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 31 May 2007
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.
Form 20-F þ 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
Yes No þ
If Yes is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
INDEX
Federal Court says ACCC acted illegally
Decrease in Telstra Instalment Receipts due to Prepayment
$1.5 billion Next IP network brings Australian business to the next dimension
Transcript from Telstras media conference $1.5 billion Next IP network brings
Australian business to the next dimension
Telstra presentation to the Macquarie Australian Conference, Sydney
Transcript from Telstra presentation to the Macquarie Australian Conference, Sydney
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5 April 2007
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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
Federal Court says ACCC acted illegally
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
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Media Release
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Federal Court says ACCC acted illegally
Telstra has renewed a call for the ACCCs powers to be overhauled after the Federal Court
ruled the ACCC acted illegally in issuing a competition notice to Telstra almost a year ago.
Justice Annabelle Bennett quashed the notice, ruling that its issue was invalid and the ACCC had
not treated Telstra fairly.
Telstras Director of Regulatory Affairs, Tony Warren, said Telstra has long argued that Part XIB
of the Trade Practices Act gave the ACCC too much power, and Telstra should be treated like every
other company.
The ACCC tried to argue in this case that it is not subject to the normal laws governing all
government agencies and believes it is above the law. The Federal Court has slapped it down, Dr
Warren said.
The judgement follows the ACCCs withdrawal of the competition notice last month because it
couldnt support its allegations against Telstra, despite using its coercive information-gathering
powers on ten occasions over 16 months,
This case demonstrates its simply too easy for the ACCC to dash out a competition notice,
exposing Telstra to potential fines mounting at $3 million a day, as a form of bureaucratic
bullying.
Competition notices impose substantial costs on Telstra, damaging its brand and reputation. During
the course of this case it became clear the ACCC sees them as a relatively cheap and simple way it
can bully a company into submission.
If the ACCC really had serious concerns about the impact of the change to our line rental charges,
leading to the competition notice, it had 12 months to bring the matter to court.
In fact is has been 16 months since the price changes, and there is no evidence of an
anticompetitive effect in the market.
The Government should recognise the lesson from this judgement, and the ACCC should adhere to its
obligations to afford procedural fairness in the exercise of its duties.
When subject to an unfair or improper regulatory attack, Telstra will continue to use appropriate
avenues to protect its rights and pursue the interests of shareholders, Dr Warren said.
Media Contact
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Rod Bruem |
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(02) 9206 0092 |
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0438 288010
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See background over page... |
Background
The competition notice related to price increases to two Telstra basic network access products
one a wholesale line rental service called Home Access, and the second a retail product called
HomeLine Part
The ACCC was briefed on the proposed line rental prices increases for HomeLine Part and in a letter
dated 24 October 2005, the Commission consented to them.
Telstra advised the Commission on 28 October 2005 as to the proposed line rental price increases to
Home Access. The Commission did not indicate any issues or concerns with the line rental price
increases prior to its letter of 30 November 2005 in which it raised concerns regarding the impacts
on competition of the two plan increases.
The price increases came into effect in December 2005.
On 1 December Telstra was issued with a notice under s155 of the Trade Practice Act to provide
documents in relation to the proposed wholesale increase for Home Access. Telstra was given 24 hrs
to comply.
On December 22 Telstra was issued with a Consultation Notice and given until January 27 to provide
a written submission in response.
On 13 April 2006 Telstra was issued with a competition notice which raised different concerns
to the Consultation Notice, including introducing the new concept of an anticompetitive price
squeeze in the low-spend consumer market.
Based on the issuing of the Competition notice, Optus launched legal action against Telstra just
four working days later.
On May 1, Telstra launched the Federal Court Challenge to the issuing of the competition notice.
The case was heard by Justice Annabelle Bennett in August 2006.
On 2 March, 2006 the ACCC revokes the competition notice after issuing a total of 10 coercive
orders for information from Telstra in an attempt find evidence to support its claims, but failing.
5 April, 2007. Justice Bennett rules the notices were invalid (not in compliance with Pt XIB and
procedural fairness) because they were materially different and so Telstra was not afforded a
proper opportunity to make submissions to the ACCC about the matters dealt with in the competition
notice.
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located
at: www.telstra.com.au/abouttelstra/media
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17 April 2007
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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
Decrease in Telstra Instalment Receipts due to Prepayment
Telstra advised that following prepayment of 5,474,944 instalment receipts on 16 April 2007, the
total number of instalment receipts (TLSCA) on the register now stands at 4,149,420,351.
Please note that no new Telstra (TLS) securities have been issued.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
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26 April 2007
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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
$1.5 billion Next IP network brings Australian business to the next dimension
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
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Media Release
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$1.5 billion Next IP network brings Australian business to the next dimension
Telstra today unveiled the largest fully integrated wireline and wireless national Internet
Protocol (IP) network in the world the Telstra Next IP network representing a long-term
investment in the future of Australia.
Telstras new Next IP network, coupled with Telstras Next G wireless network launched in October
2006, creates a platform that will transform communications for Australian businesses and
governments.
Now Telstras integrated wireline and wireless network enables Telstras vision to deliver a
seamless user experience across all devices and platforms with one-command simplicity.
Telstra Chief Executive Officer, Mr Sol Trujillo, said Telstra has invested $1.5 billion to date in
the Telstra Next IP network to establish the largest business network in Australia, servicing 95
percent of businesses. In addition, there will be further expenditure on migration and enhancements
of the network.
The network provides world-class reliability, enhanced security and its IP/MPLS core is 77 times
more scalable (up to 92Tbps per node) than the old network with 99.999 per cent reliability.
As an illustration of the networks capability, when fully scaled up the core of the network could:
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transfer the data contents of the Australian National Library in 4.6 seconds; and |
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connect three billion telephone calls in one second. |
Mr Trujillo said that while the network build continued, Telstras new Next IP network had already
been dimensioned to meet current customer demand and could be rapidly scaled up to deliver capacity
for next generation business services.
Today we unveil Telstras world-leading national IP network the Telstra Next IP network, Mr
Trujillo said. The core of the network has been completely rebuilt.
The Telstra Next IP network is the latest achievement in Telstras five year transformation -
giving businesses in both metro and regional areas more possibilities, more convenience and more
control over their businesses.
Now Telstra can offer a combination of our Next G network and our new Telstra Next IP network to
eliminate Australias business constraints of time, distance and devices.
The Telstra Next IP network further demonstrates Telstras commitment to securing Australias
future as a nation that works smarter and faster again proving that Telstra will make large
investments in Australia under the right regulatory settings.
The Telstra Next IP network is a fully integrated fixed line network with world leading strategic
suppliers providing best-of-breed and well tested technologies.
The Telstra Next IP network consists of:
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Ciscos IP/MPLS Core with 99.999 per cent reliability and a capability to scale up to
92Tbps per node. |
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Juniper Networks new Virtual Private Network (VPN) Edge, supporting a range of access
services and traffic differentiation capabilities. |
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Alcatel-Lucents next generation Ethernet Aggregation, removing the need for point to point
links or platform specific networks. |
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Tellabs 8800 Multi Service Edge to deliver existing and new data services, supporting the
transition from ATM/Frame Services to Ethernet. |
Telstra Enterprise and Government Group Managing Director, Mr David Thodey, said the Telstra Next
IP network would significantly improve productivity, sales, profitability and reduce business
costs for Australian businesses, putting Telstra light years ahead of its competitors.
He said the new network would provide online learning and school administration systems that could
significantly improve access to information and productivity for the education sector, while in
finance and banking it could provide massive amounts of secure transactions at split-second speed.
Importantly, this is only available from Telstra the only company that can put this all
together, Mr Thodey said. We are now able to offer our customers differentiated, integrated and
unique services across multiple devices and platforms.
The Telstra Next IP network enables unified communications, virtual meetings, instant
collaboration, Instant Messaging, multimedia web-conferencing and more all this with a single,
simple interface across all devices.
On the security side, we have enterprise data protection, protection from hackers and attack
protection for internet sites.
Telstra Business Group Managing Director, Ms Deena Shiff, said unlike many IP networks, the Telstra
Next IP network was not just for the big end of town.
Ms Shiff said many SMEs could benefit from the Telstra Next IP network right away-increasing
their productivity and getting the additional security they need to safely run their businesses.
The core of the Telstra Next IP network will be a major benefit for small business
particularly as the majority dont have a CIO and are time poor, Ms Shiff said.
The journey has just begun, and Telstra is working on a number of new technology developments
which will further leverage Telstras Next G and Telstra Next IP network capabilities, creating
even more value creation opportunities for Australian businesses.
Telstra Media contact:
Brent Hooley
Tel: 0439 400 214
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:
www.telstra.com.au/abouttelstra/media
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26 April 2007
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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
Transcript from Telstras media conference $1.5 billion Next IP network brings
Australian business to the next dimension
I attach a copy of the transcript from todays media conference for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
ROD BRUEM: Thank you for coming along today for what is a very important day for Telstra, for
communications in Australia, and, dare I say it, we even have a couple of world firsts. A special
welcome to those who are joining us on the webcast this morning.
My name is Rod Bruem, from the Telstra News Services Team, and today were here to reveal Telstras
new IT network, Next IP. This will take Australias business communications into the future. Very
soon youll hear from our business leaders, Deena Shiff and David Thodey, and first up, CEO, Sol
Trujillo. But before we do that, well have a quick look at a video presentation.
