |
|
|
Year ended |
|
|
Year ended |
|
|
Year ended |
|
|
|
June 2006 |
|
|
30 June 2005 |
|
|
30 June 2004 |
|
|
30 June 2003 |
|
|
30 June 2002 |
|
|
|
$m |
|
|
$m |
|
|
$m(1) |
|
|
$m(1) |
|
|
$m(1) |
|
|
Sales revenue |
|
|
22,750 |
|
|
|
22,161 |
|
|
|
20,737 |
|
|
|
20,495 |
|
|
|
20,196 |
|
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|
|
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|
|
EBITDA |
|
|
9,584 |
|
|
|
10,464 |
|
|
|
10,175 |
|
|
|
9,170 |
|
|
|
9,483 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit available to Telstra |
|
|
3,181 |
|
|
|
4,309 |
|
|
|
4,118 |
|
|
|
3,429 |
|
|
|
3,661 |
|
|
|
|
(1) |
|
During fiscal 2006, we adopted Australian equivalents to International
Financial Reporting Standards (A-IFRS). We restated our comparative information
for the year ended 30 June 2005. The previous financial years ended 30 June 2004,
30 June 2003 and 30 June 2002 are presented under the previous Australian
Generally Accepted Accounting Principles (AGAAP). |
REMUNERATION VS COMPANY PERFORMANCE
Telstras remuneration strategy aligns with the new
business strategy by assigning clear transformational and operational targets with longer term
objectives which will deliver increases in shareholder wealth.
As stated in our remuneration strategy, a significant proportion of the CEO and senior
executives total remuneration depends on the achievement of specific short and long term
targets.
STI results and payments
Financial measures have represented a significant percentage of the STI plan over the last five
years and therefore financial performance has a direct impact on the rewards received through the
plan.The financial measures:
|
|
provide a strong correlation with our ability to increase shareholder returns; |
|
|
|
have a direct impact on our bottom line; and |
|
|
|
are measures over which the executives can exercise control. |
The average STI received by senior executives as a percentage of the maximum achievable payment for
achieving those short term measures is reflected in Figure 14 below.
The calculation below is made by aggregating the actual STI payments to the CEO and senior
executives for the financial year and dividing that by the aggregate maximum achievable payments
for those same executives. The result is then expressed as a percentage of the maximum achievable
STI payment.
Figure 14: Average STI payment as a % of maximum payment
|
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Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
STI received |
|
|
73.8 |
% |
|
|
54.6 |
%(1) |
|
|
31.4 |
% |
|
|
41.1 |
% |
|
|
57.6 |
% |
|
|
|
(1). |
|
This includes both the cash and equity components for fiscal 2005. While the total
equity component is included in determining the above percentage, the value of the
rights to Telstra shares granted in fiscal 2005 will be reflected in remuneration over
the following 3 years as the shares vest over their performance period. |
A-7
Remuneration report
Relationship between company performance and STI payments
Figure 15 below demonstrates the relationship between the companys performance in the form of
EBITDA and the percentage of STI payments that were made in each fiscal year.
Figure 15: Relationship between company performance (EBITDA) and STI payments
LTI results and payments
Any LTI awarded to an executive is required to be reported in accordance with International
Financial Reporting Standards (IFRS). This requires a value to be attributed to the LTI equity
granted before vesting has occurred. That value is then amortised over the vesting period (ie the
five-year performance period for fiscal 2006 allocations). However, as vesting of any equity
allocated under the LTI plans is subject to a range of internal and external performance measures,
senior executives may or may not ultimately derive any value from these equity instruments.
As at 30 June 2006 the vesting status of LTI equity set out in Figure 16 below.
DETAILS OF SENIOR EXECUTIVES REMUNERATION
Detailed explanation of the various components of remuneration received by the CEO and
senior executives in fiscal 2006.
In this section we set out the remuneration of our CEO and the senior executives who are key
management personnel. These executives had authority and responsibility for planning, directing and
controlling the activities of Telstra and its controlled entities during
fiscal 2006. They also include the five highest remunerated executives.
Figure 17 on page 52 sets out the short term employee benefits, post-employment benefits and
share-based remuneration received during the fiscal year as calculated under applicable accounting
standards. It also details the remuneration components of those senior executives who ceased
employment with Telstra during fiscal 2006 and would otherwise have been included in this report.
Figure 18 on page 53 sets out the details of the annual STI for fiscal 2006, and Figure 19 on
page 53 sets out the amortised value of the CEO and senior executive allocations under the LTI
plans.
Remuneration received in fiscal 2006
The
remuneration of our key management personnel (excluding non-executive directors) are set out in
the following tables. In accordance with the requirements of AASB 124, the remuneration disclosures
for fiscal 2006 only include remuneration relating to the portion of the relevant periods that each
individual was considered a KMP. As a result this approach can distort year-on-year remuneration
comparisons.
Termination payments to Dr Switkowski in fiscal 2006
As specified in the remuneration report for fiscal 2005 Dr Switkowski ceased employment with the
company on 1 July 2005 and was entitled to receive termination payments in accordance with his
employment contract including:
|
|
a termination payment of 12 months fixed remuneration
$2,092,000; and |
|
|
|
accrued annual and long service leave $1,059,526.42. |
These payments have been aggregated and appear in Figure 17 on page 52 under Termination
benefits in accordance with the prescribed accounting standards.
Dr Switkowski also received a payment of $1,961,000 under the 2004/05 STI plan.This payment is not
included in Figure 17 on page 52 as it has previously been disclosed in the remuneration report for
fiscal 2005.
In addition, and consistent with last years remuneration report, Figure 21 on page 55 shows Dr
Switkowskis retained allocations of equity under the Deferred Remuneration and LTI plans.
Figure 16: LTI Status
|
|
|
|
|
|
|
|
|
|
Status of plan |
|
Result |
|
Next steps |
|
The fiscal 2001
plans (September 2000
and March 2001*) did
not meet the
performance
measure.
|
|
All instruments have lapsed.
|
|
The performance
period for these
plans expired in
fiscal 2006 and both
plans have
ceased. |
|
|
|
|
|
The fiscal 2002
plans (September 2001
and March 2002*) did
not meet the
performance measure in
the first quarter of
the performance
period.
|
|
Half of all allocations lapsed.
|
|
For September
2001, the performance
measures were
subsequently achieved
in fiscal 2005 and
the remaining half of
the allocations
vested. The March
2002 plan performance
measures are
currently below the
required performance
hurdle. |
|
|
|
|
|
The fiscal 2003
plan did not meet the
performance hurdle in
the first quarter of
the performance
period.
|
|
Half of all allocations lapsed.
|
|
The performance
measures are
currently below the
required performance
hurdle. |
|
|
|
|
|
Fiscal 2004, 2005
and 2006 plans have
yet to enter their
respective performance
periods.
|
|
No instruments have lapsed or vested yet.
|
|
Performance
measures have not yet
reached the
assessment
points. |
|
|
|
* |
|
March allocations were mid-cycle allocations to accommodate new executives. |
A-8
Remuneration report
Figure 17: Senior executives remuneration
|
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|
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|
|
Salary and Fees: Includes salary,
salary sacrificed benefits (other than
superannuation), leave provisions
and fringe benefits tax
|
|
|
|
Short Term Incentives:
Includes annual bonuses
payable in relation to
fiscal 2006
|
|
|
|
Non-monetary benefits: Such as
the value of goods and services
provided as well as expatriate
benefits including medical insurance,
housing, private air travel
|
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|
|
Other equity: Performance rights,
restricted shares & options granted under
Telstras LTI plans. This includes amounts
accrued for current and prior year LTI grants |
|
|
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Post- |
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|
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Other |
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|
|
employment |
|
|
Termination |
|
|
long term |
|
|
Equity settled |
|
|
|
|
|
|
|
|
Short term employee benefits |
|
|
benefits |
|
|
benefits |
|
|
benefits |
|
|
share-based payments |
|
|
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|
|
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|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued |
|
|
Short term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
Short term |
|
|
monetary |
|
|
|
|
|
|
Super- |
|
|
Termination |
|
|
long service |
|
|
incentive |
|
|
Deferred |
|
|
Other |
|
|
|
|
|
|
|
|
and
fees(1) |
|
|
incentives(2) |
|
|
benefits(3) |
|
|
Other(4) |
|
|
annuation(5) |
|
|
benefits |
|
|
leave |
|
|
shares(6) |
|
|
shares(7) |
|
|
equity(8) |
|
|
Total |
|
Name |
|
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Solomon Trujillo |
|
Commenced |
|
|
2,987,861 |
|
|
|
2,581,200 |
|
|
|
|
|
|
|
1,745,011 |
|
|
|
1,012,139 |
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
309,305 |
|
|
|
8,710,516 |
|
Chief Executive Officer |
|
1 July 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce Akhurst |
|
Ongoing |
|
|
984,974 |
|
|
|
1,519,035 |
|
|
|
11,740 |
|
|
|
|
|
|
|
188,026 |
|
|
|
|
|
|
|
29,325 |
|
|
|
276,443 |
|
|
|
115,592 |
|
|
|
650,036 |
|
|
|
3,775,171 |
|
Chief Executive Officer,
Sensis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kate McKenzie |
|
Appointed |
|
|
223,280 |
|
|
|
180,950 |
|
|
|
|
|
|
|
|
|
|
|
20,787 |
|
|
|
|
|
|
|
6,026 |
|
|
|
22,067 |
|
|
|
|
|
|
|
30,871 |
|
|
|
483,981 |
|
Group Managing Director, |
|
GMD 16 Jan 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telstra Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Moffatt |
|
Ongoing |
|
|
876,970 |
|
|
|
1,019,991 |
|
|
|
18,138 |
|
|
|
|
|
|
|
316,030 |
|
|
|
|
|
|
|
29,825 |
|
|
|
131,095 |
|
|
|
129,101 |
|
|
|
779,461 |
|
|
|
3,300,611 |
|
Group Managing Director,
Telstra Consumer Marketing &
Channels |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deena Shiff |
|
Ongoing |
|
|
645,857 |
|
|
|
768,951 |
|
|
|
6,062 |
|
|
|
|
|
|
|
116,643 |
|
|
|
|
|
|
|
20,000 |
|
|
|
155,829 |
|
|
|
37,438 |
|
|
|
214,391 |
|
|
|
1,965,171 |
|
Group Managing Director,
Telstra Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Stanhope |
|
Ongoing |
|
|
919,499 |
|
|
|
655,412 |
|
|
|
9,668 |
|
|
|
|
|
|
|
101,001 |
|
|
|
|
|
|
|
25,825 |
|
|
|
126,792 |
|
|
|
76,968 |
|
|
|
335,804 |
|
|
|
2,250,969 |
|
CFO and Group Managing
Director
Finance & Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Thodey |
|
Ongoing |
|
|
1,031,086 |
|
|
|
926,798 |
|
|
|
8,248 |
|
|
|
|
|
|
|
52,914 |
|
|
|
|
|
|
|
27,100 |
|
|
|
108,869 |
|
|
|
105,198 |
|
|
|
560,789 |
|
|
|
2,821,002 |
|
Group Managing Director,
Telstra Enterprise & Government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Winn |
|
Commenced |
|
|
1,280,944 |
|
|
|
1,408,918 |
|
|
|
1,685 |
|
|
|
1,101,907 |
|
|
|
10,814 |
|
|
|
|
|
|
|
32,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,836,446 |
|
Chief Operating Officer |
|
11 Aug 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUB-TOTAL |
|
|
|
|
8,950,471 |
|
|
|
9,061,255 |
|
|
|
55,541 |
|
|
|
2,846,918 |
|
|
|
1,818,354 |
|
|
|
|
|
|
|
245,279 |
|
|
|
821,095 |
|
|
|
464,297 |
|
|
|
2,880,657 |
|
|
|
27,143,867 |
|
Past Employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski |
|
Ceased 1 July 2005 |
|
|
5,451 |
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
281 |
|
|
|
3,151,526 |
(9) |
|
|
|
|
|
|
|
|
|
|
491,049 |
(10) |
|
|
4,516 |
(11) |
|
|
3,652,858 |
|
SUB-TOTAL |
|
|
|
|
5,451 |
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
281 |
|
|
|
3,151,526 |
|
|
|
|
|
|
|
|
|
|
|
491,049 |
|
|
|
4,516 |
|
|
|
3,652,858 |
|
TOTAL |
|
|
|
|
8,955,922 |
|
|
|
9,061,255 |
|
|
|
55,576 |
|
|
|
2,846,918 |
|
|
|
1,818,635 |
|
|
|
3,151,526 |
|
|
|
245,279 |
|
|
|
821,095 |
|
|
|
955,346 |
|
|
|
2,885,173 |
|
|
|
30,796,725 |
|
|
|
|
(1) |
|
Includes salary, salary sacrifice benefits (excluding salary sacrifice superannuation
which is included under Superannuation) and fringe benefits tax. |
|
(2) |
|
Short term incentive relates to performance in fiscal 2006 and is based on actual performance
for Telstra and the individual. |
|
(3) |
|
Includes the benefit of interest-free loans under TESOP97 and TESOP99, the value of
personal home security services provided by Telstra and the value of the personal use of
products and services
related to Telstra employment. |
|
(4) |
|
Includes payments made to executives on commencement of employment with Telstra and
relocation payments made in accordance with their relocation agreement and which are
classified as
remuneration under the accounting standards. |
|
(5) |
|
Represents company contributions to superannuation as well as any additional superannuation
contribution made through salary sacrifice by executives. |
|
(6) |
|
This represents the value of Short Term Incentive Shares allocated under the 2004/05 STI
Equity plan whereby 50% of the STI payment was provided as shares to be distributed over 3
years at 12
month intervals. The values shown represent the annualised value for fiscal 2006 in
accordance with the relevant accounting standards. |
|
(7) |
|
The value included in deferred shares relates to the current year amortised value of vested
and unvested shares issued in fiscal 2003 and fiscal 2004 under the Deferred Remuneration
Plan. The values
shown represent the annualised value for fiscal 2006 in accordance with the relevant accounting
standards |
|
(8) |
|
The value represents the annualised value of restricted shares, performance rights and options
as detailed in figure 21. The executive only receives value if the performance hurdles are met. |
|
(9) |
|
Includes payments made on cessation of employment with Telstra in accordance with his
employment contract. The payments include unused annual and long service leave and an
eligible
termination payment equal to 12 months fixed remuneration. |
|
(10) |
|
The value represents the remaining amortised value of deferred shares which has been brought
forward due to the early vesting of Deferred Shares following separation from Telstra. |
|
(11) |
|
The value represents the pro-rated amortised value of restricted shares, options and
performance rights following Dr Switkowskis separation from Telstra on 1 July 2005. |
A-9
Remuneration report
Figure 18: STI for fiscal 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Where the actual STI payment is less
than the maximum potential, (eg achieved
performance was Less than maximum performance
level) the difference is forfeited and
does not become payable in subsequent years.
|
|
|
|
The minimum value of the STI may be $0 where the
performance measures fail to meet the specified
threshold levels. |
|
|
|
Maximum |
|
|
|
|
|
|
% of the |
|
|
|
potential STI |
|
|
Actual STI |
|
|
maximum- |
|
Name |
|
($) |
|
|
($) |
|
|
potential |
|
Solomon Trujillo |
|
|
3,000,000 |
* |
|
|
2,581,200 |
|
|
|
86.0 |
% |
Bruce Akhurst |
|
|
1,642,200 |
|
|
|
1,519,035 |
|
|
|
92.5 |
% |
Kate McKenzie |
|
|
241,041 |
|
|
|
180,950 |
|
|
|
75.1 |
% |
David Moffatt |
|
|
1,670,200 |
|
|
|
1,019,991 |
|
|
|
61.1 |
% |
Deena Shiff |
|
|
1,120,000 |
|
|
|
768,951 |
|
|
|
68.7 |
% |
John Stanhope |
|
|
1,055,294 |
|
|
|
655,412 |
|
|
|
62.1 |
% |
David Thodey |
|
|
1,517,600 |
|
|
|
926,798 |
|
|
|
61.1 |
% |
Gregory Winn |
|
|
2,030,000 |
|
|
|
1,408,918 |
|
|
|
69.4 |
% |
|
|
|
* |
|
$1,500,000 for strategic plan & $1,500,000 based on fiscal 2006 performance measures. |
Tax Equalisation of foreign earned income
As prefaced in their employment contracts, Mr Trujillo and Mr Winn received re-imbursement for the
additional personal income tax payable due to a double taxing in Australia and the United States as
a result of the international taxation rules covering foreign earned income. This only applies for
fiscal 2006 as changes to the international taxation provisions come into effect on 1 July 2006 and
no further payments will be required.