(Video played)
SOL TRUJILLO: Good morning, everyone. Obviously today is another special day and its another
milestone day in Telstras transformation. Last October Telstra launched our Next G network, and
it changes again. What Id like to do today is to explain how were changing the game one more
time because today were unveiling our Next IP network for businesses. This is a very
business-centric announcement here, which means that what you saw on the screen, our Next IP
network, is the largest fully integrated nationwide IP network in the world, the Telstra Next IP
network, combined and integrated with our Next G network, we now stand alone. Clearly we stand
alone here in Australia versus those that we compete with, but not only that, we stand alone in the
world. Together, as fully integrated networks, theyre beyond comparison, theyre larger, faster
integrated, so, as I said, we are changing the game.
I would like to put it in a context as I think about Next IP and when you hear these words about
IP, what does it mean? What does it mean to me as a business? Well, the way I like to put is in the
context of how we have used things, how weve been able to do the things that we do every day when
we think about communicating. In the context of an old network, pre IP, we had multiples of
networks. There is a map that Ive showed before that showed our network, which was a big
amalgamation of lots of different networks accumulated over the years, ATM networks, frame relay
networks, dedicated private line networks, all kinds of networks that sometimes talked each other
but in many cases they were single purpose
kinds of networks. Some were efficient for certain purposes, some were not efficient for other
purposes. But the punch line is, is that there were too many and they werent enabling enough
efficiency, given the way that our lives have now changed in terms of an internet world, in terms
of a messaging world, and now in terms of the capabilities that were bringing around video
communications, where were going to re-personalise the opportunity for people to communicate.
So that was kind of the old world. Thats part of what we said, back in November 2005, that we
were going to change, that we were going to fundamentally change the experience here in Australia.
So now, today, were announcing the launch and the capabilities of our Telstra Next IP network. IP
stands for internet protocol, but its not about the internet. It is next generation technology
for network infrastructure and it does allow our services to be converged operative word
converged on the network, be it voice, video, data picks, or mobile services.
Now, when we talk about things at Telstra we always put it in a context of being carrier grade,
meaning five times reliability, 99.999 per cent with robustness and with security as we think about
the traversing of various kinds of messages, before one at a time and now simultaneous, across a
network, which allows, in our case, for the optimisation and standardisation in terms of how we
operate our networks and how were going to enable customers to operate their networks. Some of
you may be sitting there saying, Well, thats a lot of techy talk or is this really about
technology? and the answer is no. But let me again talk about it in the context of a person
running a business: We have costs that we incur associated with travel, we have costs that we
incur relative to trying to get people to work together to collaborate more real-time because the
dynamics of our world are now real-time. We cant schedule meetings a month out or two weeks out
or whatever. It may be that we have to make decisions in a very real-time basis. It may be that
we need to get products and services and offerings enhanced in our capabilities to customers today.
Well, in the old configurations and in the old networks it was very difficult to do, but in an IP
world its all about software changes now going forward.
So here in Australia we now have the capability that no-one else has anywhere in the world and so
were now making it available to our customers and we are, in essence, changing the game. So every
day, now, in Australia our business customers across the nation will be able to do things that they
havent been able to do in the past, assuming the working and the inner workings with Telstra.
But with that then comes our capabilities where we start breaking down some of the barriers that
have existed if youre running a business, right, and even in your own personal lives, but in this
case about running a business. Its about the barriers of time or the constraints of time, the
constraints of distance and the constraints also of devices. Were now preparing all of our people
inside the business, thats the people youre going to hear from in particular that worked for
David Thodey and Deena Shiff, to truly become IP consultants because we are going to consult and
enable services in a different way. When we talk about all of this, I want to be clear that this
is about world leading services for our business customers, which is different than FTTN, which
still means its an issue that needs to be solved. But that is another issue for another day.
I want to talk now specifically about these constraints that we all have lived with in the business
world. One of them is time. We are constrained by opening hours and closing hours, were
constrained by time zones, were constrained by the time that it takes to process and share
information, files, data, other things, in a real-time way. Well in the new world its about
securing on-line, or enabling secure on-line processing, SMS authentification with on-line banking,
which were doing and launching with National Australia Bank. Its about call centre optimisation,
where you can actually have the capability where people can work from wherever they choose to work
because you can network it and enable it. Its about having a call centre without having to build a
call centre. Its about enabling customers to get even faster service. Or it may be about doing
business with your supplier face-to-face without even going there. Or it may be about your
inventory and delivering your inventory in a real-time basis or how you shop or how you enable your
customers to be able to shop with you in new and varied forms in a real-time basis, where I can
actually sample, see and compare simultaneously across the world. How you can enable payments
using RFID technologies in a real-time basis. I can go on and on with the numbers of examples
because were already talking to our customers about ways that they change their core structure,
about ways that they grow their revenues and about ways that they enhance their customers
experience because those are the net results of what we do, helping and facilitating increased
revenues, reducing labour costs, enabling a more accurate real-time way for people to manage
inventory, investments and obviously their experience with their customers.
Lets talk about distance. Part of the old world, pre Next IP, is about distance and constraint.
Its always about where people are, what they were doing, physical distance between and your office
or you and your PC, or you and wherever you were going in terms of an off site kind of experience.
In the new world its really about your staff being able to work together without having to be
together. Yesterday I have a telepresence call with four different people in four different
locations and I was able to set it up personally as an IP consultant for myself, in terms of
enabling that kind of capability in a real-time on demand call basis. The paradigms are now
shifting. So we can do these things but we can even do them now in a high definition way. Today
Telstra is enabling that, so that you can be where you need to be without having to go there. Also
being able to remotely manage your workforce, your data centres and also your assets without having
to be there. The net result can be business travel expenses savings, office accommodation costs
savings. Another issue for all of us thats part of our lives is about reducing carbon emissions
and how we can now be serious about things weve been saying in this industry and in this world for
the last 10 years, we can now truly effect.
Lets talk about devices and the old world in terms of devices. Well, we had a lot of constraints.
Sometimes devices are incompatible, they dont work together. Sometimes sending files across
different devices and different platforms cant happen. Sometimes just a simple access to the
internet is different depending upon what kind of device that you might have. Well, guess what?
Were now enabling the ability to have voice, data, video flowing all over the same network,
getting to
your desktop without getting to your desk, and editing your corporate home page from your PC,
mobile, or even TV. So the net result, again, for you in your business is about savings. Its
about business hardware savings, managing all these technology costs, where things get old, they
need to be replaced; well, now you can simplify that. You think about security, which is a core
issue in almost every business today, and I will talk about that in a minute. Its about storage,
all the files now that were starting to save. Its about the unnecessary travel costs, which is
all part of the story here, with the Next IP data set of capabilities offered now to our business
customers.
So this is all part of our plan. This is part of Telstras plan for Australia, about nationwide
coverage. We are the only company that thinks nationwide and, more importantly, not thinks, but
acts nationwide. Were the only company that thinks about world-class speeds and delivers on
world-class speeds, and now, in this IP world, the notion of security and raising the bar in terms
of what happens and whats needed with security is obviously critical, along with robustness and
along with reliability. So this is part of our plan and it is about the scale and the scope of
Telstras Next IP network, improving operational efficiencies for all businesses to take advantage
of these capabilities.
Now there is a lot more to add relative to that when you think about businesses and all the
requirements that we have in running our businesses associated with training, with people, with
standardisation and enabling things now to happen in a much more efficient way. We will be
bringing value add not only to the businesses, but I believe ultimately to the productivity of this
country as we think about all businesses.
But let me talk for a minute about security because security is a big issue. It is an issue that
has now affected all of us in our individual lives when we think about our PC or our laptop, as we
go on the internet sometimes we get infections, sometimes we get viruses, sometimes we have people
that want to track everything that you do, sometimes its legal, sometimes its illegal. We all
need protection. I call the internet today somewhat equivalent to what some of you might remember
in old western movies, the Wild, Wild West.
There is a lot of bandits out there, there is a lot of people out there that want to take advantage
of people, people that are riding into town on their horses and trying to take advantage of the
local folks that are trying to do things just in their normal community way. Well, there is a need
for security in that Wild, Wild West, and in the case of Telstra and our Next IP we have and are
delivering enhanced security compared to any of our competitors. We have more experience building
and operating IP networks, we have security anywhere access with reliable, resilient and robust
equipment. Weve built this network using 99.999 carrier grade design principles and we have been
independently certified against international standards, deploying world leading firewall
technologies to be able to separate businesses traffic from many of the malicious traffic, to be
able to detect hackers and prevent intrusion and to filter spam and viruses that prevent your
application corruption and better protection from network vulnerabilities. This is all critical as
you think about running the business in todays webified world. I would say that all of us are
into that webified world.
So I have a little demo here that I think were going to play as part of the background here, but
Im going to talk about it. We have this thing called unified communications, which is really
about enabling how you communicate across all devices, across all platforms in the various forms
that you have across a business. Its about tailored inbound and outbound communications, checking
the availability of peers, looking at your network-based address book. How many of you have your
address book in your mobile, but when you go to work its not there, or when you go home and to
your fixed line its not there? Wouldnt it be nice to have all of that information housed within
the network? Well now you can. Now that we have businesses with people distributed across
Australia, I can say that a lot of us have lost that ability to just walk down the hall and have a
conversation with somebody because somebody happens to be in Perth, somebody happens to be in
Adelaide, somebody happens to be somewhere else; well guess what? Now, in the Next IP world, I
literally can get real-time, instantly, somebody on the line, in a web conference, a video
conference, set up quickly. We can bring down-the-hall conversations back without physically
bringing the people together.