Equity valuations
Figure 19 below provides the amortised accounting value of all LTI equity instruments, including
allocations of equity made from
fiscal 2001 2006.
The senior executives have not received any monetary value from any of these equity grants
apart from the September 2001
Performance Rights plan and the September 2002 Deferred Share plan (see Figure 20 on page 54),
either because the LTI performance measures were not satisfied during the performance period or the
performance period is continuing. The value attributed to the unvested instruments allocated on 8
September 2000 and 16 March 2001 only reflects the notional value until 8 September 2005 and 16
March 2006, respectively, when they lapsed.
Where
allocations have been made to the CEO and senior executives for
fiscal 2002, 2003, 2004, 2005 and 2006 and have not yet vested, the CEO and senior executives may or may not derive any value
from these allocations as they are still subject to performance measures and the performance period
has not yet expired.
Figure 19: Amortised accounting value of all LTI equity for fiscal 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortised
value of LTI equity
allocations(1)(2) |
|
|
Total |
|
|
|
|
|
|
|
Performance |
|
|
Restricted |
|
|
|
|
|
|
Options |
|
|
rights(3) |
|
|
shares |
|
|
|
|
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Solomon Trujillo |
|
|
|
|
|
|
309,305 |
|
|
|
|
|
|
|
309,305 |
|
Bruce Akhurst |
|
|
290,185 |
|
|
|
354,513 |
|
|
|
5,338 |
|
|
|
650,036 |
|
Kate McKenzie |
|
|
|
|
|
|
30,871 |
|
|
|
|
|
|
|
30,871 |
|
David Moffatt |
|
|
367,050 |
|
|
|
391,010 |
|
|
|
21,401 |
|
|
|
779,461 |
|
Deena Shiff |
|
|
82,016 |
|
|
|
131,691 |
|
|
|
684 |
|
|
|
214,391 |
|
John Stanhope |
|
|
113,080 |
|
|
|
220,808 |
|
|
|
1,916 |
|
|
|
335,804 |
|
David Thodey |
|
|
241,368 |
|
|
|
319,421 |
|
|
|
|
|
|
|
560,789 |
|
Gregory Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski(4) |
|
|
1,743 |
|
|
|
2,737 |
|
|
|
36 |
|
|
|
4,516 |
|
|
|
|
(1) |
|
The value of each instrument is calculated by applying option valuation
methodologies as described in note 31 to the financial statements and is then amortised
over the relevant vesting period. The values included in the table relate to the current
year amortised value of all LTI instruments detailed as other equity in the remuneration
table. The valuations used in current year disclosures are based on the same underlying
assumptions as the previous year. Please refer to note 31 for details on our employee
share plans. |
|
(2) |
|
Where a vesting scale is used, the table reflects the maximum achievable allocation. |
|
(3) |
|
The September 2002 plan failed to satisfy the performance measure in the first quarter
of the performance period. In accordance with the terms of the plan half the maximum
potential allocation of performance rights lapsed on 6 December 2005. Although an
accounting value is recorded above, the executives received no value from this plan. |
|
(4) |
|
This represents the pro-rated amortised value of LTI instruments up to date of
separation in accordance with accounting standards. These equity instruments are still
subject to
meeting performance hurdles and Dr Switkowski may or may not derive any value from these
instruments. |
A-10
Remuneration report
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 2006 are set out in
Figure 20 below and Figure 21 on page 55. As the values shown in Figure 20 represent the accounting
value, the executive may not have actually received these amounts. The value of lapsed instruments
in Figure 20 is based on the accounting value. This value is included to address our reporting
obligations only. Where these instruments lapse, there is no benefit at all to the executive, and
therefore no transfer of any equity or equity-related instrument. All instruments that have lapsed
were subjected to the external performance measure of Total Shareholder Return (TSR).
The actual number of LTI instruments that were granted, exercised and lapsed in fiscal 2006 is set
out in Figure 21 on page 55. Of the performance rights allocated in fiscal 2006,100% of the
allocations were granted and none were forfeited, lapsed or vested during fiscal 2006. However, all
unvested equity instruments may lapse in future years if the performance measures are not
satisfied.
Figure 20: Value of equity instruments granted, exercised and lapsed in fiscal 2006
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rights granted, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised |
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
Lapsed |
|
|
and lapsed |
|
|
|
Granted
during period
(1) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($) |
|
|
Remuneration(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solomon Trujillo |
|
|
2,482,011 |
|
|
|
28.5 |
% |
|
|
|
|
|
|
|
|
|
|
2,482,011 |
|
Bruce Akhurst |
|
|
436,714 |
|
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
436,714 |
|
Kate McKenzie |
|
|
164,838 |
|
|
|
34.1 |
% |
|
|
|
|
|
|
|
|
|
|
164,838 |
|
David Moffatt |
|
|
444,159 |
|
|
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
444,159 |
|
Deena Shiff |
|
|
297,846 |
|
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
|
297,846 |
|
John Stanhope |
|
|
384,589 |
|
|
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
|
384,589 |
|
David Thodey |
|
|
403,578 |
|
|
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
|
403,578 |
|
Gregory Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This represents the accounting value at grant date of performance rights granted in
fiscal 2006. |
|
(2) |
|
Total Remuneration is the sum of short term benefits, post employment benefits and share based
payments detailed in Figure 19
on page 53. |
A-11
Remuneration report
Figure 21: Number of equity-based instruments granted, vested, exercised and lapsed
|
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|
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|
Vested but |
|
|
|
|
|
Balance at |
|
|
Granted |
|
|
Exercised |
|
|
Lapsed |
|
|
Balance at |
|
|
not exercised |
|
|
|
Instrument |
|
1 July 2005 |
|
|
during
period |
(1) |
|
during period |
|
|
during period |
(2) |
|
30 June 2006 |
(3) |
|
during period |
(4) |
|
Solomon Trujillo |
|
Performance Rights |
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
|
|
|
|
|
836,821 |
|
|
|
|
|
|
Bruce Akhurst |
|
Performance Rights |
|
|
473,600 |
|
|
|
147,240 |
|
|
|
59,000 |
|
|
|
66,900 |
|
|
|
494,940 |
|
|
|
|
|
|
|
Restricted shares |
|
|
39,000 |
|
|
|
|
|
|
|
|
|
|
|
39,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
805,000 |
|
|
|
|
|
|
|
|
|
|
|
188,000 |
|
|
|
617,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
135,300 |
|
|
|
|
|
|
|
66,900 |
|
|
|
|
|
|
|
68,400 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
120,967 |
|
|
|
|
|
|
|
|
|
|
|
120,967 |
|
|
|
|
|
|
Kate McKenzie |
|
Performance Rights |
|
|
36,000 |
|
|
|
55,576 |
|
|
|
|
|
|
|
|
|
|
|
91,576 |
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
18,905 |
|
|
|
|
|
|
|
|
|
|
|
18,905 |
|
|
|
|
|
|
David Moffatt |
|
Performance Rights |
|
|
521,600 |
|
|
|
149,750 |
|
|
|
71,000 |
|
|
|
76,300 |
|
|
|
524,050 |
|
|
|
|
|
|
|
Restricted shares |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
890,000 |
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
740,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
152,400 |
|
|
|
|
|
|
|
76,300 |
|
|
|
|
|
|
|
76,100 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
57,365 |
|
|
|
|
|
|
|
|
|
|
|
57,365 |
|
|
|
|
|
|
Deena Shiff |
|
Performance Rights |
|
|
151,600 |
|
|
|
100,420 |
|
|
|
17,000 |
|
|
|
19,800 |
|
|
|
215,220 |
|
|
|
|
|
|
|
Restricted shares |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
202,200 |
|
|
|
|
|
|
|
|
|
|
|
24,200 |
|
|
|
178,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
42,300 |
|
|
|
|
|
|
|
19,800 |
|
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
68,188 |
|
|
|
|
|
|
|
|
|
|
|
68,188 |
|
|
|
|
|
|
John Stanhope |
|
Performance Rights |
|
|
290,000 |
|
|
|
129,666 |
|
|
|
23,000 |
|
|
|
23,800 |
|
|
|
372,866 |
|
|
|
|
|
|
|
Restricted shares |
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
310,000 |
|
|
|
|
|
|
|
|
|
|
|
69,000 |
|
|
|
241,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
73,200 |
|
|
|
|
|
|
|
23,800 |
|
|
|
|
|
|
|
49,400 |
|
|
|
|
|
|
|
Incentive shares |
|
|
|
|
|
|
55,482 |
|
|
|
|
|
|
|
|
|
|
|
55,482 |
|
|
|
|
|
|
David Thodey |
|
Performance Rights |
|
|
427,200 |
|
|
|
136,068 |
|
|
|
51,000 |
|
|
|
59,000 |
|
|
|
453,268 |
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
534,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
534,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
121,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,600 |
|
|
|
59,000 |
|
|
|
Incentive shares |
|
|
|
|
|
|
47,639 |
|
|
|
|
|
|
|
|
|
|
|
47,639 |
|
|
|
|
|
|
Greg Winn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zygmunt Switkowski |
|
Performance Rights |
|
|
1,643,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,643,600 |
|
|
|
|
|
|
|
Restricted shares |
|
|
96,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,000 |
|
|
|
|
|
|
|
Options |
|
|
1,810,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,810,000 |
|
|
|
|
|
|
|
Deferred shares |
|
|
500,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,700 |
|
|
|
|
|
|
|
|
|
(1) |
|
Instruments granted during fiscal 2006 relate to the annual LTI plan for fiscal 2006
and the STI plan for fiscal 2005. |
|
(2) |
|
No equity instruments granted during fiscal 2006 lapsed in fiscal 2006. |
|
(3) |
|
This represents the number of vested and unvested equity instruments which have not been
exercised or lapsed as at 30 June 2006, or in the case of Dr
Switkowski, the date of cessation with Telstra. |
|
(4) |
|
The number of instruments that vested during fiscal 2006 relate to the September 2002 Deferred
Shares and had not been exercised at 30 June 2006. |
A-12
Remuneration report
Figure 22: Summary of contract arrangements for CEO and senior executives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed remuneration |
|
|
Additional |
|
|
|
Termination |
Name |
|
Term of agreement |
|
at 30 June 2006 |
|
|
conditions |
|
Notice Period(1) |
|
payment(2) |
|
Solomon Trujillo |
|
Ongoing |
|
$ |
3,000,000 |
|
|
nil |
|
30 days |
|
12 months(3) |
Bruce Akhurst |
|
Ongoing |
|
$ |
1,173,000 |
|
|
nil |
|
6 months |
|
12 months |
Kate McKenzie |
|
Ongoing |
|
$ |
530,000 |
|
|
nil |
|
6 months |
|
12 months |
David Moffatt |
|
Ongoing |
|
$ |
1,193,000 |
|
|
nil |
|
6 months |
|
12 months |
Deena Shiff |
|
Ongoing |
|
$ |
800,000 |
|
|
nil |
|
6 months |
|
12 months |
John Stanhope |
|
Ongoing |
|
$ |
1,033,000 |
|
|
nil |
|
6 months |
|
12 months |
David Thodey |
|
Ongoing |
|
$ |
1,084,000 |
|
|
nil |
|
6 months |
|
12 months |
Gregory Winn |
|
11 August 2005 to 10 August 2007(4) |
|
$ |
1,450,000 |
|
|
$500,000 sign on bonus paid 12 Sept 2005. Contract completion payments(5) |
|
3 months |
|
6 months + pro-rata at target
STI + pro-rata contract completion payment (where pro-rata performance met) |
Zygmunt Switkowski |
|
1 September 2003 to 31 December 2007 |
|
$ |
2,092,000 |
|
|
nil |
|
6 months |
|
12 months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Upon notice being given Telstra can require the executive to work through the notice
period or terminate employment immediately by providing payment in lieu of notice. |
|
(2) |
|
Payment is calculated on fixed remuneration as at date of termination. There will be no
payment if termination is a result of serious misconduct or
redundancy (in which case
Telstras redundancy policy applies). |
|
(3) |
|
A 24 month termination payment applied where MrTrujillos employment was terminated in
the first 12 months. As this period has now expired the standard 12 month
termination payment will apply. |
|
(4) |
|
Where both parties mutually agree, the contract can be extended by 12 months until 8 August
2008. Where extended, and termination occurs between 2-3 years of employment,
Mr. Winn is paid the lesser of: remaining fixed remuneration to completion or 6 months fixed
remuneration and pro-rata 3rd year contract completion payment (where pro-rata
performance is met). |
|
(5) |
|
Contract completion payments are in lieu of LTI participation (due to fixed term contract).
Payment of up to $1.8m subject to performance against pre-determined measures.
Where contract is extended an additional contract completion payment of $500,000 is available. |
2 CONTRACT ARRANGEMENTS
The key terms and conditions for the CEO and senior executive service contracts are set out in
Figure 22 above.
A contract typically outlines the components of remuneration paid to the executive but does not
prescribe how remuneration levels are to be modified from year to year.
Generally, contracts can be terminated by either the company or senior executive providing 6 months
notice. Upon notice being given Telstra can require the executive to remain employed by Telstra for
the notice period or terminate employment immediately by providing payment in lieu of notice.