If we think about old world video conferencing, room to room with technicians, right? Those
businesses that have capability, you have to have techs and they have to set it up and they have to
keep on adjusting things and enabling stuff to happen. Well, guess what? In my office today I can
do all of that myself, and if it can pass the Sol test of simplicity, then anybody can do it.
Thats how simple things are becoming in terms of enabling services to our customers. Were able
to establish meetings without assistance. This isnt just for the big end of town, it has direct
relevance and leverage for Deenas small and medium enterprises as well, and it enables this
consistent user interface. So think about multimedia web conferencing, marketing presentations
real-time, collaborating real-time, interoperability with legacy audio conferencing, recording,
playback, desktop sharing, next IP networks enable a virtual PBX also in a kind of branch office in
a box. Think about setting up a remote ATM at a major event, think about opening up a new retail
location as a trial, think about setting up a temporary insurance office at the scene of a natural
disaster. Any of these are possible and require about two hours of set up time. Well, thats
simply because in our case, with Next G, Next IP, were not dependent on, in this case, a wire
infrastructure. You dont have to wait and there is no additional facilities investments. All of
that is important.
So let me talk about education. In the case of education there is a lot of paradigm shifts as
well; being in multiple classes at the same time, notes on whiteboards and interacting real-time
multiple locations, multiple students, even in multiple cities, states or even countries. A
student can attend via TV and record two other lectures in the background. You can multitask in a
Next IP world. In the case of healthcare think about a blood sample that been taken and sent to a
lab. In the old world it was delivered, over multiple networks, to a physician, to a lab, to a
hospital, and then accessed by potentially multiple people through multiple sign ons onto each
device that it was delivered to. Well, its virtually impossible to audit who had access to that
data. In the new world now you can have a single sign on for all devices through a single network
and a precise audit trail of every individual who has accessed that
information. This has applications and relevance in all other industries, and whether it be, as I
said, on the education side, on-line learning and school administration, significantly improving
access to the information and productivity of the school system, right, real-time information. An
example is right here in Australia. The Western Australian Catholic Education Office is already
working with us to deliver educational information in new ways to children regardless of the school
size or its location. The retail sector is looking now at smart stores that improve customer
service through in-store media E coupons, check in and checkout processes that flow the traffic
much differently. In the case of finance and banking massive amounts of secure transactions at
split second speeds, improving customer services and bank productivity. Look at the mining and
resource sectors. When we think about that and advanced communications and asset management, it
improves the productivity of people and the machines that theyre operating, for many things now
can be done remotely, monitored remotely in new and different ways.
Well, what does all of this mean and how do we, Telstra, enable it? To me its about what I call
the flex, the flex in our networks. We can expand, we can contract, we can move here, we can move
there in now new and different ways, rather than in the old physical, dedicated, constrained kind
of world. Not only that, because it is IP and because our Next G network is IP as well, we can do
it almost anywhere across the nation. So it is about flexibility for people, it is about flexing
hours, it is about flexing your presence and locations. But the punch line really is that it is
about more flexibility for business, and thats why were doing it, because back to the original
principle our of transformation is putting our customers at the centre and enabling our customers
more in terms of their ability to do what they want to do.
In closing here, this is about innovation, it is about our strategy, it is about our plan and it is
about changing the game. We have now innovated our IP platform, weve innovated on a technology
basis, weve taken our innovation to our people, building the expertise through training and other
experiences with our Telstra IP consultants. We have collaborated with our strategic suppliers.
Weve brought in the best of breed,
well tested suppliers and their technologies and the Next IP is now part of the Telstra vision and
the know-how, and it is part of the next dimension that I would say is only available with Telstra.
Now, it is important to note and we bear this responsibility and we take it very seriously that
Telstra really is Australias central nervous system because we connect all voice calls, video
calls, data calls, other things that are happening within the economic infrastructure of this
country. Telstras Next IP network can in fact enable reductions of costs, increases in revenues,
improving asset management, reducing risks and liabilities for Australian businesses. So it really
is about, in the case of Telstra with next IP, being bigger, better and world-class.
Id like to introduce to you and ask you to watch with me a video. After the video our GMD in
charge of our Telstra Enterprise and Government Business, David Thodey, will come up and talk more
specifically about the offers. Please enjoy the video. Thank you.
(Video played)
DAVID THODEY: Good morning. For those who dont know me, my name is David Thodey. I dont know
about you, but Ive seen these videos for I dont know how many years, maybe 10; but for the first
time this is now a reality. In fact I went through the products that you need to be able to deliver
that sort of capability and I think weve nearly got every one of them. What we need to do is
actually integrate it together, but you can see this is a great example of convergence. Its about
business and home life coming together, its about using your mobile and that old fixed line phone
together, its about convergence at a very real level. The reason we showed you the video is that
we wanted to show you how real it is in terms of impacting peoples lives today, because this is
whats going to really make a difference. We will talk a lot about technology, but until it makes
a difference to a business, to someones personal life, it means nothing. So what weve got for
you here today, which well give you on the way out, is a brochure and it actually has the DVD in
the back and you can take it and go and have a look at it. I think that it gives you real insight
into what were talking about here today, about
Next G and Next IP. So what I say, I dont say the future in terms of I say the future is
now.
Now Im going to go through a couple of things. I think Sol has given you a very good perspective
of what Next IP is and what Telstra is doing, but Im going to take you, firstly, a little bit
about the technology sitting behind Next IP, and then Im going to go, just at the end, and show
some real live examples of a couple of projects that weve been working on that make Next IP come
alive in various industries. So Ill take you through both those.
Remember, what were talking about today is about a new way of working and it is what we call next
dimension working. IP is not new, in fact I think IP has been around since, what, the late 90s,
but what is new in terms of this announcement is the whole new generation of technology that is
faster, bigger, but, more importantly, more integrated. Remember, I work with large enterprise and
governments every day so Im working with governments about how to deliver better services for
citizens, about banks and about how they deliver better service to customers, about how they can
provide their information and product. One of the big challenges we always have is about how to
deliver information in a more integrated way because these networks have built up, as Sol said,
over time and are completely separate, and when you try to provide a seamless interaction to a
customer, it is very, very difficult. So while we sit here and talk about technology I want you to
understand the real challenge is actually the engineering behind here, and it is very, very complex
and its very important that you get a sense of that as we go forward. Now, remember, what
customers want, what enterprises, the companies you work for, is all about productivity, better
customer service, better efficiency, and unless you can articulate this technology to mean
something, then it is all but words.
Next IP network is going to deliver, obviously, more capacity, and it is about this next generation
of technology. Remember, it is about Next IP and Next G coming together, both the wireless and the
wire line. Just think about your own experience, about how you use your mobile phone today and/or
your PDA, and then what you do when you come to the office and youre using your laptop; they are
quite different experiences and we need to pull this together into one seamless environment with
one command, one touch, one screen, as Sol often talks about. So this is very, very important.
So what we are announcing today is the worlds largest integrated wire line and wireless network.
It will change the way businesses in Australia operate, and I mean that. It is going to change
them at a very fundamental level, its going to allow them to do things theyve never been allowed
to do before. Weve invested $1.5 billion already in this network and there is more to come, but
this is about building out the infrastructure to allow this to take place.
I want to go through a few statistics because its important you get some sense of this. Firstly,
it is scalable up to 92 terabytes per second. You look at me and say, Whats 92 terabytes? Well
Ill come on to that. Whats important is that its 77 times faster than what we have today. When
you are thinking about a business, remember what they need is instantaneous response time, they
need to be able to deliver these multimedia services far more quickly than they have before, be it
Woolworths in terms of a retail point of sale environment, or a bank or a government. To do that
you need this enormous infrastructure. How fast is 92 terabytes per second? Here is couple of
things for you: If you wanted to move all the contents of the Australian National Library out of
Canberra, it would take you 4.6 seconds, so thats pretty quick. It could handle 3 billion phone
calls in one second. So this is important because scale and size is critically important when you
start talking about enterprise, and in fact if youre a technologist in a large company, thats
what you do every day, its about providing reliable, scalable infrastructure that allows people to
just get on to do what they need to do.
Now, I, like some of you would have experienced, but I know the moment that there is a problem in
the network because suddenly businesses in Australia are not operated. You see, thats the way
that were so integrally a part of the fabric of this country. So when things arent working, I
know about it, because these networks are the lifeblood of the organisation.
So whats the other features of this network? Well, of course theyre reliable, more reliable,
more scalable,
and as Sol talked about security, in fact security is probably the subject I talk more
about with executives in Australia than anything else. It gives us the ability to provide
these enterprises and governments with the seamless scalability that they need as they plan
out the delivery of services as they go forward.
I do want to just say a few words about the partners that weve involved in designing in
fact Dan Burns, who is sitting at the front here, has been (indistinct) involved in
building this network and designing it. They have been critical partners for us, so I just
want to quickly go through that because they are four very important partners. Firstly,
Alcatel Lucent is providing the ethernet aggregation, for those who are technically
inclined. Cisco is providing the core network, the IP MPLS core, and then Juniper is
providing what we call the virtual private network, the edge devices, which is where all
the traffic comes in, and of course Tel Labs is providing what we call the multiservice
edges. So we could not have done this, but we have brought together world class, world
beating suppliers to be able to provide this new next generation network.