RELOCATION COSTS ASSOCIATED WITH OVERSEAS SENIOR EXECUTIVES
During the year the Board implemented significant changes to the executive management team. In
addition to Solomon Trujillo joining Telstra as the Chief Executive Officer, a number of key
executives were recruited to drive the major transformational changes required under the new
business strategy.
Where executives have been recruited from overseas, appropriate reward to secure their employment
was negotiated. This can include overseas relocation benefits in accordance with our relocation
policies or the executives contract of employment.
The range of benefits and services provided to these senior executives under those arrangements may
include:
|
|
travel to Australia for themselves and their immediate family on
commencement; |
|
|
|
a defined number of round-trip air tickets to their place of origin for
themselves and their family; |
|
|
furniture storage and removal costs; |
|
|
rental assistance while in Australia for an initial period of time; |
|
|
a relocation allowance to cover incidental and miscellaneous
expenses; |
|
|
tax equalisation of foreign earned income. |
NON-EXECUTIVE DIRECTORS
REMUNERATION POLICY AND STRATEGY
In order to maintain their independence and impartiality,
non-executive directors are remunerated with fees which are not linked to company performance. The
total fee pool is approved by shareholders.
Our non-executive directors are remunerated in accordance with our constitution, which provides for
the following:
|
|
an aggregate limit of fees is set and varied only by approval of a
resolution of shareholders at the annual general meeting; and |
|
|
the Board determines how those fees are allocated among the
directors within the fee pool. |
A-13
Remuneration report
In
recognition of the increased time and responsibility of non-executive directors, on 25 October
2005, shareholders approved an increase to the directors fee pool to $2,000,000 per annum
(previously $1,320,000 per annum). As a result of this increase:
|
|
fees paid to Board members, including additional fees paid for
service on Board committees were increased; and |
|
|
existing retirement benefits to non-executive directors, employed
before 1 July 2002, were integrated into the overall fee pool. |
In determining the required level for the fee pool and individual director fee levels, the
Committee makes recommendations to the Board, and in the case of the fee pool, the Board makes
a recommendation to shareholders, taking into account:
|
|
the companys existing remuneration policies; |
|
|
independent professional advice; |
|
|
the fee pools of other comparable companies (based on company
size using market capitalisation); |
|
|
fees paid to individual directors by comparable companies; |
|
|
|
the general time commitment and responsibilities involved; |
|
|
the risks associated with discharging the duties attaching to the
role of director; and |
|
|
the level of fees necessary to attract and retain directors of a
suitable calibre. |
In order to maintain their independence and impartiality, the remuneration of the non-executive
directors is not linked to the performance of the company, except through their participation in
the Directshare plan, which is explained below.
REMUNERATION STRUCTURE
Non-executive directors receive a total remuneration package based on their role on the Board and
their committee memberships. Non-executive directors must sacrifice at least 20% of their fees into
Telstra shares to align their interests with those of our shareholders.
All Board and committee fees, including superannuation, paid to non-executive directors in fiscal
2006 remain within the new fee pool. Board and Committee fees were increased in fiscal 2006 to take
into account the changes to retirement benefits made following the 2005 Annual General Meeting and
prevailing market rates for directors fees. Following these increases the Board and Committee fees
payable to directors in fiscal 2006 are set out below.
Board fees
|
|
|
|
|
|
|
|
|
|
|
Chairman |
|
|
Director |
|
|
Board |
|
$ |
450,000 |
|
|
$ |
130,000 |
|
Committee fees
Board members, excluding the Chairman, are paid the following additional fees for service on
Board committees:
|
|
|
|
|
|
|
|
|
Committee |
|
Chairman |
|
|
Member |
|
|
Audit Committee |
|
$ |
70,000 |
|
|
$ |
35,000 |
|
Remuneration Committee |
|
$ |
14,000 |
|
|
$ |
7,000 |
|
Nomination Committee |
|
|
|
|
|
$ |
7,000 |
|
Technology Committee |
|
$ |
7,000 |
|
|
$ |
7,000 |
|
The Board considered these fees appropriate given the additional time requirements of committee
members, the complex matters before the committees and, in the case of the Audit Committee, an
increased number of committee meetings and governance requirements.
Components of the total remuneration package (TRP)
The Board has determined that a non-executive directors total remuneration will consist of three
components: cash, shares (through the Directshare plan) and superannuation. Each year directors are
asked to specify the allocation of their total remuneration between these three components, subject
to the following conditions:
|
|
at least 30% must be taken as cash; |
|
|
at least 20% must be taken as Directshares; and |
|
|
the minimum superannuation guarantee contribution must be
made, where applicable. |
The Board will continue to periodically review its approach to the non-executive directors
remuneration structure to ensure it compares with general industry practice and best practice
principles of corporate governance.
Equity compensation Directshare
Directshare
aims to encourage a longer-term perspective and to align the directors interests with
those of our shareholders.
Through our Directshare plan, non-executive directors are required to sacrifice a minimum of 20% of
their TRP towards the acquisition of restricted Telstra shares. The shares are purchased on-market
and allocated to the participating non-executive director at market price. The shares are held in
trust and are unable to be dealt with for 5 years unless the participating director ceases to be a
director of Telstra.
If a non-executive director chooses to increase their participation in the Directshare plan, they
take a greater percentage of TRP in Telstra shares, and their cash component is reduced. As the
allocation of Directshares is simply a percentage of the non-executive directors TRP, it is not
subject to the satisfaction of a performance measure.
Directors are restricted from entering into arrangements which effectively operate to limit the
economic risk of their shareholdings allocated under the Directshare plan during the period the
shares are held in trust.
Superannuation
Mandatory superannuation contributions are included as part of each directors total remuneration.
Directors may choose to increase the proportion of their remuneration taken as superannuation,
subject to legislative requirements.
RETIREMENT BENEFITS
In accordance with good corporate governance practice, we do not provide retirement benefits for
directors appointed after 30 June 2002. However, non-executive directors appointed before that date
were eligible to receive retirement benefits on retiring as a director.
At the annual general meeting on 25 October 2005, we explained that as a result of the increase in
the directors fee pool, retirement benefits would cease to accrue. This means that directors who
were appointed before 30 June 2002 will receive cash equal to the benefits accrued to 25 October
2005. These benefits will be indexed by reference to changes in Telstras share price between that
date and the date the directors retirement takes effect.
A-14
Remuneration report
This approach:
|
|
aligns directors interests with those of stakeholders and with the
long term success of the company; |
|
|
subjects the value of the retirement benefit to movement in
Telstras share price and dividend payments; and |
|
|
maintains the principle that this payment be made when the
director retires, rather than provide an early cash payout of the
retirement benefits at the time these arrangements were approved. |
Figure 23 below shows the increase in retirement benefits payable to non-executive directors
appointed before 30 June 2002 and the value of the payment to the director if he or she had retired
on 30 June 2006.
OTHER BENEFITS
Directors also receive reimbursement for reasonable travelling, accommodation and other expenses
incurred in travelling to or from meetings of the Board or committees, or when otherwise engaged on
company business. We also provide directors with telecommunications and other services and
equipment to assist them in performing their duties. From time to time, we may also make products
and services available to directors without charge to allow them to familiarise themselves with our
products and services and with 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 24 on page 59.
Figure 23: Non-executive directors increases in retirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment to |
|
|
|
|
|
|
|
Increase |
|
|
Total |
|
|
Indexed increase |
|
|
director if he/she |
|
|
|
Balance |
|
|
in value to |
|
|
value to |
|
|
in value to |
|
|
had retired on |
|
|
|
as at 2005 |
|
|
25 October 05 |
|
|
25 October 05 |
|
|
30 June 06 |
|
|
30 June 2006 |
(1) |
|
|
(a) |
|
|
(b) |
|
|
(a) + (b) |
|
|
(c) - (a) |
|
|
(c) |
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Donald G McGauchie |
|
|
340,673 |
|
|
|
76,169 |
|
|
|
416,842 |
|
|
|
60,094 |
|
|
|
400,767 |
|
John E Fletcher |
|
|
126,138 |
|
|
|
13,829 |
|
|
|
139,967 |
|
|
|
8,437 |
|
|
|
134,575 |
(2) |
Belinda J Hutchinson |
|
|
103,794 |
|
|
|
16,584 |
|
|
|
120,378 |
|
|
|
11,943 |
|
|
|
115,737 |
|
Catherine B Livingstone |
|
|
143,074 |
|
|
|
18,059 |
|
|
|
161,133 |
|
|
|
11,849 |
|
|
|
154,923 |
|
Charles Macek |
|
|
117,949 |
|
|
|
17,315 |
|
|
|
135,264 |
|
|
|
12,099 |
|
|
|
130,048 |
|
John W Stocker |
|
|
342,176 |
|
|
|
27,273 |
|
|
|
369,449 |
|
|
|
13,026 |
|
|
|
355,202 |
|
|
|
|
(1) |
|
The value is calculated by multiplying the number of notional shares plus additional
notional sharesallocated for re-invested dividends by $3.68 being the volume weighted
average price of Telstra shares traded on 30 June 2006. |
|
(2) |
|
John Fletcher resigned as a
director on 30 June 2006 and was paid this amount in accordance with the retirmenet benefit
policy.This amount is also included as a termination
payment in Figure 24 on page 59. |
A-15
Remuneration report
DETAILS OF NON-EXECUTIVE DIRECTORS REMUNERATION
Figure 24 below provides the details of all remuneration paid to our non-executive directors in
fiscal 2006.
Figure 24: Non-executive directors details of remuneration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity settled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
share-based |
|
|
|
|
|
|
Short term employee benefits |
|
Post-employment benefits |
|
benefits |
|
payments |
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary |
|
monetary |
|
|
|
|
|
Super- |
|
Retirement |
|
Termination |
|
Direct |
|
|
|
|
|
|
and Fees(1) |
|
benefits(2) |
|
Other |
|
annuation |
|
benefits |
|
benefits(3) |
|
share |
|
Total |
Name |
|
|
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
Donald G
McGauchie |
|
Ongoing |
|
|
312,236 |
|
|
|
3,078 |
|
|
|
|
|
|
|
12,158 |
|
|
|
60,094 |
|
|
|
|
|
|
|
81,099 |
|
|
|
468,665 |
|
Chairman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John T Ralph(4) |
|
Retired COB |
|
|
17,474 |
|
|
|
380 |
|
|
|
|
|
|
|
|
(5) |
|
|
|
|
|
|
462,548 |
|
|
|
|
|
|
|
480,402 |
|
Deputy Chairman |
|
11 Aug 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony J Clark(4) |
|
Retired COB |
|
|
9,015 |
|
|
|
458 |
|
|
|
|
|
|
|
970 |
|
|
|
|
|
|
|
278,846 |
|
|
|
|
|
|
|
289,289 |
|
Director |
|
11Aug 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E Fletcher(6) |
|
Resigned COB |
|
|
94,209 |
|
|
|
2,775 |
|
|
|
|
|
|
|
8,056 |
|
|
|
|
|
|
|
134,575 |
|
|
|
26,422 |
|
|
|
266,037 |
|
Director |
|
30 June 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Belinda J
Hutchinson |
|
Ongoing |
|
|
100,611 |
|
|
|
2,288 |
|
|
|
|
|
|
|
18,551 |
|
|
|
11,943 |
|
|
|
|
|
|
|
29,740 |
|
|
|
163,133 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catherine Livingstone |
|
Ongoing |
|
|
113,063 |
|
|
|
2,288 |
|
|
|
|
|
|
|
10,998 |
|
|
|
11,849 |
|
|
|
|
|
|
|
31,015 |
|
|
|
169,213 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Macek |
|
Ongoing |
|
|
123,032 |
|
|
|
2,748 |
|
|
|
|
|
|
|
11,227 |
|
|
|
12,099 |
|
|
|
|
|
|
|
33,565 |
|
|
|
182,671 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W Stacker |
|
Ongoing |
|
|
110,817 |
|
|
|
2,288 |
|
|
|
|
|
|
|
39,006 |
|
|
|
13,026 |
|
|
|
|
|
|
|
37,390 |
|
|
|
202,527 |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Willcox(7) |
|
Commenced |
|
|
11,872 |
|
|
|
|
|
|
|
|
|
|
|
1,069 |
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
16,176 |
|
Director |
|
17 May 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Zeglis(7) |
|
Commenced |
|
|
12,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,235 |
|
|
|
16,176 |
|
Director |
|
17 May 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
905,270 |
|
|
|
16,303 |
|
|
|
|
|
|
|
102,035 |
|
|
|
109,011 |
|
|
|
875,969 |
|
|
|
245,701 |
|
|
|
2,254,289 |
|
|
|
|
(1) |
|
Includes fees for membership on Board committees. |
|
(2) |
|
Includes the value of the personal use of products and services.
|
|
(3) |
|
These payments relate to eligible retirement benefits payable on cessation as Directors of Telstra. |
|
(4) |
|
Mr Ralph and Mr Clark retired as Directors of Telstra effective 11 August 2005. |
|
(5) |
|
Undercurrent superannuation legislation Mr Ralph did not receive superannuation benefits as he had passed his 70th birthday. |
|
(6) |
|
Mr Fletcher resigned as a Director of Telstra on 30 June 2006. |
|
(7) |
|
Mr Willcox and Mr Zeglis were appointed as Directors on 17 May 2006.Mr Zeglis is based in the United States. |
There are no individual contracts for service with our non-executive directors other than as
described above in relation to post-employment benefits.
A-16
|
|
|
20 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra 3 Share Offer Final Canadian Offering Memorandum
In accordance with the listing rules, I attach a copy of an announcement for release to the
market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Canadian Confidential Offering Memorandum
Private Placement in Canada
Telstra Corporation Limited
(A.B.N. 33 051 775 556)
ordinary shares
in the form of instalment receipts
This Canadian Offering Memorandum constitutes an offering of the securities described
herein only in those jurisdictions and to those persons where and to whom they may be lawfully
offered for sale, and therein only by persons permitted to sell such securities. This Canadian
Offering Memorandum is not, and under no circumstances is it to be construed as, an advertisement
or a public offering of the securities
referred to in this document in Canada. No securities commission or similar regulatory
authority in Canada has reviewed or in any way passed upon this Canadian Offering Memorandum or the
merits of the securities described herein and any representation to the contrary is an offence.
The official daily noon rate of exchange between the Australian dollar (the A$) and the
Canadian dollar (the C$) as reported by the Bank of Canada on November 17, 2006, the latest
practicable date, was approximately A$1.14 = C$1.00.
Price
First Instalment: A$2.10 per share
Final Instalment: A$1.60 per share
Final Price: A$3.70 per share
Joint Global Coordinators
|
|
|
|
|
|
|
|
|
|
ABN AMRO Rothschild
|
|
Goldman Sachs JBWere
|
|
UBS Investment Bank |
Co-lead Managers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Citigroup
|
|
Credit Suisse
Lehman Brothers
|
|
Daiwa Securities SMBC
Morgan Stanley
|
|
JPMorgan |
Co-Manager
RBC Capital Markets
The date of this Canadian Offering Memorandum is November 18, 2006.