So when you start thinking about it, if businesses can imagine the possibility that were
going to be able to deliver solutions that suit their needs and in a secure and reliable
environment. So its all about the integration of this network, its about Next IP and Next
G working together in a seamless way to provide a future that we call next dimension
working. I do want to stress that. Sol talked about unified communications, which is a bit
of an industry buzzword, but what it is, its allowing you to have the seamless interface
which will revolutionise the way we have dealt with technology over time.
So when I talk about Next IP there is really four or five things that I stress, and I think
its important we just spend a few moments on is this. Firstly, I talk about this network
being the largest business network in Australia. It provides coverage that is unmatched and
it will address 95 per cent of all businesses in Australia, and if you go across all the
technologies, we are just untouchable in terms of breadth and scale. This is very important
to a business, because unless you can have access to this technology across the country,
you end up
having different technology that is very, very difficult to manage. So having one seamless
technology at many access points across the country is very, very important. I mean, we
touch already 4,500 customer buildings, we have 750 retail POPS, and then you combine that
with Next G of 98.8 per cent of the population of Australia, really there is just no-one
who can provide this integrated network the way we can.
I talked before about being the fastest network in Australia, a scale of up to 92 terabytes
per second. I think that is very important to understand because it really gives assurity
for our business customers to know that they can grow with this network. I talked about
enhanced reliability, Sol mentioned 99.999 per cent; now, remember, what that means is that
that network is designed only to be not available about 5 minutes per year. That is a
reliability that is unheard of traditionally. If you talk about IT systems, they are
usually designed about 99 per cent, but 99.999 per cent is a network of tremendous
proportions. We talked about security, security in terms of (indistinct) service attack, in
terms of the whole virus protection, very, very important, and then unauthorised attack.
These are issues that we all face every day. Then of course we talk about management and
control of the network. This will give customers the ability to look at their network and
actually see what is happening in the network at any one time and then take corrective
action. This, again, is critically important for large companies in Australia. Of course we
talked about a rich set of applications, which Ill mention in a moment.
So Next IP enables customers to do things differently, in a new way, in an exciting way
that is going to allow them to provide better customer service, improve productivity and
improve efficiency.
So let me just now move a little bit away from the technology and talk about a couple of
examples that weve been working on over the last six months. Remember, weve been building
this network for 18 months and its been an enormous effort by a lot of our engineering
community. Let me talk about two, one is in the retail media industry and the other one is
in the health industry. For those who have been into Retravision recently, you may have
gone in and seen their digital
screens. What they have in there is, they show advertisements during the day, but they
change. So if you go in there at 9 oclock in the morning youll see a series of
advertisements that are run until to 11 oclock, between 11 and 2 oclock the
advertisements change and they change again in the afternoon. This is being run off an
application we call retail media solutions. Every one of those digital screens is connected
to the IP network and so were pumping down videos that are dynamically changed during the
day and depending on what we believe, or Retravision believes at any one time, is the
customer base going through the shop, they are able to change the advertisements. So let me
just read what Keith Perkins, the CEO of Retravision said just the other day. He said: The
good thing about Telstra retail media solutions is that it takes the consumer right through
to the point of purchase. It completes the transaction. You see, 75 per cent of all buying
decisions are made at the point of sale, 75 per cent of all decisions. He said: We dont
believe that there is another way to do it in a cost effective manner. I dont believe
anyone else could do it other than Telstra because of the size and shape of the network.
You see, this is what its all about, this is what customers look for. The early signs from
this project are very, very encouraging. So thats one example.
Another one is a project that weve been working on for a number of months now at Lyell
McEwin Hospital in Adelaide. Its what we call managed healthcare systems. Were going to
show you a video about this in a moment because its great to see it, and it showed a
little bit of it in the video before, but this really gets out the detail about the change
that is taking place in the delivering of patient care systems, but also entertainment in
and around a hospital bed. What it brings to life here is, we used a large amount of
content from Foxtel, BigPond, Sensis, plus IP telephony, plus a clinical patient care
system all integratable in one device that both the doctor and the patient can use, so this
is truly exciting. Again, this project has been incredibly successful. Well show you that
video in a minute, but let me just finish: Let me assure you this is a very exciting day.
Ive been in this industry a long time, but Next IP really does take us to a new level in
providing the seamless infrastructure that allows businesses in Australia to do what
theyve never been
able to do before. Whats more important, there is no-one else in Australia that is able
to provide the service, so its only at Telstra, and it is going to be able to improve
productivity, improve customer service, and, most effectively and importantly, drive real
operational efficiency in many of our customers.
So lets see the video, and then after the video my colleague, Deena Shiff, will come up
and talk about small and medium business, or Telstra business, and take you through some
other examples. So lets have a look at the video now. Thank you.
(Video played)
DEENA SHIFF: Hi, Im Deena Shiff, and I am here to tell you that this new Next IP network
isnt just for the big end of town. In fact smaller businesses, local plumbers,
hairdressers, small services firms will be the most dramatic beneficiaries of this. In fact
the technology habits of Australias small and medium enterprise has changed dramatically
in recent times. Today in Australia 90 per cent of small and medium enterprises are
connected to the internet and 80 per cent have broadband. Thats a number thats doubled in
the last two years. The internet is now being used by these businesses for a much wider
range of purposes, but theyre ready to use it to trade and to sell and to use business
applications using this technology. Were seeing a very significant increase in the use of
smart phones and portable devices for business. But small businesses really want to be able
to work anywhere, but hitherto these kinds of applications, which have just been for the
top end of town, people who have had large private networks. But what the Telstra Next IP
network does, coupled with Next G, is that it enables smaller firms to work anywhere. This
next dimension of working enables a small business the same experience whether theyre on a
fixed or a wireless network on whatever their choice of device. So as Sol said, it means
that they can use one address book across all accesses and devices and they have can have a
single message centre or mailbox for any kind of message; whether its e-mail, voice or
video, it can be retrieved. Plus the Next IP network, the Telstra Next IP network, is
scalable and its smart enough to know when to prioritise and to increase capacity to cope
with additional business demands. So its really important if youre a business
that has varying needs and is growing. Imagine what this means for small firms that want to
be more productive and for small businesses that are growing and want to be part of a
global market. Take a tradesman, for example, who can minimise the administration of their
business and headache around tax time by billing customers on the spot by using a Telstra
mobile payment solution that will run over the back of this network. This solution will not
only process the payments, but it will update and store the transaction to accounting
records. So Telstras small and medium enterprise customers are now going to be able to
access a range of these Telstra Next IP products, and these include the video collaboration
and conferencing applications that Sol spoke about. It also means that business broadband,
the broadband built for business only, where the traffic for the internet is segregated for
business customers, is built onto this Next IP network, and that is a unique proposition
for small business in this market.
Other applications will then be able to run over this network, like business on-line, which
is available now, a do-it-yourself web builder and web hosting service that enables small
business to establish an on-line presence. So it really is about a new way of working and
being able to take your data centre, or your desktop, with you if youre a smaller
business.
Let me introduce you to a customer of mine and I hasten to add this is a genuine customer
and not a character in a video. Her name is Gay Murray, she works alone from home in Sydney
and she has quite a sophisticated business actually, she delivers E-learning and computer
based training to large clients overseas, notably Cathay Pacific. E-mail is her core
communication tool when she communicates with Cathy Pacific in Hong Kong, as well as the
system integrators who work for her out of Mumbai. The content on her laptop represents her
entire business. Mobility is also incredibly important for her because of the nature of her
work and the fact that shes often dealing with clients in different time zones. Shes
stretched, shes stretched so while servicing her current clients she needs to look for the
next one, but shes clearly got scope for growth in this business, so that is a classic
Australian services export story if she can grow. But how could next dimension working help
Gay? Business broadband, including PC back up and business
security, ensures her data is secure, externally stored, and that she has enough capacity.
Were establishing a website and on-line presence for her so she can attract new clients,
and when she works with her clients overseas and in Australia IP video conferencing and
document collaboration is perfect for helping her to share and edit content on-line,
without necessarily having to travel overseas. But if she does travel overseas, weve given
her a Next G wireless turbo card so that she can work while travelling in the same way.
Let me take another one of our customers Ive got to admit Im also his customer;
restaurant owner, Mr Hanabi. Mr Hanabi is a small restaurateur, he has a staff of about 10
and his business is open from lunchtime to midnight. Hes pretty ambitious and he wants to
open another restaurant, which hes currently in the process of doing, and its on the go.
He sells great food but he has no on-line transactions, no web sites, and he does advertise
but its in the print through the local Chinese, Japanese and Korean newspapers. So how
could next dimension working help Mr Hanabi and meet his desires to grow this business?
Well, business broadband start up will include an on-line presence and business security
for him, and hes decided to take on-line orders via e-mail and offer tourist information
about his restaurant by linking the web presence to Sensis, Where Is and Australia tourist
sites, so hes expanded his range of available customers. Hes also going to retain me,
even though Im moved offices to the other side of down, and hes going to do deliveries
of, hopefully, really good food after this publicity, but he will be able to, when he
delivers to us, swipe the transaction on a mobile payment solution. So hes not lost a
customer and hes expanding his range of customers.