CANADIAN OFFERING MEMORANDUM
(British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Québec)
The Commonwealth of Australia (the Commonwealth) is hereby offering 3,693,955,817 shares of
Telstra Corporation Limited (Telstra) in a global offering (the Global Offering). The Global
Offering includes an offering of 467,785,111 shares by the Commonwealth to qualified institutional
buyers in the United States in reliance on the exemption from registration under the U.S.
Securities Act of 1933, as amended (the Securities Act), afforded by Rule 144A thereunder (the
U.S. Offering), and to institutional investors in the rest of the world (excluding Australia, New
Zealand and Japan), including to accredited investors in Canada, in reliance on Regulation S under
the Securities Act (the ROW Offering and, together with the U.S. Offering, the International
Offering). The ROW Offering includes the offer of shares to investors in Japan by way of a public
offer without listing under a Japanese Prospectus (the Japanese Offering). In addition, the
Global Offering will consist of a concurrent offering by the Commonwealth of shares by way of a
general public offering to retail and institutional investors in Australia and New Zealand (the
Australian Offering). The institutional component of the Australian Offering is referred to as
the Australian Institutional Offering and the International Offering and the Australian
Institutional Offering are referred to collectively as the Institutional Offering.
Purchasers of the shares must pay for them in two instalments. The first instalment is due on
the closing of the Global Offering and the second instalment is due on or before May 29, 2008
(Sydney time). Purchasers may prepay the final instalment of A$1.60 per share, in Australian
dollars, before its due date. After payment of the first instalment, purchasers will receive
instalment receipts. After payment of the final instalment, purchasers will receive shares.
Attached hereto and forming part of this Canadian Offering Memorandum is the institutional
offering memorandum dated November 18, 2006 (the Offering Memorandum) prepared in connection with
the Institutional Offering. Except as otherwise provided herein, capitalised terms used in this
document without definition have the meanings assigned to them in the Offering Memorandum. The
offering of shares in Canada is being made solely by this Canadian Offering Memorandum and any
decision to purchase shares should be based solely on information contained in this document. No
person has been authorised to give any information or to make any representations concerning this
offering other than as contained herein. This Canadian Offering Memorandum constitutes an offering
of the shares described herein in the Canadian provinces of British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario and Québec only. Canadian investors are advised to review the
sections entitled Relationship between Shares and Instalment Receipts, Description of Shares and
our Constitution, Description of the Instalment Receipts and Trust Deed and Plan of
Distribution contained within the Offering Memorandum for further details relating to the shares,
the instalment receipts, over-allotment options and the inter-relationships and allocations between
the U.S. Offering, the ROW Offering, the Australian Offering and the Japanese Offering.
This Canadian Offering Memorandum is for the confidential use of only those persons to whom it
is delivered by the Joint Global Coordinators, the Co-Lead Managers, the Co-Manager and their
respective affiliates or an authorised dealer in connection with the offering of shares in the
provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Québec. The
Commonwealth, Telstra and the Joint Global Coordinators, the Co-Lead Managers, the Co-Manager and
their respective affiliates reserve the right to reject all or part of any offer to purchase shares
for any reason or allocate to any purchaser less than all of the shares for which it has
subscribed.
Investing in the shares involves a degree of risk. Canadian investors should refer to the
section entitled Risk Factors contained within the Offering Memorandum for additional
information.
RESPONSIBILITY
Except as otherwise expressly required by applicable law or as agreed to by contract, no
representation, warranty, or undertaking (express or implied) is made and no responsibilities or
liabilities of any kind or nature
2
whatsoever are accepted by the Commonwealth, the Joint Global Coordinators, the Co-Lead Managers,
the Co-Manager and their respective affiliates or any dealer as to the accuracy or completeness of
the information contained within this Canadian Offering Memorandum or any other information
provided by Telstra in connection with this offering.
RESALE RESTRICTIONS
The distribution of shares in Canada is being made on a private placement basis only and is
exempt from the requirement that the Commonwealth and Telstra prepare and file a prospectus with
the relevant Canadian regulatory authorities. Accordingly, any resale of shares must be made in
accordance with applicable securities laws which may require resales to be made in accordance with
prospectus and registration requirements or exemptions from the prospectus and registration
requirements.
Telstra is a reporting issuer as such term is defined under applicable Canadian securities
legislation in each province in which the shares may be offered. Canadian investors are advised
that Telstra currently does not intend to file a prospectus or similar document with any securities
regulatory authority in Canada qualifying the resale of the shares to the public in any province or
territory of Canada. Canadian investors are advised to seek legal advice prior to any resale of the
shares both within and outside of Canada and to review the section entitled Notice to Investors
contained within the Offering Memorandum.
REPRESENTATIONS OF PURCHASERS
Each Canadian investor who purchases shares will be deemed to have represented to the
Commonwealth, Telstra, the Joint Global Coordinators, the Co-Lead Managers, the Co-Manager and
their respective affiliates and any dealer who sells shares to such purchaser that:
|
(a) |
|
the offer and sale of the shares was made exclusively through the final version of the Canadian
Offering Memorandum and was not made through an advertisement of the shares in any printed media of
general and regular paid circulation, radio, television or telecommunications, including electronic
display, or any other form of advertising in Canada; |
|
|
(b) |
|
such purchaser has reviewed and acknowledges the terms referred to above under the section
entitled Resale Restrictions; |
|
|
(c) |
|
where required by law, such purchaser is purchasing as principal, or is deemed to be purchasing
as principal in accordance with applicable securities laws of the province in which such purchaser
is resident, for its own account and not as agent for the benefit of another person; and |
|
|
(d) |
|
such purchaser, or any ultimate purchaser for which such purchaser is acting as agent, is
entitled under applicable Canadian securities laws to purchase shares without the benefit of a
prospectus qualified under such securities laws, and without limiting the generality of the
foregoing: |
|
(i) |
|
in the case of a purchaser resident in the province of British Columbia, Alberta,
Saskatchewan, Manitoba or Québec, such purchaser is an accredited investor as defined in
section 1.1 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106);
and |
|
|
(ii) |
|
in the case of a purchaser resident in Ontario, such purchaser: |
|
(1) |
|
is an accredited investor, other than an individual, as defined in section 1.1 of
NI 45-106 and is purchasing shares from a dealer registered as an international dealer
in Ontario within the meaning of section 98(4) of the Regulation to the Securities Act
(Ontario); or |
|
|
(2) |
|
is an accredited investor, including an individual, as defined in section 1.1 of
NI 45-106 and is purchasing shares from a dealer registered as an investment dealer or
limited market dealer in Ontario within the meaning of section 98(5) and section 98(6)
of the Regulation to the Securities Act (Ontario), respectively; and |
3
|
(e) |
|
such purchaser is not a person created or used solely to purchase or hold the shares as an
accredited investor as described in paragraph (m) of the definition of accredited investor in
section 1.1 of NI 45-106. |
Each Canadian investor who purchases shares in Canada will also be deemed to have represented,
warranted and agreed as set forth under the section entitled Notice to Investors contained within
the Offering Memorandum and is advised to review carefully the materials contained thereunder.
In addition, each resident of Ontario who purchases shares, by the purchasers receipt of a
purchase confirmation, will be deemed to have represented to the Commonwealth, Telstra, the Joint
Global Coordinators, the Co-Lead Managers, the Co-Manager and their respective affiliates any
dealer from whom such purchase confirmation was received, that such purchaser:
|
(a) |
|
has been notified by the Commonwealth and Telstra that |
|
(i) |
|
the Commonwealth and Telstra may be required to provide personal information pertaining to
the purchaser as required to be disclosed in Schedule I of Form 45-106F1 under NI 45-106
(including its name, address, telephone number and the number and value of any shares
purchased) (personal information), which Form 45-106F1 is required to be filed by the
Commonwealth and Telestra under NI 45-106; |
|
|
(ii) |
|
such personal information may be delivered to the Ontario Securities Commission (the
OSC) in accordance with NI 45-106; |
|
|
(iii) |
|
such personal information is collected indirectly by the OSC under the authority granted
to it under the securities legislation of Ontario; |
|
|
(iv) |
|
such personal information is collected for the purposes of the administration and
enforcement of the securities legislation of Ontario; and |
|
|
(v) |
|
the public official in Ontario who can answer questions about the OSCs indirect collection
of such personal information is the Administrative Assistant to the Director of Corporate
Finance at the OSC, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8,
Telephone: (416) 593-8086; and |
|
(b) |
|
has authorized the indirect collection of the personal information by the OSC. |
Furthermore, each Canadian purchaser acknowledges that its name, address, telephone number and
other specified information, including the number of shares it has purchased and the aggregate
purchase price paid by the purchaser, may be disclosed to other Canadian securities regulatory
authorities and may become available to the public in accordance with the requirements of
applicable Canadian laws. By purchasing the shares, each Canadian purchaser consents to the
disclosure of such information.
ADDITIONAL INFORMATION
Telstra is a reporting issuer in each province where the shares may be offered and, as such,
files reports and other information, including audited financial statements for the five (5) year
period ended June 30, 2006, with provincial securities regulatory authorities in Canada. These
materials are available over the internet at www.sedar.com.
EXCHANGE RATE INFORMATION AND OTHER LIMITATIONS AFFECTING INVESTORS
Financial Statements
Telstra prepares its financial statements in Australian dollars, the legal currency of tender
in the Commonwealth of Australia. The summary consolidated financial information for Telstra for
the five (5) year period ended June 30, 2006 included within the Canadian Offering Memorandum has
been prepared from Telstras audited financial statements. Canadian investors are referred to the
section entitled Additional Information contained
4
within this Canadian Offering Memorandum and should review the section entitled Selected
Consolidated Financial and Statistical Data contained within the Offering Memorandum.
Historical Foreign Exchange Rate Information
The official daily noon rate of exchange between the Australian dollar and the Canadian dollar
as reported by the Bank of Canada on November 17, 2006, was approximately A$1.14 =C$1.00.
The Offering Memorandum contains financial information for the period ended June 30 for the
years 2002 through 2006. The official average daily noon rate of exchange between the Australian
dollar and the Canadian dollar as reported by the Bank of Canada on June 30, 2002, June 30, 2003,
June 30, 2004, June 30, 2005 and June 30, 2006 was, respectively, approximately A$1.17 = C$1.00,
A$1.10 = C$1.00, A$1.07 = C$1.00, A$1.07 = C$1.00 and A$1.21 = C$1.00. The official average daily
noon rate of exchange between the Australian dollar and the Canadian dollar as reported by the Bank
of Canada for each of the years ended June 30, 2002, June 30, 2003, June 30, 2004, June 30, 2005
and June 30, 2006 was, respectively, approximately A$1.22 = C$1.00, A$1.14 = C$1.00, A$1.04 =
C$1.00, A$1.06 = C$1.00 and A$1.15 = C$1.00.
The following table sets forth, for the periods indicated, certain information concerning the
official rate of exchange for the Australian dollar and the Canadian dollar as reported by the Bank
of Canada. Such rates were not used by Telstra in the preparation of its financial statements or
other financial information included in this Canadian Offering Memorandum and this table should not
be construed as a representation of the Australian dollar, at present, could be converted at the
rate indicated.
A$=C$
|
|
|
|
|
Year ended December 31, |
|
At Period End |
|
Average Rate(1) |
2001 |
|
1.23 |
|
1.25 |
2002 |
|
1.12 |
|
1.17 |
2003 |
|
1.03 |
|
1.10 |
2004 |
|
1.07 |
|
1.04 |
2005 |
|
1.17 |
|
1.08 |
|
|
|
(1) |
|
The average of the official rate on the working days of the relevant year. |
Exchange Controls and Foreign Ownership Australia
Canadian investors are referred to the section entitled Exchange Controls and Foreign
Ownership contained within the Offering Memorandum. Canadian investors are advised to consult with
their own legal advisers concerning foreign exchange controls and regulations in Australia,
restrictions on the level of foreign ownership of shares in Telstra and the consequences of an
investment in the shares in their particular circumstances.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Withholding Tax
Australia has concluded a tax treaty with Canada for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income (the Canada-Australia Income Tax
Convention). Under the Canada-Australia Income Tax Convention, dividends paid to a shareholder of
Telstra who is regarded as a resident of Canada may be subject to Australian dividend withholding
tax at a rate not exceeding 15% of the gross dividend or 5% in the case of a franked dividend paid
to a corporate shareholder that directly holds at least 10% of the voting power in Telstra.
Fully franked dividends (being a dividend which is franked) paid to residents of Canada are
not subject to dividend withholding tax under current Australian law. This is notwithstanding the
terms of the Canada-Australia Income Tax Convention.
5
Dividends paid to a non-resident shareholder to the extent that they are not fully franked are
generally subject to dividend withholding tax at the rate of 30% (unless reduced under the
provisions of a relevant double tax treaty).
In the case of a resident of Canada, the reduction under Article 10 of the Canada-Australia
Income Tax Convention to 15% requires that the shares are not effectively connected with a
permanent establishment or a fixed base of the resident of Canada in Australia through which the
resident of Canada carries on business in Australia or provides independent personal services.
The unfranked part of any dividends paid by Telstra to a resident of Canada will be subject to
dividend withholding tax. Telstra will deduct dividend withholding tax from the relevant dividend
paid and pay the balance to the resident of Canada.
Fully franked dividends paid to residents of Canada and dividends that have been subject to
dividend withholding tax are not subject to any further Australian income tax.
Treatment of gains
In general, as the holding of an instalment receipt constitutes an interest in an Australian
resident trust estate, under the current capital gains tax provisions, a capital gain on the
disposal of instalment receipts by tax nonresidents will be subject to Australian income tax.
Under the current capital gains tax provisions, in general, a capital gain on disposal of
shares by tax nonresidents should not be subject to Australian income tax where the tax
non-residents holding, together with the holding of associates, over a prescribed period is less
than 10% of issued shares in Telstra.
The Canada-Australia Income Tax Convention may exempt a gain from taxation, if the gain
represents business profits and the resident of Canada does not, amongst other things, have a
permanent establishment in Australia to which those business profits are attributable. The
Canada-Australia Income Tax Convention specifically excludes capital gains from business profits.
Residents of Canada who wish to rely on the Canada-Australia Income Tax Convention for relief from
liability to pay Australian tax are urged to consult their tax advisers.
Under the proposed changes to the Australian capital gains tax provisions, a capital gain from
an instalment receipt or a share by a resident of Canada should be subject to Australian income tax
only in limited circumstances. This is, in general terms, where the value of the relevant interest
is wholly or principally attributable to Australian real property. Residents of Canada should seek
their own advice in relation to the potential impact of the proposed changes to take into account
their own circumstances.
For further information on the relevant Australian income tax considerations associated with
the payment of distributions by Telstra and the future disposal of the shares, Canadian investors
should see the section entitled Taxation Australian Taxation contained within the Offering
Memorandum for further details relating to taxation of payments in respect of the shares and
instalment receipts in Australia.
Taxation and Eligibility for Investment
Any discussion of taxation and related matters contained in this Canadian Offering Memorandum
does not purport to be a comprehensive description of all the tax considerations that may be
relevant to a
decision to purchase the shares by Canadian investors and, in particular, does not address
Canadian tax considerations. Canadian purchasers of the shares should consult their own legal and
tax advisers with respect to the tax consequences of an investment in the shares in their
particular circumstances and with respect to the eligibility of the shares for investment by the
purchaser under relevant Canadian federal and provincial legislation and regulations.
RIGHTS OF ACTION FOR DAMAGES OR RESCISSION
Securities legislation in certain of the Canadian provinces provides purchasers of securities
pursuant to this Canadian Offering Memorandum with a remedy for damages or rescission, or both, in
addition to any other rights they may have at law, where this Canadian Offering Memorandum and any
amendment to it contains a misrepresentation. Where used
herein,
misrepresentation means an
untrue statement of a material fact or an
6
omission to state a material fact that is required to be stated or that is necessary to make any
statement not misleading in light of the circumstances in which it was made. These remedies, or
notice with respect to these remedies, must be exercised or delivered, as the case may be, by the
purchaser within the time limits prescribed by applicable securities legislation.
Ontario
Section 130.1 of the Securities Act (Ontario) (the Ontario Act) provides that every
purchaser of securities pursuant to an offering memorandum (such as this Canadian Offering
Memorandum) shall have a statutory right of action for damages or rescission against the issuer and
any selling security holder on whose behalf the distribution is made in the event that the offering
memorandum contains a misrepresentation. A purchaser who purchases securities offered by an
offering memorandum during the period of distribution has, without regard to whether the purchaser
relied upon the misrepresentation, a right of action for damages or, alternatively, while still the
owner of the securities, for rescission against the issuer and the selling security holders,
provided that:
|
(a) |
|
if the purchaser exercises its right of rescission, it shall cease to have a right of action
for damages against the issuer or any selling security holders; |
|
|
(b) |
|
the issuer and the selling security holders, if any, will not be liable if they prove that the
purchaser purchased the securities with knowledge of the misrepresentation; |
|
|
(c) |
|
the issuer and the selling security holders, if any, will not be liable for all or any portion
of damages that they can prove do not represent the depreciation in value of the securities as a
result of the misrepresentation relied upon; and |
|
|
(d) |
|
in no case shall the amount recoverable exceed the price at which the securities were offered. |
Section 138 of the Ontario Act provides that no action shall be commenced to enforce these
rights more than:
|
(a) |
|
in the case of an action for rescission, 180 days after the date of the transaction that
gave rise to the cause of action; or |
|
|
(b) |
|
in the case of an action for damages, the earlier of: |
|
(i) |
|
180 days after the date that the purchaser first had knowledge of the facts giving
rise to the cause of action; or |
|
|
(ii) |
|
three years after the date of the transaction that gave rise to the cause of action. |
This Canadian Offering Memorandum is being delivered in reliance on exemptions from the
prospectus requirements contained under NI 45-106 (the accredited investor exemption). The rights
referred to in section 130.1 of the Ontario Act do not apply in respect of an offering memorandum
(such as this Canadian Offering Memorandum) delivered to a prospective purchaser in connection with
a distribution made in reliance on the accredited investor exemption if the prospective purchaser
is:
|
(a) |
|
a Canadian financial institution or a Schedule III bank (each as defined in NI 45-106); |
|
|
(b) |
|
the Business Development Bank of Canada incorporated under the Business Development Bank of
Canada Act (Canada); or |
|
|
(c) |
|
a subsidiary of any person referred to in paragraphs (a) and (b), if the person owns all of
the voting securities of the subsidiary, except the voting securities required by law to be
owned by directors of that subsidiary. |
Saskatchewan
The Securities Act, 1988 (Saskatchewan) (the Saskatchewan Act) provides that, subject to
certain limitations, where an offering memorandum (such as the Canadian Offering Memorandum),
together with any amendment to the offering memorandum sent or delivered to a purchaser contains a
misrepresentation, a purchaser who purchases a security covered by the offering memorandum or an
amendment to the offering memorandum is
7
deemed to have relied on that misrepresentation, if it was a misrepresentation at the time of
purchase, and has a right of action for damages against:
|
(a) |
|
the issuer and the selling security holder on whose behalf the distribution is made; |
|
|
(b) |
|
every promoter and director of the issuer and the selling security holder, as the case may
be, at the time the offering memorandum or any amendment to it was sent or delivered; |
|
|
(c) |
|
every person or company whose consent has been filed respecting the offering, but only with
respect to reports, opinions or statements that have been made by them; |
|
|
(d) |
|
every person or company that, in addition to the persons or companies mentioned in clause
(a) to (c), signed the offering memorandum or the amendment to the offering memorandum; and |
|
|
(e) |
|
every person who or company that sells securities on behalf of the issuer and the selling
security holder under the offering memorandum or amendment to the offering memorandum. |
Alternatively, where the purchaser purchased the security from the issuer or a selling
security holder, the purchaser may elect to exercise a right of rescission against the issuer or
selling security holder and, when the purchaser so elects, the purchaser shall have no right of
action for damages against the issuer or selling security holder.
In addition, where an individual makes a verbal statement to a prospective purchaser that
contains a misrepresentation relating to the security purchased and the verbal statement is made
either before or contemporaneously with the purchase of the security, the purchaser is deemed to
have relied on the misrepresentation, if it was a misrepresentation at the time of purchase and has
a right of action damages against individual who made the verbal statement.
No action may be commenced to enforce any of the foregoing rights:
|
(a) |
|
in the case of rescission, more than 180 days after the date of the transaction that gave
rise to the cause of action; and |
|
|
(b) |
|
in the case of any other action, other than an action for rescission, more than the earlier
of (i) one year after the purchaser first had knowledge of the facts giving rise to the cause
of action, or (ii) six years after the date of the transaction that gave rise to the cause of
action. |
The Saskatchewan Act also provides a purchaser who has received an amended offering memorandum
delivered in accordance with subsection 80.1(3) of the Saskatchewan Act, has a right to withdraw
from the agreement to purchase the securities by delivering a notice to the person or company that
is selling the
securities, indicating the purchasers intention not to be bound by the purchase agreement,
provided such notice is delivered by the purchaser within two business days of receiving the
amended offering memorandum. The foregoing summaries are subject to the express provisions of the
Ontario Act and the Saskatchewan Act, respectively, and the rules, regulations and other
instruments thereunder, and reference is made to the complete text of such provisions contained
therein. Such provisions may contain limitations and statutory defences on which the Commonwealth,
Telstra and the Joint Global Coordinators, the Co-Lead Managers, the Co-Manager and their
respective affiliates may rely. The enforceability of these rights may be limited as described
herein under the section entitled Enforcement of Legal Rights.
The rights discussed above are in addition to and without derogation from any other right or
remedy which purchasers may have at law.
8
ENFORCEMENT OF LEGAL RIGHTS
Telstra is organized in Australia. All or substantially all of the directors and officers of
Telstra and the experts named herein, may be located outside of Canada and, as a result, it may not
be possible for Canadian purchasers to effect service of process within Canada upon Telstra or such
persons. A substantial portion of the assets of Telstra and such other persons may be located
outside of Canada and, as a result, it may not be possible to satisfy a judgement against Telstra
or such persons in Canada or to enforce a judgement obtained in Canadian courts against Telstra or
persons outside of Canada.
The Commonwealth is foreign sovereign state. Therefore, it may not be possible for Canadian
investors to effect service of process within Canada upon the Commonwealth or to satisfy a
judgement against the Commonwealth in Canada or to enforce a judgement obtained in Canadian courts
against the Commonwealth.
LANGUAGE OF DOCUMENTS
Upon receipt of this document, each Canadian investor hereby confirms that it has expressly
requested that all documents evidencing or relating in any way to the sale of the securities
described herein (including for greater certainty any purchase confirmation or any notice) be drawn
up in the English language only. Par la réception de ce document, chaque investisseur canadien
confirme par les présentes quil a expressément exigé que tous les documents faisant foi ou se
rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes
(incluant, pour plus de certitude, toute confirmation dachat ou tout avis) soient rédigés en
anglais seulement.
9
[INTENTIONALLY LEFT BLANK]
10
|
|
|
24 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Appendix 3Y Change in directors interest notices
In accordance with the listing rules, I attach an announcement for release to the market.
The table below summarises the purchase of instalment receipts by Telstra directors under the
Telstra 3 share offer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct interest |
|
Indirect Interest |
|
Total IRs |
D McGauchie |
|
|
27,800 |
|
|
|
3,000 |
|
|
|
30,800 |
|
S Trujillo |
|
|
250,000 |
|
|
|
|
|
|
|
250,000 |
|
B Hutchinson |
|
|
|
|
|
|
155,000 |
|
|
|
155,000 |
|
C Livingstone |
|
|
10,000 |
|
|
|
10,000 |
|
|
|
20,000 |
|
C Macek |
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
J Stocker |
|
|
|
|
|
|
24,150 |
|
|
|
24,150 |
|
P Willcox |
|
|
|
|
|
|
12,500 |
|
|
|
12,500 |
|
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
BELINDA HUTCHINSON |
|
|
|
Date of last notice
|
|
24 AUGUST 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest
|
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
(including registered holder) |
|
|
Note: Provide details of the circumstances giving rise to the
relevant interest. |
|
|
|
|
|
Date of change
|
|
24 NOVEMBER 2006 |
|
|
|
No. of securities held prior to change
|
|
DIRECT 38,912 (FPO) |
|
|
INDIRECT 40,426 (FPO) |
|
|
|
Class
|
|
INSTALMENT RECEIPTS |
|
|
|
Number acquired
|
|
155,000 |
|
|
|
Number disposed
|
|
NIL |
|
|
|
Value/Consideration
|
|
$310,000 |
Note: If consideration is non-cash, provide details and
estimated valuation |
|
|
|
|
|
No. of securities held after change
|
|
DIRECT 38,912 (FPO) |
|
|
INDIRECT 40,426 (FPO) & 155,000 (IR) |
|
|
|
Nature of change
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
Example: on-market trade, off-market trade, exercise of
options, issue of securities under dividend reinvestment plan,
participation in buy-back |
|
|
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
CATHERINE LIVINGSTONE |
|
|
|
Date of last notice
|
|
24 AUGUST 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest
|
|
CHANGE TO INDIRECT AND DIRECT INTERESTS |
|
|
|
Nature of indirect interest
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
(including registered holder) |
|
|
Note: Provide details of the circumstances giving rise to the
relevant interest. |
|
|
|
|
|
Date of change
|
|
24 NOVEMBER 2006 |
|
|
|
No. of securities held prior to change
|
|
DIRECT 11,637 (FPO) |
|
|
INDIRECT 27,800 (FPO) |
|
|
|
Class
|
|
INSTALMENT RECEIPTS |
|
|
|
Number acquired
|
|
DIRECT 10,000 |
|
|
INDIRECT 10,000 |
|
|
|
Number disposed
|
|
NIL |
|
|
|
Value/Consideration
|
|
$40,000 |
Note: If consideration is non-cash, provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change
|
|
DIRECT 11,637 (FPO) &10,000 (IR) |
|
|
INDIRECT 27,800 (FPO) & 10,000 (IR) |
|
|
|
Nature of change
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
Example: on-market trade, off-market trade, exercise of options,
issue of securities under dividend reinvestment plan, participation
in buy-back |
|
|
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
CHARLES MACEK |
|
|
|
Date of last notice
|
|
24 AUGUST 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest
|
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
(including registered holder) |
|
|
Note: Provide details of the circumstances giving rise to the
relevant interest. |
|
|
|
|
|
Date of change
|
|
24 NOVEMBER 2006 |
|
|
|
No. of securities held prior to change
|
|
DIRECT NIL |
|
|
INDIRECT 53,704 (FPO) |
|
|
|
Class
|
|
INSTALMENT RECEIPTS |
|
|
|
Number acquired
|
|
50,000 |
|
|
|
Number disposed
|
|
NIL |
|
|
|
Value/Consideration
|
|
$100,000 |
Note: If consideration is non-cash, provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change
|
|
DIRECT NIL |
|
|
INDIRECT 53,704 (FPO) & 50,000 (IR) |
|
|
|
Nature of change
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
Example: on-market trade, off-market trade, exercise of options,
issue of securities under dividend reinvestment plan, participation
in buy-back |
|
|
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
DONALD MCGAUCHIE |
|
|
|
Date of last notice
|
|
24 AUGUST 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest
|
|
CHANGE TO DIRECT AND INDIRECT INTERESTS |
|
|
|
Nature of indirect interest
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
(including registered holder) |
|
|
Note: Provide details of the circumstances giving rise to the
relevant interest. |
|
|
|
|
|
Date of change
|
|
24 NOVEMBER 2006 |
|
|
|
No. of securities held prior to change
|
|
DIRECT 1,866 (FPO) |
|
|
INDIRECT 68,278 (FPO) |
|
|
|
Class
|
|
INSTALMENT RECEIPTS |
|
|
|
Number acquired
|
|
DIRECT 27,800 |
|
|
INDIRECT 3,000 |
|
|
|
Number disposed
|
|
NIL |
|
|
|
Value/Consideration
|
|
$61,600 |
Note: If consideration is non-cash, provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change
|
|
DIRECT 1,866 (FPO) & 27,800 (IR) |
|
|
INDIRECT 68,278 (FPO) & 3,000 (IR) |
|
|
|
Nature of change
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
Example: on-market trade, off-market trade, exercise of options,
issue of securities under dividend reinvestment plan, participation
in buy-back |
|
|
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
JOHN STOCKER |
|
|
|
Date of last notice
|
|
24 AUGUST 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest
|
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
(including registered holder) |
|
|
Note: Provide details of the circumstances giving rise to the
relevant interest. |
|
|
|
|
|
Date of change
|
|
24 NOVEMBER 2006 |
|
|
|
No. of securities held prior to change
|
|
DIRECT 2,953 (FPO) |
|
|
INDIRECT 99,985 (FPO) |
|
|
|
Class
|
|
INSTALMENT RECEIPTS |
|
|
|
Number acquired
|
|
24,150 |
|
|
|
Number disposed
|
|
NIL |
|
|
|
Value/Consideration
|
|
$48,300 |
Note: If consideration is non-cash, provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change
|
|
DIRECT 2,953 (FPO) |
|
|
INDIRECT 99,985 (FPO) & 24,150 (IR) |
|
|
|
Nature of change
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
Example: on-market trade, off-market trade, exercise of options,
issue of securities under dividend reinvestment plan, participation
in buy-back |
|
|
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
SOLOMON TRUJILLO |
|
|
|
Date of last notice
|
|
4 JULY 2005 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest
|
|