I can give you thousands, thousands of examples like this about my customers. Im looking
forward to putting these solutions together for all of them. So in conclusion, Telstra is
committed to helping even the smallest business work smarter and be more connected.
ROD BRUEM: Thank you, Deena, and if you could stay on stage and well invite Sol and David
to come back as well. At this point Id also like to welcome on the stage Dan Burns, who is
the managing director of Network Operations, and Dr Hugh Bradlow, our Chief Technology
Officer. Theyll be able to handle some of the more technical questions that you may have.
So well open the floor to questions. There is two mics here in the centre of room, if you
could make your way to one of those if you have a question, and we also have a large
audience on-line today, interstate and overseas, and well be taking some questions over
the conferlink facility, so well alternate. But we might take the first question from here
on the floor.
QUESTION: Michael Fraser from The Australian. The 1.5 billion, could you break that down a
bit for us? Does that include spending that happened on the network before you got here, or
is that just since you announced this network at the end of 2005? I mean, how much of that
money was spent with Cisco and the big vendors, and if you could maybe break it down a bit
for us? Regarding all the fancy stuff we saw in the movie, those applications, are they
being developed are they actual Telstra applications or are they applications that are
developed by other software companies that youve just stuck your brand on? How much of its
own software and application development is Telstra doing and how does this compare with
what was happening a couple of years ago? The last question is about travel: I was just
wondering I guess your travel is pretty legendary, Sol how much of this going in the
office and doing all of this on video are you doing yourself and making other senior
executives do, and how much is Telstra actually saving on travel because of using its own
applications like this?
SOL TRUJILLO: Okay, let me take it in pieces. As usual, I probably need to correct you on
two or three things. Number one; in terms of the applications, the applications, as we
talked today, are about an integrated set of capabilities that nobody in the world has.
When you talk about an IP wireless network and an IP fixed network, no-one has that, so
were developing those applications. We have people like Dan Burns and Greg Wynn and John
Garner and other people that are working in a collaborative way in Sydney, in Melbourne, in
other places around Australia, to make those happen, yes, collaboratively, and, yes,
sometimes we travel, but a lot of times taking advantage of the technology. In terms of the
investment the $1.5 billion, thats really been part of what weve called our IP core and
the MPOS investments
that have been made since the time that we announced our strategy back in November 05. In
terms of the details of it, who we spent, how much with, we dont disclose that because
those are all subject to private negotiations between us and the suppliers that we have.
Finally, in terms of the travel, we are now enabling ourselves to equip a lot of our
locations across the country to be able to enable people to talk real-time. The example is,
just over the last few days, as we were working on this, working on some other issues, Ive
had people, essentially, on a call within five minutes of trying to set up the call, which
is unheard of in a business like ours where everybody gets out their calendars, they talk
about scheduling something a week from now, two weeks from now, versus being on demand in
terms of our business. But its changing our business internally and it is changing what
our customers are being offered, and finally in some cases, yes, there are some
applications that some of our suppliers enable with us, and in other cases were developing
many of them ourselves.
QUESTION: One follow up on the 1.5 billion: What sort of cost savings does that mean to
Telstra and how much of those are being passed on to customers?
SOL TRUJILLO: Im sorry, ask the question again.
QUESTION: What sort of costs savings has that investment given for Telstra, can you
quantify that? And how much of those costs savings are being passed on to customers?
SOL TRUJILLO: Well, the benefits of our investments are being passed on to customers
literally every day. Thats the way we talk about this business. In terms of costs savings,
there is efficiencies that are afforded, and at the same time that enables us to invest in
other things to bring Australia to world-class levels, as opposed to being left behind. Now
were at a point where, in Australia, the wireless capabilities from Telstra are unique and
world leading, and now, again, in the case of the IP capabilities, integrated with our
wireless, we now have world-leading capabilities in Australia. Thats where the value and
the benefit goes to our customers. Next question.
QUESTION: Stuart Connor from IT Wire and Exchange. Sol,
until you can migrate all your customers and all your services onto this new homogenous all
IP network, youre going to be running that network and youre going to be running
spaghetti bowl of legacy networks that you showed on the slide. Im wondering if you can
give us some indication of the timeframe that we should expect to be able to progressively
close down all the legacy networks and some indication as to what the Opex reductions will
be going forward as those networks are closed down? Because obviously, today, youre
running all those and youre running your new network, so your Opex, I would imagine, would
have increased significantly from when you were running the old legacy networks.
SOL TRUJILLO: Thats a great question. We talked about this back in November 05. We talked
about the fact that we were going to be making some investments, wed have a Capex bubble,
wed have an Opex bubble for the first few years, and then on the back end, at the end of
our transformation, wed be removing legacy equipment, networks, systems, other things. So
in the next couple of years, once we get past the 08 period we will begin removing a lot
of that legacy equipment. I cant tell you network by network or system by system, but over
time we will be doing that and thats part of what David and Deena and David Moffat and
Geoff Booth and some of our leaders that deal with our customers were also working on
plans with them in terms of migration.
QUESTION: So you dont have a set timeframe by which you expect to be able to do all this?
See how it goes?
SOL TRUJILLO: We have a set timeframe, yes, to build, and we have a set timeframe to do
all that, but we have not disclosed that yet in terms of details and I wont disclose it
today.
QUESTION: So youve no indication of when you expect the Opex (indistinct?
SOL TRUJILLO: Weve said publicly and again Im only going to disclose what weve already
disclosed financially weve already said that 08, as a financial year, we will start
seeing material reductions in Capex and Opex as a result of some of the things that were
already doing? 09, the savings will become greater in terms of the actual absolute levels
as well as the saving
levels. In 010, they will actually be one of the greatest years, because thats when we
will have completed a lot of the builds, we will have completed the implementations of our
systems and we will actually begin, or have continued in a big way the removal of legacy.
So weve already said this to the financial markets; 08, 09, 010, and thats where you
see us going from where we are at today in terms of the cash flow generation to the $67
billion of free cash that we believe that well be generating in the 010 period.
QUESTION: One follow up question: Today could you support all the legacy access your
customers have on this new network, so if a customer wants to maintain the service they
have, can you actually carry that on the new network today, or are there any services which
you have to maintain that (indistinct)?
SOL TRUJILLO: There are some that the answer is yes and there are some that the answer is
no, because we dont want to were no different than a retailer; you cant carry all
products in perpetuity, you have to manage a certain number of SKUs in terms of inventory.
But we will work with our customers in terms of whats needed and what we can now offer,
bigger, better other services with, and thats what David and Deena and Geoff and David
Moffat are doing as we speak. Thank you.
QUESTION: Brendan (indistinct) from ABC Television, the Lateline Business program. You are
attempting to unravel that spaghetti that we see out there in Australia, but moving to
spaghetti westerns and gunfights and the internet, yet youve been involved in long-running
gun battles with the Feds about internet speed in Australia. Where exactly are we in your
attempts to speed things up?
SOL TRUJILLO: I think weve been fairly clear that we believe that in the case of fibre to
the node were behind the rest of the world and falling behind quickly. So weve been
fairly public in advocating the fact that Australia is going to need to make a decision in
changing the regulatory policies that disincent investments. Its pretty clear. When there
are incentives that say a shareholder who has invested a lot of capital and earned
competitive returns in a company like Telstra, when they invest in things like that, just
like they can when they invest in a BHP or an NAB or any other investment
alternative, then thats when you start seeing investments occur that enable that. But that
means old, what I would call, 20th century regulatory policies start moving to be
consistent with the 21st century, and thats where we are at. So today you see it with Next
IP, its based on contractual relationships with customers, and our shareholders risking
capital because they get to set prices and do all of that in terms of what we do in running
the business. Its the same with the wireless business. So where there has been no
regulation world-class capabilities are being brought to bear. What we want to do is bring
world-class capabilities to bear across everything that we do.
QUESTION: There appears to be a little disappointment if you take a look at the share
price, clearly investors are concerned about the speed of negotiations with the Federal
authority. Whats your observation on that?
SOL TRUJILLO: My observation is that Ive been very clear in terms of what our requirements
are. I think the shareholders of Telstra, since the T3 sell down, they understood the
policies under which we will run this company, theyve understood the strategies under
which we will run the company, theyve understood how we will compete in the marketplace
and how we will represent their interests as stewards, as fiduciaries of the business. The
share price has reflected their either confidence or lack of confidence. If you call the
percentage increase a sign of confidence, you can call it that, or you can call it whatever
you choose to. I think the market is making their own decisions.
QUESTION: Just one last question, if I may: Were seeing a fundamental shift in the
technology from the old fixed line days where that was Telstras main business and
something it did widely. But if you take a look out there in the community there are many
complaints about maintaining that fixed line business. There was a letter in the Herald the
other day about an elderly person who couldnt get a fixed line phone in hospital. They
didnt happen to be one of the many Australians with a mobile phone. Are you abandoning
those loyal customers of all those years?
SOL TRUJILLO: The answer to that is absolutely not, and the facts would say that your
observation is incorrect.
We
QUESTION: Its was my observation a letter to the editor, and if you walk around here
looking for a basic payphone, youll be walking for a while.