CHANGE TO DIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
(including registered holder) |
|
|
Note: Provide details of the circumstances giving rise to the
relevant interest. |
|
|
|
|
|
Date of change
|
|
24 NOVEMBER 2006 |
|
|
|
No. of securities held prior to change
|
|
DIRECT NIL |
|
|
INDIRECT NIL |
|
|
|
Class
|
|
INSTALMENT RECEIPTS |
|
|
|
Number acquired
|
|
250,000 |
|
|
|
Number disposed
|
|
NIL |
|
|
|
Value/Consideration
|
|
$525,000 |
Note: If consideration is non-cash, provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change
|
|
DIRECT 250,000 (IR) |
|
|
INDIRECT NIL |
|
|
|
Nature of change
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
Example: on-market trade, off-market trade, exercise of options,
issue of securities under dividend reinvestment plan, participation
in buy-back |
|
|
Part 2 Change of directors interests in contracts
NIL
Rule 3.19A.2
Appendix 3Y
Change of Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
Name of entity TELSTRA CORPORATION LIMITED
ABN 33 051 775 556
We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
PETER WILLCOX |
|
|
|
Date of last notice
|
|
24 AUGUST 2006 |
Part 1 Change of directors relevant interests in securities
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
Direct or indirect interest
|
|
CHANGE TO INDIRECT INTERESTS ONLY |
|
|
|
Nature of indirect interest
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
(including registered holder) |
|
|
Note: Provide details of the circumstances giving rise to the
relevant interest. |
|
|
|
|
|
Date of change
|
|
24 NOVEMBER 2006 |
|
|
|
No. of securities held prior to change
|
|
DIRECT NIL |
|
|
INDIRECT 31,897 (FPO) |
|
|
|
Class
|
|
INSTALMENT RECEIPTS |
|
|
|
Number acquired
|
|
12,500 |
|
|
|
Number disposed
|
|
NIL |
|
|
|
Value/Consideration
|
|
$25,000 |
Note: If consideration is non-cash, provide details and estimated
valuation |
|
|
|
|
|
No. of securities held after change
|
|
DIRECT NIL |
|
|
INDIRECT 31,897 (FPO) & 12,500 (IR) |
|
|
|
Nature of change
|
|
PURCHASE OF T3 INSTALMENT RECEIPTS |
Example: on-market trade, off-market trade, exercise of options,
issue of securities under dividend reinvestment plan, participation
in buy-back |
|
|
Part 2 Change of directors interests in contracts
NIL
|
|
|
24 November 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra Foreign Ownership Regulations
Following on from the adoption of Telstras new constitution, attached please for release to
the market is a copy of the updated Foreign Ownership Regulations.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Effective from 14 November 2006
Approved under Management Delegations
Telstra Foreign Ownership Regulations
|
|
|
Telstra Corporation Limited
Foreign Ownership Regulations |
Contents
Table of contents
|
|
|
|
|
|
|
1 |
|
Definitions |
|
|
2 |
|
|
|
1.1 Definitions |
|
|
2 |
|
|
|
1.2 Members who will be deemed Foreign Members |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Foreign Register |
|
|
4 |
|
|
|
2.1 Establishment of Foreign Register |
|
|
4 |
|
|
|
2.2 New Zealand branch share register and ADR program |
|
|
4 |
|
|
|
2.3 Reliance on information provided by members and in Foreign Register |
|
|
4 |
|
|
|
|
|
|
|
|
3 |
|
Obligations of members to notify company of Foreign Holding |
|
|
5 |
|
|
|
3.1 Members to provide information regarding foreign ownership of shares |
|
|
5 |
|
|
|
3.2 Initial notification obligations acquisitions through CHESS |
|
|
5 |
|
|
|
3.3 Initial notification obligations acquisitions other than through CHESS |
|
|
5 |
|
|
|
3.4 Continuing notification obligations |
|
|
5 |
|
|
|
3.5 Consequences of a failure to notify |
|
|
6 |
|
|
|
3.6 Number of shares deemed to be in a members Foreign Holding |
|
|
7 |
|
|
|
|
|
|
|
|
4 |
|
Mixed Members to endeavour to use different HINs or SRNs |
|
|
7 |
|
|
|
|
|
|
|
|
5 |
|
Procedures for Unacceptable Individual Foreign-Ownership Situation |
|
|
7 |
|
|
|
5.1 Directors power to dispose of shares |
|
|
7 |
|
|
|
5.2 Treatment of proceeds of sale |
|
|
8 |
|
|
|
|
|
|
|
|
6 |
|
Procedures for Unacceptable Aggregate Foreign-Ownership Situation |
|
|
8 |
|
|
|
6.1 Procedures when Aggregate Foreign Ownership Limit exceeded |
|
|
8 |
|
|
|
6.2 Foreign Members must dispose of Breach Shares |
|
|
8 |
|
|
|
6.3 Directors power to dispose of Breach Shares |
|
|
9 |
|
|
|
6.4 Determining priority among Foreign Members date on which shares considered registered |
|
|
9 |
|
|
|
6.5 Treatment of foreign to foreign transactions |
|
|
10 |
|
|
|
|
|
|
|
|
7 |
|
Procedures when Individual Foreign-Ownership Limit exceeded |
|
|
11 |
|
|
|
|
|
|
|
|
8 |
|
Telstras obligations to notify the Exchange |
|
|
11 |
|
|
|
8.1 Obligation to notify Exchange on exceeding certain limit |
|
|
11 |
|
|
|
8.2 Obligation to notify Exchange when cease to exceed certain limit |
|
|
11 |
|
|
|
|
|
|
|
|
9 |
|
Co-operation with TIRT |
|
|
11 |
|
|
|
|
|
|
|
|
10 |
|
Share registrar may act on the companys behalf |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
Schedules |
|
|
|
|
|
|
|
|
|
|
|
|
|
TIRT Regulations |
|
|
14 |
|
Telstra Foreign Ownership Regulations page 1
1 |
|
Definitions |
|
1.1 |
|
Definitions |
|
|
|
Capitalised terms used but not defined below have the meaning given in the companys
constitution. The meanings of the terms used in this document are set out below. |
|
|
|
Term |
|
Meaning |
|
ADRs
|
|
American Depository Receipts |
|
|
|
Aggregate Foreign
|
|
the meaning given in regulation 8.1 |
Ownership Limit |
|
|
|
|
|
Breach Shares
|
|
the meaning given in regulations 6.1(b) and regulation 7 |
|
|
|
CHESS
|
|
the Clearing House Electronic Subregister System |
|
|
|
CHESS participant
|
|
a participant in CHESS |
|
|
|
Disposal Notice
|
|
a notice issued by the directors to a Foreign Member under regulations 5.1(a) or
6.1(b) containing the information set out in regulation 5.1(c) |
|
|
|
Divestment Date
|
|
the last day of a period specified in a Disposal Notice as the date by which
shares must be disposed or the date determined under regulation 6.2, as the
case may be |
|
|
|
Domestic Member
|
|
a member who in relation to a HIN or SRN holds only Domestic Shares. Such a
member is to be considered a Domestic Member in relation to that HIN or SRN
only |
|
|
|
Foreign Member
|
|
(a) a Foreign Person or an Associate of a Foreign Person who holds an
interest in the shares registered in the name of that member; |
|
|
|
(b) the registered holder of shares in which a Foreign Person or an Associate
of a Foreign Person has an interest; and |
|
|
|
(c) any person who is deemed a Foreign Member under regulation 1.2 or TIRT
Regulation 4. |
|
|
|
Foreign Ownership
Notification Form
|
|
the form required to be lodged by certain new members upon initially acquiring
shares in the company under regulation 3.3 |
Telstra Foreign Ownership Regulations page 2
|
|
|
|
|
1 Definitions |
|
|
|
Term |
|
Meaning |
|
IRs
|
|
the meaning given in the companys constitution |
|
|
|
level of foreign
ownership
|
|
the meaning given in regulation 8.11 |
|
|
|
Non-Commonwealth
Shares
|
|
the total number of shares in the company held by persons other than the
Commonwealth |
|
|
|
Notification Date
|
|
the meaning given in regulation 6.4(a) |
|
|
|
Special SRNs
|
|
the meaning given in regulation 6.1(a) |
|
|
|
Specified Day
|
|
the meaning given in regulation 6.1(a) |
|
|
|
TIRT
|
|
Telstra Instalment Receipt Trustee |
|
|
|
TIRT Regulations
|
|
the regulations relating to the Telstra Instalment Receipt Trustee and foreign
ownership set out in the schedule to these regulations |
|
|
|
Warning Notice
|
|
a notice issued by the directors to a Foreign Member under regulation 5.1(a)
informing the Foreign Member that the Foreign Member may be required to
dispose of shares |
1.2 |
|
Members who will be deemed Foreign Members2 |
|
(a) For the purposes of these regulations, the following persons shall be deemed a Foreign
Member: |
|
(1) |
|
the depository for the ADRs or its custodian or nominee; |
|
|
(2) |
|
those persons holding an interest in shares represented by ADRs; |
|
|
(3) |
|
members holding shares registered on any New Zealand branch share register,
in respect of those shares only; |
|
|
(4) |
|
Mixed Members in respect of their Foreign Holding only (unless the directors
determine otherwise); |
|
|
(5) |
|
members: |
|
(A) |
|
whose registered address is not in Australia; and |
|
|
(B) |
|
who the directors elect to treat as a Foreign Member because the
member is required, but fails to return a Foreign Ownership
Notification Form within the time period specified in regulation 3.3(a)
or 3.4(c), as the case may be; and |
|
|
|
1 |
|
See also TIRT Regulation 5.2, which applies as long as IRs are on issue. |
|
2 |
|
See also TIRT Regulation 4, which applies as long as IRs are on issue. |
Telstra Foreign Ownership Regulations page 3
|
|
|
|
|
2 Foreign Register |
|
(6) |
|
members who the directors elect to treat as a Foreign Member because a response
has not been received from the member under regulation 3.4 (other than regulation 3.4(c))
within 30 days after the date the response was required by that regulation. |
2 |
|
Foreign Register |
|
2.1 |
|
Establishment of Foreign Register |
|
(a) |
|
The directors may establish and maintain a Foreign Register which will record, amongst
other things, those members who are Foreign Members and the number of shares in the
Foreign Holding of each Foreign Member. |
|
(b) |
|
The Foreign Register does not form part of the Register of the company. |
|
(c) |
|
The Foreign Register may be prepared or kept by recording or storing the information by
means of a mechanical, electronic or other device. |
|
2.2 |
|
New Zealand branch share register and ADR program |
|
(a) |
|
The directors may determine that only shares which are not, and may not become,
subject to a Warning Notice or a Disposal Notice under regulation 5.1(a) may be: |
|
(1) |
|
recorded or remain on any New Zealand branch share register; or |
|
|
(2) |
|
transferred into the ADR program, |
|
|
and may: |
|
|
(3) |
|
decline to record on the New Zealand branch share register or transfer into the
ADR program; or |
|
|
(4) |
|
in the case of shares already recorded on the New Zealand branch share
register, remove to the companys Register, |
|
|
shares which they believe, or are concerned, may become, subject to a Warning Notice
or a Disposal Notice. |
|
(b) |
|
Notwithstanding regulation 2.2(a), shares may only be transferred onto the New Zealand
branch share register or into the ADR program if: |
|
(1) |
|
Disposal Notices have not been issued and are not able to be issued in relation
to the relevant shares; or |
|
(2) |
|
the transfer would not result in the shares being placed in a Special SRN in
accordance with regulation 6.1. |
2.3 |
|
Reliance on information provided by members and in Foreign
Register |
|
(a) |
|
The information in the Foreign Register is to be taken as correct unless proven otherwise. |
|
(b) |
|
The directors may rely on information in the Foreign Register when forming a belief as to
whether an Unacceptable Foreign Ownership Situation exists. |
|
(c) |
|
For the purposes of the Foreign Register, the directors and the company will be entitled
to rely on information provided by CHESS participants, members and persons acting or
purporting to act on their behalf, TIRT and the registrar of TIRTs Foreign Register under
these regulations or otherwise. |
Telstra Foreign Ownership Regulations page 4
|
|
|
|
|
3 Obligations of members to notify company of Foreign Holding |
3 |
|
Obligations of members to notify company of Foreign Holding |
|
3.1 |
|
Members to provide information regarding foreign ownership of
shares
|
|
|
|
Members must provide the directors with information regarding the foreign ownership of
their shares at the times and in the manner set out in this regulation 3. |
|
3.2 |
|
Initial notification obligations acquisitions through CHESS |
|
|
|
If shares in the company are initially acquired through CHESS, the CHESS participant
must provide the information required by the ASTC Settlement Rules to ensure that the
company is notified whether the CHESS participant will be a Foreign Member or a Mixed
Member. |
|
3.3 |
|
Initial notification obligations acquisitions other than through
CHESS |
|
(a) |
|
If, for any reason, shares in the company are initially acquired other than through CHESS
and the acquirer will be a Foreign Member or a Mixed Member, the member (on its own
behalf or through an agent) must complete and return a Foreign Ownership Notification
Form within 5 business days after the registration of the acquisition of the shares, except
that: |
|
(1) |
|
acquirers of shares to be registered on the New Zealand branch share register;
and |
|
|
(2) |
|
the depository for the ADRs (or its custodian or nominee), |
|
|
do not need to return a Foreign Ownership Notification Form. |
|
(b) |
|
For the avoidance of doubt, a Foreign Ownership Notification Form is only required in
respect of a members initial acquisition of shares and not in relation to each acquisition
of shares by a member unless the shares are to be registered in a different HIN or SRN. |
|
(c) |
|
Foreign Ownership Notification Forms are available from brokers, the Exchange, the
company and the companys share registrar. |
|
(d) |
|
A Foreign Ownership Notification Form requires each new member to indicate if they are
a Foreign Member or a Mixed Member. A Foreign Ownership Notification Form is only
valid if the relevant HIN or SRN is quoted. |
|
3.4 |
|
Continuing notification obligations |
|
(a) |
|
Ongoing obligations of members |
|
|
|
Members must notify the directors: |
|
(1) |
|
within 5 business days if they become, or cease to be, a Foreign Member or
Mixed Member; |
|
|
(2) |
|
within 5 business days if there is a change to their Foreign Holding; |
|
|
(3) |
|
as soon as practicable if they become aware that an Unacceptable Individual
Foreign-Ownership Situation exists in relation to any of the shares held by
them; |
|
|
(4) |
|
as soon as practicable if they become aware that an Unacceptable Individual
Foreign-Ownership situation exists in relation to any person who has an interest
in any shares held by the member (and, if so, the name of the relevant person
and total number of shares in which that person has an interest). |
Telstra Foreign Ownership Regulations page 5
|
|
|
|
|
3 Obligations of members to notify company of Foreign Holding |
(b) |
|
Annual audit |
|
|
|
Each year (or at such other intervals as the directors determine from time to time), each
member registered as holding more than 0.05% of the Non-Commonwealth Shares will
be requested to state in relation to each of their HINs or SRNs: |
|
(1) |
|
whether they are a Foreign Member or Mixed Member; |
|
|
(2) |
|
the number of shares (if any) in the members Foreign Holding; |
|
|
(3) |
|
to the knowledge of the member: |
|
(A) |
|
the identity of each Foreign Person or Associate of a Foreign Person
who has an interest in the shares registered in the name of the
member; |
|
|
(B) |
|
the total number of shares in which that person has an interest; and |
|
|
(C) |
|
if that person is an Associate of a Foreign Person, the name of the
relevant Foreign Person; and |
|
(4) |
|
whether the member is aware of an Unacceptable Individual
Foreign-Ownership Situation of the type referred to in regulations
3.4(a)(3) and 3.4(a)(4) (and, if so, details of that situation). |
|
|
Members must respond to a request under this regulation 3.4(b) within 5 business days
after receipt of the request. |
|
(c) |
|
Occasional request for information |
|
|
|
The directors may, at any time, send to a member who: |
|
(1) |
|
has an address which is not in Australia; |
|
|
(2) |
|
has notified the directors that they are a Foreign Member or Mixed Member; |
|
|
(3) |
|
has not provided a notification required to be provided under this regulation 3; |
|
|
(4) |
|
holds an interest representing more than 0.05% of the
Non-Commonwealth Shares; |
|
|
(5) |
|
the directors have reason to believe, or are concerned, may
be a Foreign Member; or |
|
|
(6) |
|
the Minister has requested be sent such a request, |
|
|
a request for information in a form approved by the directors which requires the member
to inform the directors of any (or all) of the information set out in regulations 3.4(b)(1) to
3.4(b)(4) and any other information relating to foreign ownership as determined by the
directors. The request may specify a time by which the member must provide the