SOL TRUJILLO: I dont think if you walk around most places you will have a hard time
finding a payphone. You will have a hard time finding as many payphones that were never
used. We have removed those payphones that arent used. In the case of service to
Australians across the nation we track those results. The government has a reporting scheme
where these things are tracked, and the numbers that we report today are the best ever in
terms of service delivered to Australians across the nation. Those are the facts. Now, I
would say to you, at the same time, we are not perfect. We have humans working in the
business; sometimes there are mistakes, sometimes natural disasters happen, sometimes
cables get cut, sometimes things happen that we cannot control every single circumstance.
That creates those unique situations where people dont have service after a flood, dont
have service after a cyclone or a cable being cut that has to be restored, and it takes
time to get people out there digging up trenches, isolating the trouble then trying to
re-splice all the cable that sometimes you cant do in a minute, you cant do in a day.
Those are all part of the business.
ROD BRUEM: Well take another question from the back there.
QUESTION: Alex Hunter (indistinct) from IT Wire. I just wanted to ask about the pricing for
wireless. Ive just come back from a conference in Beijing in Intel and they seem to be
still very gung ho on the global Y Max roll out. Obviously its very easy for them to say
theyre going to deliver a cheaper broadband on a global basis wirelessly when the network
doesnt exist, but ultimately, in fact, they seem to be spending lots of money in funding
companies around the world to do that. In Australia I know that Next G has the fastest
network and the fastest speeds and those sorts of things, but your competitors are offering
cheaper prices on the next series with 3, Virgin offering a gigabyte for $10, all those
crazy prices after that even Vodafone dropping prices. But to all of you, when we will
see better pricing on wireless? Your competitors are doing it, eventually market forces
will force you to do the same.
SOL TRUJILLO: Youre absolutely right, market forces will always work. Today the market
forces are at work, were doing very well in capturing the market because customers are
making the choice around value. Price is one dimension, but there is no other player in the
market that covers the nation. There is no other player in the market that has the speed.
There is no other player in the market that has the features, the content, the services.
Thats all part of the value equation. Its like the car you drive, you can buy one thats
here, you can buy one thats there, not all of us buy that same car. The shoes that you
wear, the shirt that you buy; all of those things are about value trade-offs that we make,
and were doing very well in the market today with the value that we deliver. Its not just
about the lowest, cheapest price, because if you want cheap, you can have inadequate
service, less speed, less quality and you can get cheap, youre right.
QUESTION: Thats all true, but even so, now that some of the customers are really starting
to put price pressure, the price difference between Telstra and the competition is going to
get a lot wider. I mean are you feeling the pressure to reduce prices or are you just going
to hold out for as long as possible?
SOL TRUJILLO: The difference in quality, reach, coverage, speed, content, youre right,
is huge between Telstra and our competitors. Youre absolutely right.
ROD BRUEM: Look, well have to leave it there, ladies and gentlemen. Thank you for coming
along today. The webcast from today will be available on-line on Telstra.com very soon. Im
sure youll all agree that its a very exciting new start for business in Australia from
today. Thanks again, and good afternoon.
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2 May 2007
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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
Telstra presentation to the Macquarie Australian Conference, Sydney
In accordance with the listing rules, I attach a copy of a presentation by John Stanhope,
Chief Financial Officer, to the Macquarie Australian Conference, Sydney, for release to
the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Telstra Corporation Limited |
Macquarie Australian Conference Sydney May 2007 |
John Stanhope Chief Financial Officer |
These presentations include certain forward-looking statements that are based on information and
assumptions known to date and are subject to various risks and uncertainties. Actual results,
performance or achievements could be significantly different from those expressed in, or implied
by, these forward-looking statements. Such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other factors, many of which are
beyond the control of Telstra, which may cause actual results to differ materially from those
expressed in the statements contained in these presentations. For example, the factors that are
likely to affect the results of Telstra include general economic conditions in Australia; exchange
rates; competition in the markets in which Telstra will operate; the inherent regulatory risks in
the businesses of Telstra; the substantial technological changes taking place in the
telecommunications industry; and the continuing growth in the data, internet, mobile and other
telecommunications markets where Telstra will operate. A number of these factors are described in
Telstras Annual Report and Form 20-F. |
All forward-looking figures in this presentation are unaudited and based on A-IFRS. Certain figures
may be subject to rounding differences. All market share information in this presentation is based
on management estimates based on internally available information unless otherwise indicated. |
1
Transformation Overview... |
Telstras transformation at a glance |
OLD Telstra 15 Nov 05 NEW Telstra |
What is the What does the Pre-transformation transformation
transformation about? translate to? |
Declining PSTN revenue Give customers a Improved customer and market
share powerful, seamless user understanding through experience across all
MBM Slowing growth in wireless market devices and platforms Modern
networks Minimal new product 1-click, 1-touch, 1- Take out costs revenue
button, 1-screen, 1-step Reduced complexity Costs growing Grow revenue
and cut costs Innovation Too much complexity Integration Build
competitive Network getting old advantage Better value proposition Little
differentiation Build new operating than our competitors Weak customer
service model |
Deliver new customer experiences and create Not sustainable
long term value for shareholders |
2
1.2m 3G SIOs added more than 700,000 1H07 |
Mobiles Market leader at end of January 4 months ahead of target 3G ARPU uplift of $20 maintained |
Next G driving content and applications non SMS data ARPU +74% |
Outgrowing competitors to increase market share by 1%pp to 45% Broadband Beating nearest
competitor 3:1 Over 200,000 retail wireless broadband subscribers |
Total line loss of 0.8% since June best in class PSTN Residential lines held at June
levels best in 5 years |
Positive residential churn and market share gain 1 st time since comp |
Sensis Share of new media revenue increasing from 10% to 15% SouFun triple digit percentage growth |
FOXTEL subscribers up 10% |
Foxtel FOXTEL subscriber revenue growth of 15% |
100% digital TV provider cable analogue service switched off 1 Feb |
Completed construction of Launched in October 2006 |
3
Wireless Australias largest and fastest Upgraded peak network speeds to 14.4 Mbps and Next
G national wireless broadband extended coverage up to 200km at selected sites on network network
15 February 2007 Built 5,112 base stations and building an additional 400 in FY07 Wireline -
Construction of IP/MPLS core, Launched on 26 h April 2007 Next IP Multiservice Edge and IP-
Migration of internet backbone IP traffic to core network DSLAMs. To be completed by completed
early February 2007 mid calendar year 2007. |
Market Extensive understanding of the MBM initiatives (e.g. subscription pricing plans) Based
customer helped reduce fixed-line churn and slow revenue Mgmt decline Online purchase process
simplified Reducing and simplifying On target to achieve 80% out of box requirements IT Systems
systems will deliver improved Exited 148 systems since November 2005, on track to customer
experience and lead achieve 75% target reduction by end of FY08 to cost savings and efficiencies
Investing in our people to better Over 6,900 Telstra vehicles fitted with GPS devices to Workforce
serve our customers needs improve customer scheduling and productivity Over 6,400 participants in
the Learning Academy On track to achieve FY08 headcount reductions |
The building blocks are in place.... |
4
IPTV / HDTV (mobile or fixed) NB
Applications and Services |
-Fixed and mobile call completion Video calling (GSM 2100 3GSM 850)
-Mobile SMS and MMS Other Content and Applications
-Call connect Big Pond Apps & Services
Narrow Band Transaction services Sensis Online including interactive
IT services Software solutions
Managed Network Services
Products 10% of Sales Revenue at Jun 06
Hosting
3% of Sales Revenue at Jun 06
PSTN (Basic, Local, LD) VoIP |
Dialup Internet Access Mobile 3G voice
Fixed to mobile calling Integrated
Fixed-Mobile Mobile voice Broadband Access
Print directories ADSL, HFC, Satellite |
Foxtel FTTP
Unbundled Local Loop EVDO HSDPA
IP Data
78% of Sales Revenue at Jun 06 9% of Sales Revenue at Jun 06 |
Growing new revenues from next generation platforms |
Next IP Network Next Dimension Working |
In the next dimension we are not limited by time, distance or devices |
5
International
Traffic Growth (CAGR
2006 2009) |
Inbound international traffic into Australia |
Sydney Hawaii cable link |
Increasing demand for international capacity from Australia to Asia & US |
Broadband subscriber growth, bandwidth (speed) expansion and content rich applications driving much
of the increased demand Building 9,000 km submarine cable from Sydney Hawaii to meet increased
demand Sydney Hawaii cable is the largest ever built and owned by an Australian company |
Investing now for the continued growth in internet traffic |
Next G network leads the world |
ONE Austria Telstras Next G network 49 HSDPA networks is the world fastest |
7.2 Mbps around the world nationwide wireless support peak Around 100 HSDPA broadband
network network speeds of networks support Built in a record 10 months 3.6Mbps peak
network Lower spectrum better speeds of 1.8Mbps breadth and depth of 3.6 Mbps coverage
1.8 Mbps Lower operating/capital costs |
(1) Global mobile Suppliers Association (GSA) GSM/3G Market/Technology update 30 April 2007 |
6
Where the competition is at...response to Next G |
Speed Coverage Response to Next G
1.9m sq km AVAILABLE NOW
98.8% population 3G market leader
14.4 Mbps
Greater in-building
1.2m+ 3G customers,
coverage with 850
415k Next G (at 13/2/07)
5,112 base stations
Launched HSDPA
56% of population Launched X-series
3.6 Mbps 2,400 base stations Only 2 HSDPA handsets
available
Announced expansion to 3G
~55% of population
1.8 Mbps network to cover one third the
~1,500 base stations coverage area of Next G
55% of population
1.8 Mbps
~1,500 base stations |
Telstras Competitive Advantage - |
Penetration of base: Next GTM v 3G 2100 |
9 FOXTEL by Mobile: 7% 9 FOXTEL by Mobile: 0.8% 4 new channels launched
9 Mobile Music: 24% 9 Mobile Music: 5% driving an increase in |
9 Video Streams: 53% 9 Video Streams: 11% streaming minutes and customer take up Most popular
channels are |
Next GTM v 3G 2100 Usage (Oct Dec) |
Fox 8, Comedy Channel and 2100 11.3X Disney Channel Next GTM Increase in channel content:
Simple Life & Jerry |
7.4X
Springer (FOX8); MAD TV (Comedy Channel)
3.3X |
7
Puts the customer at the
centre of everything we do
Extensive customer research |
· 400,000+ customer
interviews Created a
dedicated SME unit |
Collated detailed data on 7
consumer & 5 business
segments
MBM used to rebrand and
refocus advertising
Launched new products,
including subscription pricing
plans
MBM initiatives helped
reduce fixed-line churn in
1H |
Future of MBM and Technology |
8
To give the customer a powerful, seamless user One network, any device, optimal customer experience
across all platforms and devices experience Imagine the Possibilities |
Mobile Integrated next generations networks Seamless movement between devices |
& Data Integrated experience across devices & platforms
Directories, info & search Real-time on demand experience |
Individual controls the experience |
Broadband Australia Campaign (BACK) |
Broadband
subscribers per 100
inhabitants, 2006 |
Australia is lagging behind
the world in broadband
penetration |
Broadband Australia Camp aign (BACK)
launched 21st February to
kickstart the broadband debate
BACK flyers sent to shareholders and
customers Get active and join the
broadband debate at
www.nowwearetalking.com |
Broadband now key bipart isan
election issue People are talking
about broadband Signed up
thousands of Telstra Active
Supporters |
Australia is in the broadband slow lane |
9
$107m provision raised in FY06 |
CDMA migration Normal recontracts included in budget for year |
Cheaper than 2100 handsets Range continues to grow, including 850
Handset Range recent launch of Samsung Blackjack 7.2Mbps devices
available from June 07 |
Higher network peak speeds allows No devices capable of 14.4Mbps
more customers to experience higher speeds |
Fibre-to-the-node (FTTN) In talks with, govt, opposition & others No
competitive return, NO investment |
We still face risks and challenges, Only 17 months into 5 year but we are making good progress
transformation |
We need to keep ticking off proof points 9 Winning where it matters |
· Broadband, 3G, online, integration Risks have not disappeared |
- Regulatory 9 Continued transformation execution
- Transformation execution But... Next G and Next IP networks
9 Delivering financial performance
FY07 revenue and earnings guidance upgrade
9 Creating new opportunities
Evolution to media comms
8 Regulatory environment |
10
FY2007 Guidance and Long Term Management Objectives |
FY2007 Long Term Management Objectives
Revenue Growth of 2.5% to 3.0% Growth of 2.0% to 2.5%pa to FY10
New product N/A In excess of 30% of sales revenue FY10
revenue
Depreciation & D & A similar to FY06 incl N/A
accelerated
Amortisation D & A of $300m to m
N/A 2.0% to 3.0%
Cost growth
EBITDA N/A 2.0% to 2.5%pa growth to FY10
EBITDA Margin N/A 46% to 48%pa by FY10
Growth in range of +3% to
EBIT +5% N/A
EBIT (2H07) Growth in range of +37% to N/A
+40%
Workfor
ce N/A Down 12,000 by FY10
Cash operating Range $5.4bn to $5.7bn due 10% to 12% of revenue by FY10
to
capex transformation
Intention to pay 14c final N/A
dividend
Divi
dend
N/A $6b to $7b by FY10
Free cash flow |
11
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3 May 2007
|
|
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
Transcript from Telstra presentation to the Macquarie Australian Conference, Sydney
I attach a copy of the transcript from yesterdays presentation by John Stanhope, Chief
Financial Officer to the Macquarie Australian Conference, for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
MACQUARIE AUSTRALIAN CONFERENCE
CFO TRANSCRIPT
2 MAY 2007 SYDNEY
ANDREW LEVY: John joined Telstra 40 years ago and since that time hes worked in pretty much every
role across Operations and Finance. In 1995 he was appointed Director of Finance and in 2003 he
was appointed to his current role as the companys CFO. He is a Director of Telstra Super, Telstra
Clear, Sensis, SouFun, Reach, and the Chairman of CSL New World Mobility, and Ive just found out
hes a coterie member of the Geelong Football Club as well, and across all his roles, John is now
part of an executive team that is implementing and overseeing, you know, an all-encompassing
transformation program that is pretty much re-shaping the way Telstra does business, and in many
ways is leading the world in terms of what its trying to achieve.
So on that note Id like to call John up to talk to you.
MR STANHOPE: Thanks very much Andrew and good morning everybody. Im going to have to scratch that
zero off the 40 years I think. And one of my least successful activities is the Geelong Football
Club, unfortunately. Ill just make sure this thing works for me. How about that. Okay.
Well here we are at the start of May and Ive not got a lot of new news for you, but hopefully I
can expand on where we are with our transformation and Im sure people are interested in Broadband
as well. We seem to get headlines, particularly in The Australian newspaper.
So Id really like to start today with a brief re-cap of our transformation. You probably will know
a fair bit of this, but its important just to get this context, and of course we have the usual
disclaimer there.
November 15 was sort of Watershed Day in 2005. It was significant in the history, or the 106 year
history of Telstra. It was the day we did announce our five year transformation strategy. Prior to
this date I think, if you followed Telstra for any period of time you would have realised that we
had our high margin PSTN revenue and market share in decline, our costs were growing, our new
revenue was minimal, we had too much complexity with three mobile networks, two transmission core
networks, over 1200 IT systems and so on, and we basically had too much of everything, plus some
more. And we werent close enough to our customers, so we didnt understand our customers well
enough. So that really translated into our customer service being below par.
Clearly that was an unsustainable position to be in and we needed to transform the business and we
needed a plan for the future.
We recognised Telstra had to compete in a new world, not just against traditional Telco providers
operating locally, but against global media comms business, as this business that we are in starts
to converge.
As a result we developed a comprehensive five year transformation strategy and in a nutshell, this
transformation strategy is about giving our customers a powerful, seamless user experience. Its
about integration across devices and platforms giving customers the one click, one touch, one
button, one screen, one step real-time user experience, and weve already found that that is what
customers have warmed to, particularly in the next G, and Ill talk about that a bit later.
Its about growing revenue from next generation platforms and cutting the costs in the company as
we remove that complexity that I was talking about. Its also about building competitive advantage
because we were very much like our competition, and Ill touch on how weve done that already in
Next G, and now, Next IP networks.
Its all about delivering customers new experiences and creating long term value for our own
shareholders.
The scope and scale of the transformation is unmatched anywhere around the world, and we are
setting the new world benchmark.
So, progress to date. When I spoke at this Conference last year we were only a few months into the
transformation, and we tend to forget it is a five year journey. We even tend to forget that
inside the company. But it is a five year journey and it has well laid out steps.
Were now 17 months in and we are ticking off the proof points one by one as we said we would, and
as we said we needed to. Because when we introduced this transformation strategy there was a lot
of disbelief.
So we are winning where it matters. Were winning in each of the key markets. So were doing the
transformation and also winning in the market. I mean, you can do a transformation and your
financials dont improve; hey. Youve got to ask yourself why you are doing it.
So we are winning in the key markets. We are the 3G market leader within excess of 42 per cent
market share, and that was achieved four months ahead of our May target. We expected to be there
about now, and we were four months ahead of that.
Our $20 3G ARPU uplift, which is the difference between 2G and 3G, is driven by data use with
non-SMS data ARPU up 74 per cent. We continue to take a disproportionate share in Broadband;
market share was up another percentage point to 45 per cent at the half-year close 31 December
2006. The average revenue per user held for the first time since Broadband was launched, with the
first half average revenue per user of $49 flat on the second half 06. And its grown since the
launch of high speed plans.
The PSTN revenue. That chestnut. That revenue decline slowed further to 5.6 per cent compared with
the 7.6 per cent in the first half of 06, and total line loss was only 0.8 per cent since June,
and that is a best in class performance if you look around Telcos around the world.
Weve held our residential lines, or our consumer lines, steady since June and we posted positive
competitor churn, so starting to win basic access lines back. And we recorded market share gains
for the first time since competition began.
So what about this transformation? We have made good progress in executing our transformation. You
can see it on this slide. Im not going to go through every point on this slide. And Im pleased to
say were on track to meet our key milestones over the remainder of this calendar year. Last week
you saw we announced the launch of the Next IP network. A key part of our wireline transformation.
So whilst this thing is not absolutely sequential, things are happening in parallel. Wireless is
really first, and the Next IP wireline core has been second, and as I say, we announced that. And
Ill provide some more details on the Next IP network shortly.
In October last year we launched the 3G 850 network which we call Next G. The worlds fastest
national wireless broadband network. And I mean that. It is the worlds fastest.