information and the penalty, if any, for failure to comply with the request. |
|
3.5 |
|
Consequences of a failure to notify |
|
(a) |
|
Subject to any penalty determined by the directors under regulation 3.4(c), no penalty will
be imposed for a failure to provide a Foreign Ownership Notification Form or to otherwise
comply with the notification obligations in this regulation 3 except that: |
|
(1) |
|
a Foreign Member may lose priority in the Foreign Register for the purposes of
regulation 6.4; and |
|
|
(2) |
|
the directors may treat all the shares registered in the members relevant HIN or
SRN as constituting a Foreign Holding. |
(b) |
|
The company is not required to follow-up any members who have not complied with the
notification obligations in this regulation 3. |
Telstra Foreign Ownership Regulations page 6
|
|
|
|
|
4 Mixed Members to endeavour to use different HINs or SRNs |
3.6 |
|
Number of shares deemed to be in a members Foreign Holding |
|
(a) |
|
A member who in relation to a HIN or SRN is, or is deemed to be, a Foreign Member will
remain a Foreign Member in relation to that HIN or SRN until notice is received under this
regulation 3 that the member is no longer a Foreign Member in relation to all or part of the
holding in that HIN or SRN. |
|
(b) |
|
The number of shares in a Foreign Members Foreign Holding at any time shall be the
lower of the number of shares: |
|
(1) |
|
deemed to constitute a members Foreign Holding under regulation 3.5(a)(2); |
|
|
(2) |
|
registered in the HIN or SRN containing the Foreign Holding; and |
|
|
(3) |
|
notified by the member under regulations 3.2, 3.3 or 3.4 as constituting the
Foreign Holding for that HIN or SRN. |
(c) |
|
Notwithstanding any other regulation of these regulations, a Mixed Member may be
treated by the directors, for the purposes of these regulations, as if the member were two
separate members, one with Domestic Shares and the other with a Foreign Holding,
whether or not the Mixed Member has been allocated different HINs or SRNs in relation
to their Domestic Shares and their Foreign Holding. |
|
4 |
|
Mixed Members to endeavour to use different HINs or SRNs |
|
(a) |
|
Where possible, a Mixed Member should maintain two separate HINs or SRNs, with all
Domestic Shares held in one of the HINs or SRNs and all shares constituting the Foreign
Holding held in the other HIN or SRN. |
|
(b) |
|
Where a Mixed Member has been allocated different HINs or SRNs under regulation 4(a),
the Mixed Member must ensure that only Domestic Shares are recorded in the HIN or
SRN allocated to hold the Domestic Shares. |
|
5 |
|
Procedures for Unacceptable Individual Foreign-Ownership
Situation |
|
5.1 |
|
Directors power to dispose of shares |
|
(a) |
|
If the directors believe that an Unacceptable Individual Foreign-Ownership Situation
exists, the directors may (but are not obliged to) issue: |
|
(1) |
|
a Warning Notice; or |
|
|
(2) |
|
a Disposal Notice, |
|
|
to the relevant member in any form approved by the directors from time to time. |
|
(b) |
|
For the avoidance of doubt, nothing in these regulations require the directors to issue a
Warning Notice to a member before issuing that member with a Disposal Notice. |
|
(c) |
|
The Disposal Notice may: |
|
(1) |
|
require the member to dispose of all or any of the members shares as specified
in the Disposal Notice; |
|
|
(2) |
|
require disposal to take place by the Divestment Date; and |
|
|
(3) |
|
specify circumstances, consistent with these regulations, in which the member
need not dispose of all or any of the shares the subject of a Disposal Notice if
certain events happen. |
Telstra Foreign Ownership Regulations page 7
|
|
|
|
|
5 Procedures for Unacceptable Aggregate Foreign-Ownership Situation |
(d) |
|
If the terms of a Disposal Notice are not complied with by a member, the directors may, at
any time, sell all or any of the members shares specified in the Disposal Notice in
accordance with regulation 5.1(e). |
|
(e) |
|
For the purposes of regulation 5.1(d): |
|
(1) |
|
the directors may sell the members shares at the best price reasonably
obtainable at the relevant time and any sale of shares by the directors on the
Exchange will be regarded as discharging this obligation; |
|
|
(2) |
|
each member appoints the company and each of the directors jointly and
severally as its attorney (with power to appoint sub-attorneys) in the name of
the member and on behalf of the member to execute any documents and
implement any procedures as may be necessary or desirable in the opinion of
the attorney to procure the sale and transfer of shares on behalf of the member;
and |
|
|
(3) |
|
the title of the transferee to any shares sold under regulations 5.1(d) and 5.1(e)
is not affected by any irregularity or invalidity in connection with the sale and
transfer of the shares to the transferee (but nothing in this regulation 5.1
prevents the exercise by the directors of their powers under these regulations if
the transferee is a Foreign Member). |
5.2 |
|
Treatment of proceeds of sale |
|
(a) |
|
The proceeds of any sale of shares under regulation 5.1 will be dealt with in accordance
with rule 9 of the constitution. |
|
(b) |
|
The net amount payable to the member may be paid in any manner determined by the
directors under rule 12.7(a) of the constitution. |
|
6 |
|
Procedures for Unacceptable Aggregate Foreign-Ownership
Situation |
|
6.1 |
|
Procedures when Aggregate Foreign Ownership Limit exceeded |
|
(a) |
|
If, as a result of a days (Specified Day) registrations, the Aggregate Foreign Ownership
Limit is exceeded, all shares registered in the names of Foreign Members as a result of
that days registrations (including those shares which are deemed registered on that day
under regulation 6.4) will be registered in separate SRNs (one for each affected Foreign
Member) in the companys issuer sponsored sub-register (Special SRNs). |
|
(b) |
|
The shares registered in the Special SRNs (Breach Shares) must be divested and the
company will send a Disposal Notice to all Foreign Members holding Breach Shares. |
|
(c) |
|
No Warning Notices will be issued in relation to Breach Shares. |
|
(d) |
|
If, even after the Breach Shares have been dealt with in accordance with this regulation
6, the companys level of foreign ownership still exceeds the Aggregate Foreign
Ownership Limit, the limit shall be treated as also having been exceeded on the day
preceding the Specified Day, and so on until the companys level of foreign ownership
does not exceed the Aggregate Foreign Ownership Limit. |
|
6.2 |
|
Foreign Members must dispose of Breach Shares |
|
(a) |
|
Foreign Members must dispose of Breach Shares and register a transfer to give effect to
that disposal prior to the 5th business day of the month following the month in which the
Disposal Notice was issued (also a Divestment Date). However, if that 5th business day
is less than 30 calendar days after the date the Disposal Notice was issued, the Foreign |
Telstra Foreign Ownership Regulations page 8
|
|
|
|
|
6 Procedures for Unacceptable Aggregate Foreign-Ownership Situation |
Member must dispose of the Breach Shares and register a transfer to give effect to
that disposal prior to the 5th business day of the next month (also a Divestment Date).
|
Example 1: |
|
If a Disposal Notice is issued to a Foreign Member on 6 August, the Breach
Shares must be disposed of and the transfer registered prior to the 5th business day of
September. |
|
|
Example 2: |
|
If a Disposal Notice is issued to a Foreign Member on 20 August, the Breach
Shares must be disposed of and the transfer registered prior to the 5th business day of
October. |
6.3 |
|
Directors power to dispose of Breach Shares |
|
(a) |
|
If a transfer of Breach Shares has not been registered before the relevant Divestment
Date, the directors may sell all or any of the Breach Shares. |
|
(b) |
|
For the purposes of regulation 6.3(a), the directors may transfer the relevant Breach
Shares from the Special SRN to another holding for the purposes of sale by the directors
so that the Foreign Member will not be able to settle any transaction involving the Breach
Shares (and this will apply to prevent settlement, even if a transaction has been entered
into, but not settled before the relevant Divestment Date). |
|
(c) |
|
The timing and manner of the sale of Breach Shares will be solely within the discretion of
the directors but may not be more than 20 business days after the relevant Divestment
Date. |
|
(d) |
|
The proceeds of any funds required to be remitted to the relevant member under this
regulation 6.3 will be dealt with in accordance with rule 9 of the constitution. |
|
(e) |
|
Disposal Notices issued in relation to Breach Shares will not be withdrawn prior to the
relevant Divestment Date. However, Breach Shares will not be divested if, on the
relevant Divestment Date, the level of foreign ownership is at or below the Aggregate
Foreign Ownership Limit. In this event, an announcement will be made to the Exchange
and notices will be sent to the holders of the relevant Breach Shares informing them that
the Disposal Notices previously issued have been withdrawn. |
|
(f) |
|
The directors and the company will be under no liability to any member for any loss or
disadvantage suffered by the members as a result, whether directly or indirectly, of any
divestment (including the timing of the divestment). |
|
6.4 |
|
Determining priority among Foreign Members date on which shares
considered registered |
|
(a) |
|
For the purposes of these regulations, regardless of the date of registration of a share in
the name of a member, the date of registration of a share in the name of a member shall
be the notification date as determined under regulation 6.4(b) (Notification Date). |
|
(b) |
|
For the purposes of regulation 6.4(a): |
|
(1) |
|
Initial notifications of the status of a member (ie. Foreign Member or Mixed
Member) in relation to a HIN or SRN will be treated as if the Notification Date for
that HIN or SRN by the share registrar was the date of registration
of all the shares then held by that member in that HIN or SRN; |
|
|
(2) |
|
Notifications of a change of status of a member (eg. Foreign Member to
Domestic Member or Domestic Member to Mixed Member) in relation to a HIN
or SRN will be treated as follows: |
|
(A) |
|
notification of a change of status from domestic to foreign will be
treated as if the Notification Date was the date of registration of all of
the shares then held by that member in that HIN or SRN; |
|
|
(B) |
|
notification of a change of status from domestic to mixed will be
treated as if the Notification Date was the date of registration of that |
Telstra Foreign Ownership Regulations page 9
|
|
|
|
|
|
|
|
6 Procedures for Unacceptable Aggregate Foreign-Ownership Situation |
|
|
|
portion of the shares held by that member in that HIN or SRN which,
upon notification, will constitute a Foreign Holding; |
|
|
(C) |
|
notification of a change of status from mixed to foreign will be treated
as if the Notification Date was the date of registration of that portion of
the shares held by that member in that HIN or SRN which immediately
prior to notification constituted Domestic Shares; and |
|
|
(D) |
|
notification of a change of status from foreign to domestic, foreign to
mixed or mixed to domestic will not increase the level of foreign
ownership and the shares the subject of such a notification will,
following registration of the change and receipt of any supporting
material requested, not be liable to be divested. |
|
(3) |
|
The Notification Date for a response by a Mixed Member to a notice given by
the directors under regulations 3.4(b) or 3.4(c) will be treated as if it were the
date of registration of that portion of the shares held by that member which
equals the increase (if any) in the number of shares notified in the relevant
notice as constituting that members Foreign Holding over the number of shares
then treated as being in that members Foreign Holding under regulation 3.6. |
|
|
(4) |
|
The date on which the directors elect to treat a member as a Foreign Member in
relation to a HIN or SRN in accordance with regulations 1.2(a)(5) or 1.2(a)(6) or
TIRT Regulation 4(b) will be treated as the date of registration of all the shares
then held by that member in that HIN or SRN. |
(c) |
|
For the purposes of regulation 6.4(b), the Notification Date means: |
|
(1) |
|
in relation to notifications given through CHESS, the date an electronic
notification received through CHESS is processed in accordance with the
scheduled times specified in the ASTC Settlement Rules; and |
|
|
(2) |
|
in relation to notification not given through CHESS (including, but not limited to,
Foreign Ownership Notification Forms) the date of processing of the Foreign
Ownership Notification Form or other notification, such date being within 5
business days of the receipt of the notification. |
(d) |
|
For the purposes of these divestment procedures: |
|
(1) |
|
a notification (including, without limitation, a Foreign Ownership Notification
Form) will only be valid if the relevant HIN or SRN is quoted; |
|
|
(2) |
|
for the purposes of non-CHESS transactions, Foreign Ownership Notification
Forms and other notifications will be treated as being processed on the date the
registrar matches the Foreign Ownership Notification Form or other notification
with the relevant transfer or transmission application, and in any event no earlier
than the date of registration of that transfer or transmission application; and |
|
|
(3) |
|
both notifications given through CHESS and otherwise may be treated by the
company as being given in relation to both IRs and shares in the relevant HIN
or SRN, even if not so expressed. |
6.5 |
|
Treatment of foreign to foreign transactions |
|
(a) |
|
For transactions other than through CHESS, there will be no special facility through which
foreign to foreign transfers may be quarantined from the divestment procedures in this
regulation 6. |
|
(b) |
|
Transfers of shares not held in a Special SRN, and which are traded through the special
CHESS foreign to foreign allocation system, will not be recorded in a Special SRN and,
therefore, will not potentially be liable to divestment. These purchases will be recorded in
the normal CHESS HINs or SRNs. |
|
(c) |
|
Disposal Notices will not be issued in relation to shares registered on the New Zealand
branch register or represented by ADRs (except pursuant to regulation 5). |
Telstra Foreign Ownership Regulations page 10
|
|
|
|
|
|
|
|
7 Procedures when Individual Foreign-Ownership Limit exceeded |
7 |
|
Procedures when Individual Foreign-Ownership Limit exceeded |
|
(a) |
|
If, as a result of the enquiries and notifications described in these regulations, and having
regard to the information recorded in the Foreign Register in relation to shares, the
company believes that an Unacceptable Individual Foreign-Ownership Situation exists,
the directors: |
|
(1) |
|
will identify the number of shares in which they believe the Foreign Person has
an interest and which are in excess of the individual foreign ownership limit
(Breach Shares); |
|
|
(2) |
|
may register the Breach Shares in a separate SRN in the companys issuer
sponsored sub-register under regulation 6.1(a); |
|
|
(3) |
|
will issue a Disposal Notice to the Foreign Member in respect of the Breach
Shares under regulation 6.1(b); and |
|
|
(4) |
|
if such disposal does not occur within 30 days of the date of the Disposal
Notice, will sell the relevant number of shares and regulation 6.3 will apply. |
8 |
|
Telstras obligations to notify the Exchange |
|
8.1 |
|
Obligation to notify Exchange on exceeding certain limit3 |
|
|
|
By 9.00 am each day, the company will determine, by reference to the Foreign Register,
the total number of shares held or treated as being held by Foreign Members (level of
foreign ownership) and will, in accordance with the Listing Rules, inform the Exchange
(and the market) when it becomes aware that the level of foreign ownership: |
|
(a) |
|
is equal to or exceeds a number of shares representing a percentage of the Non-Commonwealth Shares which is 5 percentage points below the Aggregate Foreign
Ownership Limit and, thereafter, where it has changed by a number of shares
representing more than 1% of the Non-Commonwealth Shares; or |
|
(b) |
|
equals or exceeds a number of shares representing the percentage of shares which is
35% of all Non-Commonwealth Shares (the Aggregate Foreign Ownership Limit). |
|
8.2 |
|
Obligation to notify Exchange when cease to exceed certain limit
|
|
|
|
The company will, in accordance with the Listing Rules, inform the Exchange (and the
market) when the level of foreign ownership has ceased to equal or
exceed a number of shares representing the Aggregate Foreign Ownership Limit of the Non-Commonwealth
Shares or falls to less than 5% below that limit. |
|
9 |
|
Co-operation with TIRT |
|
(a) |
|
The company and TIRT have agreed to cooperate in respect of the implementation of
these regulations and the TIRT Regulations and the TIRT Rules. |
|
(b) |
|
Anything required or permitted to be done by TIRT under the TIRT Regulations or TIRT
Rules may be done by the company or by the companys share registrar on its behalf. |
|
|
|
3 |
|
See also TIRT Regulation 5.2, which applies as long as IRs are on issue. |
Telstra Foreign Ownership Regulations page 11
|
|
|
|
|
10 Share registrar may act on the companys behalf |
(c) |
|
The company may direct TIRT in respect of anything to be done by TIRT under the TIRT
Regulations or the TIRT Rules. TIRT has agreed that it will act on the companys
instructions. |
|
(d) |
|
Information provided to the company under these regulations will be made available to
TIRT, and TIRT has agreed to make information provided to it under the TIRT
Regulations or the TIRT Rules available to the company. |
|
10 |
|
Share registrar may act on the companys behalf |
|
|
|
Anything required or permitted to be done by the company under these regulations may
be done by the company or by the companys share registrar on its behalf. |
Telstra Foreign Ownership Regulations page 12
Schedules
Table of contents
|
|
|
|
|
|
|
|
|
TIRT Regulations |
|
|
14 |
|
|
|
|
|
|
|
|
1 |
|
Definitions |
|
|
14 |
|
|
|
1.1 Definitions |
|
|
14 |
|
|
|
|
|
|
|
|
2 |
|
Operation of TIRT Regulations |
|
|
14 |
|
|
|
|
|
|
|
|
3 |
|
TIRTs Foreign Register and Joint Foreign Register |
|
|
15 |
|
|
|
3.1 TIRTs Foreign Register |
|
|
15 |
|
|
|
3.2 Joint Foreign Register |
|
|
15 |
|
|
|
3.3 Transfer of IR Register information to company |
|
|
15 |
|
|
|
|
|
|
|
|
4 |
|
Identification of Foreign Holdings |
|
|
15 |
|
|
|
|
|
|
|
|
5 |
|
Obligation to notify of Foreign Holdings |
|
|
16 |
|
|
|
5.1 Continuing notification obligations |
|
|
16 |
|
|
|
5.2 Telstras obligation to notify the Exchange |
|
|
16 |
|
|
|
|
|
|
|
|
6 |
|
Procedures when Aggregate Foreign-Ownership Limit exceeded |
|
|
17 |
|
|
|
|
|
|
|
|
7 |
|
Procedures when Individual Foreign-Ownership Limit exceeded |
|
|
17 |
|
Telstra Foreign Ownership Regulations page 13
Schedule 1
|
|
TIRT Regulations |
|
1 |
|
Definitions |
|
1.1 |
|
Definitions |
|
|
|
Capitalised terms used in this schedule but not defined in these regulations (including the
TIRT Regulations in this schedule) have the meaning given in the companys constitution.
The meanings of the terms used in this schedule are set out below. |
|
|
|
Term |
|
Meaning |
Breach IRs
|
|
the meaning given in TIRT Rule 6.1(b) and TIRT Rule 7 |
|
|
|
Final Instalment
|
|
the meaning given in the IR Trust Deed |
|
|
|
Final Instalment Due
Date
|
|
the meaning given in the IR Trust Deed |
|
|
|
Foreign IR Holder
|
|
the meaning given in the TIRT Rules |
|
|
|
Initial IR Holder
|
|
the meaning given in the IR Trust Deed |
|
|
|
Joint Foreign Register
|
|
the meaning given in TIRT Regulation 3.2(a) |
|
|
|
Mixed IR Holder
|
|
the meaning given in the IR Trust Deed |
|
|
|
Offer
|
|
the meaning given in the IR Trust Deed |
|
|
|
TIRT Rules
|
|
the meaning given in TIRT Regulation 3.1(a) |
|
|
|
TIRTs Foreign Register
|
|
the meaning given in TIRT Regulation 3.1(a) |
2 |
|
Operation of TIRT Regulations
|
|
|
|
These TIRT Regulations become operative on the date on which IRs are first traded on
the Exchange, then remain operative as long as IRs are on issue. |
Telstra Foreign Ownership Regulations page 14
|
|
|
|
|
<Schedule 1 TTIRT RegulationsT |
3 |
|
TIRTs Foreign Register and Joint Foreign Register |
|
3.1 |
|
TIRTs Foreign Register |
|
(a) |
|
TIRT has agreed to establish and maintain a foreign register (TIRTs Foreign Register)
of holders of IRs and to maintain rules and procedures regulating foreign ownership
which parallel these regulations (TIRT Rules), for so long as any IRs remain outstanding,
and to take action to enforce the TIRT Rules when requested by the company. |
|
(b) |
|
The company may include in the Foreign Register information relating to foreign
ownership recorded in TIRTs Foreign Register. |
|
3.2 |
|
Joint Foreign Register |
|
(a) |
|
The company and TIRT have agreed that the Foreign Register will be maintained jointly
(in such manner as TIRT and the company may agree from time to time) with TIRTs
Foreign Register. These jointly maintained registers (together the Joint Foreign
Register) will contain the information required to be kept by TIRT in respect of Foreign IR
Holders and by the company in respect of Foreign Members. |
|
(b) |
|
The Joint Foreign Register will also, where relevant, contain an aggregation of the
numbers of IRs and shares held by each Foreign IR Holder and each Foreign Member.
If, for any reason, the company determines that this is not practicable, the companys
share registrar will perform this aggregation each day for the 200 Foreign IR Holders
having the largest IR Holdings on the Joint Foreign Register and the 200 Foreign
Members having the largest share holdings on the Joint Foreign Register (and this daily
aggregation will become part of the information comprising the Joint Foreign Register). |
|
3.3 |
|
Transfer of IR Register information to company |
|
(a) |
|
At and after the Final Instalment Due Date, the information contained in the IR Register
maintained by TIRT will be transferred to the companys share register, as will information
on holdings of IRs by Foreign Persons and any other information relating to foreign
ownership incorporated in TIRTs Foreign Register. This information will supplement
information already contained in the companys Foreign Register. |
|
(b) |
|
After TIRT has transferred information to the company under TIRT Regulation 3.3(a), the
company will give TIRT access to that information during office hours to the extent TIRT
needs the information to perform its obligations to the Commonwealth under the IR Trust
Deed in respect of the sale of shares where the Final Instalment is not paid on the Final
Instalment Due Date. |
|
4 |
|
Identification of Foreign Holdings |
|
(a) |
|
Where a person has given notice (whether physically or electronically through CHESS)
that it is (or where the person is deemed by these regulations to be): |
|
(1) |
|
a Foreign Member; |
|
|
(2) |
|
not a Foreign Member; or |
|
|
(3) |
|
a Mixed Member, |
in respect of any shares held in a particular HIN or SRN, TIRT and the company may,
notwithstanding anything else in these regulations, also treat the person as being,
respectively:
Telstra Foreign Ownership Regulations page 15
|
|
|
|
|
<Schedule 1 TTIRT RegulationsT |
|
(5) |
|
not a Foreign IR Holder; or |
|
|
(6) |
|
a Mixed IR Holder, |
|
|
in respect of any IRs held in that HIN or SRN. |
|
(b) |
|
Where a person has given notice (whether physically or electronically through CHESS)
that it is (or where the person is deemed by the TIRT Rules to be): |
|
(1) |
|
a Foreign IR Holder; |
|
|
(2) |
|
not a Foreign IR Holder; or |
|
|
(3) |
|
a Mixed IR Holder, |
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in respect of any IRs held in a particular HIN or SRN, TIRT and the company may,
notwithstanding anything else in these regulations, also treat the person as being,
respectively: |
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(4) |
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a Foreign Member; |
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(5) |
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not a Foreign Member; or |
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(6) |
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a Mixed Member, |
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in respect of any shares held in that HIN or SRN. |
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5 |
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Obligation to notify of Foreign Holdings |
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5.1 |
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Continuing notification obligations |
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(a) |
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The company and TIRT have agreed that if the company makes a request under
regulation 3.4(b) or 3.4(c), such request also will be made to IR Holders jointly by TIRT
and the company under the TIRT Rules and the request will relate to both shares (in
accordance with these regulations) and to IRs (in accordance with rule 3.4(b) or 3.4(c)
and 3.4(d) of the TIRT Rules) held by the IR Holders, and that the answers to such
request (both as regards IRs and shares) will be provided to both the company and TIRT. |
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5.2 |
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Telstras obligation to notify the Exchange |
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(a) |
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By 9.00 am each day, the company will determine, by reference to the Joint Foreign
Register, the total number of IRs held or treated as being held by Foreign IR Holders (the
IR level of foreign ownership). |
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(b) |
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The company will aggregate the IR level of foreign ownership with information drawn from
the Joint Foreign Register regarding the number of shares (excluding shares held by
TIRT) held or treated as being held by Foreign Members (the share level of foreign
ownership) for the purposes of notifying the Exchange (and the market) of the level of
foreign ownership under regulation 8. |
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(c) |
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For so long as these TIRT Regulations apply, for the purposes of regulation 8: |
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(1) |
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level of foreign ownership will include the IR level of foreign ownership
aggregated with the share level of foreign ownership; and |
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(2) |
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a reference to shares will include a reference to shares and/or IRs. |
Telstra Foreign Ownership Regulations page 16
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<Schedule 1 TTIRT RegulationsT |
6 |
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Procedures when Aggregate Foreign-Ownership Limit
exceeded |
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(a) |
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Regulation 6 specifies the procedures the company will follow when the Aggregate
Foreign Ownership Limit is exceeded. TIRT has agreed that similar steps will be taken
by TIRT, in consultation with the company, in respect of IRs registered in the names of
Foreign IR Holders as a result of that days registrations or deemed registrations. |
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(b) |
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Notwithstanding TIRT Regulation 6.1(a), IRs registered in the names of Initial IR Holders
on settlement of the Offer (Offer Registrations) shall not be registered in Special SRNs
or treated as Breach IRs. |
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(c) |
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TIRT Regulation 6.1(b) does not affect the treatment of other registrations and deemed
registrations occurring on the same day as the Offer Registrations, which will be dealt
with in accordance with TIRT regulation 6.1(a) and TIRT Rule 6. |
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(d) |
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For the purposes of regulation 6.1 and TIRT Rule 6, the number of Breach IRs and
Breach Shares will be combined to determine whether an Unacceptable Aggregate
Foreign Ownership situation exists. |
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7 |
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Procedures when Individual Foreign-Ownership Limit exceeded |
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(a) |
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Regulation 7 specifies the procedures the company will follow when the Individual
Foreign-Ownership Limit is exceeded. The company and TIRT have agreed that if the
directors, as a result of the enquiries and notifications described in the regulations, and
having regard to the information recorded in the Joint Foreign Register in relation to both shares and IRs, believe that an Unacceptable Individual Foreign-Ownership Situation
exists, the directors: |
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(1) |
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will identify the number of shares in which they believe the Foreign Person and
its Associates have an interest (including IRs) and which are in excess of the
individual foreign ownership limit (Breach Shares and Breach IRs) and inform
TIRT of their determination; |
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(2) |
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may direct TIRT to register any Breach IRs in a separate SRN in accordance
with the TIRT Rules; |
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(3) |
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may direct TIRT to issue a Disposal Notice (as defined in the TIRT Rules) to the
Foreign IR Holder in respect of the Breach IRs in accordance with the TIRT
Rules; and |
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(4) |
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if such disposal does not occur within 30 days of the date of the Disposal Notice
(as defined in the TIRT Rules), will direct TIRT to sell the relevant number of
IRs in accordance with the TIRT Rules. |
(b) |
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TIRT has agreed that, upon being informed by the company that IRs are Breach IRs in
accordance with TIRT Regulation
7(a)(1) above and TIRT Rule 7, it will follow the
companys directions in respect of the Breach IRs. |
Telstra Foreign Ownership Regulations page 17
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24 November 2006
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Office of the Company Secretary |
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The Manager |
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Level 41 |
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242 Exhibition Street |
Company Announcements Office
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MELBOURNE VIC 3000 |
Australian
Stock Exchange 4th Floor, 20 Bridge Street
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AUSTRALIA |
SYDNEY NSW 2000 |
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Telephone 03 9634 6400 |
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Facsimile 03 9632 3215 |
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ELECTRONIC LODGEMENT |
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Dear Sir or Madam |
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SEC deregistration |
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Telstra confirms its intention to terminate its United States Securities Exchange Act of 1934
registration and reporting obligations regarding each class of its securities under section
12(g) and section 15(d) of that Act. Telstra intends to file its application with the United
States Securities and Exchange Commission as soon as possible after the final rules are
released, which is expected to be in mid December 2006.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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TELSTRA CORPORATION LIMITED |
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/s/ Douglas Gration |
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Name: Douglas Gration
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Title: Company Secretary |
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Date: 27 November 2006 |
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