In February this year we increased the range and turbo charged the Next G network when we
announced we had quadrupled network capacity to 14.4 megabits per second nationally, a world
first, and extended the network range capability from this is from the base stations, from 80
kilometres to 160 kilometres everywhere, obviously subject to some of the geographic conditions,
and in some locations, 200 kilometre range from a base station.
Well deliver the first release of our major IT capability at the end of calendar 2007, and I know
people are watching what we do with IT with great interest, as it is perceived to be the highest
risk area, and with reasonable grounds. But we are on track to deliver that, and the second
release will follow in late calendar 2008.
So you can see weve been busy, but theres plenty more to come.
So the building blocks are in place. Weve been able to achieve a lot in a short space of time by
putting in place those building blocks, and it is a very programmed, and thats why we have a
program office, programmed transformation.
So underpinning this future weve developed a new operating model, and I have spoken about this
before, but I have to keep reminding people about what do you get at the end of this?
The operating model splits out product and service revenues in a traditional and new, and it
further splits them on a network basis, traditional and next generation. And I think I may have
talked about this at this conference last year, but it is important to understand that this is why
were doing this transformation. To get to this end point.
The bottom right quadrant is about re-engineering opportunities. This means traditional access and
voice type products being delivered over Next Generation Networks and it costs less to do so. For
example, VoIP, Mobile 3G, Broadband access, IP data, you can see them up there.
The top right-hand quadrant there is about inventing opportunities or its the innovation that
comes from what we are building. Now this means new products and services being delivered over
these Next Generation Networks, and its things like IPTV, video calling, more and more
applications that are bandwidth hungry and need the bandwidth that these networks will provide.
In combination, so these two right-hand quadrants, we refer to those as our new revenues. And you
can see there well its pretty difficult to read, I know, but right now we are at about 12 per
cent of the base of our revenues, are the two right-hand sides, and we expect that and our long
term objective is that to be more than 30 per cent of the base by fiscal year 2010.
This new revenue generation will result in a change in the economics for delivery of the products
and services, and therefore changes the cost structure and lead to the maintenance of margins.
Now weve got a margin, long term objective 46 to 48 per cent. Now why I say maintenance of
margins, thats exactly where we were 04/05. So you might say you can argue getting back to
where we were or I would argue pre-transformation maintaining the level of margins.
So you can absorb price competition, you can absorb the pressure in the market and still deliver
those sort of margins because you are building a lower cost infrastructure.
So Next IP. With the launch of the Next IP network last week and the Next G network back in
October 06, we can offer our customers now the opportunity to eliminate time, distance and device
constraints.
The Next IP network is not limited to the big end of town, as a lot of people think, but also
benefit our small to medium sized enterprises. To demonstrate this I thought Id just show you a
video, if we could just play the Next IP video.
DVD PLAYED
Okay. Theres quite a bit of technology lingo in there, but the bottom line is that with the
products and services that we can deliver over this Next IP Network, our customers actually
can increase revenues and decrease their costs and reduce the capital expenditure that they needed
once to spend, and increase their earnings, improve their own customers experience.
Fundamentally theres a lot of networks out there, they have to buy bits and pieces to put on the
end of it, Im trying to de-technical this story. So it costs them less because weve got this
thing, what we call the multi-service edge, and its as the words describe; theres multiple
services that can come into this one point and they dont need all the things that they used to
need to be able to operate their business. It simplifies the business for us as well.
Next IP will also help us reduce the network complexity and ultimately reduce costs as we migrate
customers off all the fixed legacy networks that were spoken about in that DVD, to the new IP core
and the multi-service edge that I just talked about.
So, you know, if you look at the history of Telstra, you know, weve got a lot of what I call the
Ns; special services network, digital data networks, ISDN. Lots of Ns. All those Ns start to
go away. And obviously, as they go away, it reduces not only the expense of running them, but it
also you know, weve been spending Capex on adding, enhancing, and so that all goes away as well.
In the IP world the intelligence resides in the network. New applications and services can be
brought to market quickly and at a lower incremental cost, and thats the new operational model.
So youve got here some of the logic behind how we get to that economic model. Thats the Next
Generation Network.
I just thought Id touch on this because since the half we have announced and talked about us
building a Sydney/Hawaii cable link.
As the number of Broadband customers continue to grow, so does their appetite for more band width,
of course, driven by the ever-increasing new content and applications that come to market, and
they are delivered over these Next Generation platforms. But I just give you an idea; about 70 per
cent of the Internet traffic out of Australia goes to the US. And so to have a pipeline or a cable
to the US, or several for that matter, is very important. So in order to meet that demand, manage
the costs effectively, we are investing in a submarine cable between Sydney and Hawaii. Im not
going to tell you how much, but the numbers bandied around in the press are too high.
This investment will reduce our reliance on third parties for band width. Right now the capacity
out of Australia is filling up and we are having to use some Southern Cross capacity which has a
partnership group that contains our competitors, and as the supply and demand equation starts to
work, its starting to cost us too much money to take traffic out of Australia, so well build our
own. So it really is targeted at reducing our costs and meeting the demand, of course.
In addition we are one of 17 companies investing in a new submarine cable from Asia to West Coast
US via Hawaii, which will also go through Guam, which just happens to be an interesting central
point, but our Australia/Japan cable also goes through Guam so you can see there is a connection
possibility there for us.
Let me just talk a little bit about Next G. Telstra has set the new benchmark in wireless
broadband. Not just in Australia but, as I said before, in the world. We have the worlds largest
and fastest national wireless broadband network with those speeds I mentioned; 14.4 megabits per
second.
We launch Next G in just 10 months, and for a country the size of Australia, thats pretty
impressive. So you can understand why other Telcos around the world are looking to us for guidance,
and our vendors are using Australia and Telstra as a reference site because we are ahead of the
pack.
The Next G network is actually a data network which is optimised for voice, so rather than the old
networks where most other networks around the world are voice, networks modified for data. So what
does that mean? It means that the 3G 850 network is more efficient, leading to lower network
operating costs and the competitive advantage that it brings. Next G is a powerful force in the
marketplace and it has changed customer behavior. It is proving to be a growth opportunity for us.
But can the competitors match or better us in wireless any time soon? Well the answers probably
not. Not in the short to medium term anyway. Because we will continue to set new benchmarks. We
have a plan for the future. By 2009 we expect peak network speeds to be around 40 megabits per
second. While our competitors are assessing technology and issuing press releases, our customers
are already experiencing the next wave of speed and content not seen in Australia before. We are
leading the world.
Our Next G network operates over the 850 megahertz spectrum band which gives our customers the
greatest breadth and depth of coverage of any 3G Network in Australia. Not only that, we have over
5000 base stations, which means we cover 98.8 per cent of the population. The competitor response
so far falls short of matching the advantages Next G delivers us, and thats what they say theyre
going to do. What theyre going to do doesnt match.
Wireless is the future and we do understand the future.
The competitive advantage is in the market now and it is delivering results. As of mid February we
had 415,000 Next G customers and we are at a run rate of about 100,000 per month coming onto the
Next G network.
Penetration of our content and applications is higher for Next G customers than the traditional
3G2100 networks that are out there which everybody else has. Our usage pattern shows the
overwhelming adoption of services on the Next G network. On average each Next G customer makes 11
times more video calls than the other 3G networks, three times more music downloads, two times
more game downloads and seven times more video streams than customers on the other 3G networks.
Well, on our 3G network. Which is also out-performing others.
What this shows is that it does make a significant difference being higher speed, real time via
one touch, one screen, one click, one button experience, making it easy for the customer.
Moving away from the network a bit, wireless and wireline, let me just touch on market-based
management. It is an important part of transforming a company, one that doesnt get a lot of
discussion, but we have been organised now for some time and resourced in and focused on seven
consumer segments and five business segments. We have depth, linkages and reach that no other
Australian media comms company can match into the customer base with the extensive research that we
have. And this is how we are competing and this is how and why some of those earlier figures on
basic access that I was talking about, this is one of the reasons we can achieve these sort of
numbers or this sort of turn-around.
We can create dynamic user profiles that are based on contextual and cookie-based behavioral
targeting, which still meet privacy commitments to our customers. For example, we can serve hotel
advertisements to someone who is looking at one of our websites, such as Citysearch, because we
know they were researching accommodation on another one of our websites, GoStay earlier that week.
Were connecting buyers and sellers, weve targeted information, we know how to find them, we know
how to talk to our customers.
What you can see behind me here on the slide is a dynamic billboard advertising signage that
displays different ads depending on who is nearby, based on a mobile location and segmented
profile information. So this person passes this billboard, we can flick onto the billboard
something thats of interest to that persons profile.
We are identifying ways in which existing and Next Generation technologies can be used to deliver
new applications and services that meet the needs of the identified segment and the person.
The possibilities are endless. Really they are only limited by your imagination.
Youll see the various billboards there.
At Telstra were not only transforming the business, we are creating a new business. A new media
comms business because the business is converging.
Telstra has such a deep array of assets we can go between screens, we can provide content to end
users irrespective of whether theyre looking at a PC, a PDA, a mobile phone or a TV. We have the
scope to compete by innovating.
By 2010 consumers will demand a one command real time environment. The future is all about high
speed broadband and integration of products that allows the consumer to move seamlessly between
devices. Its about greater bandwidth capacity to handle the increased demand.
The future will be location, device and context neutral. By 2010 consumers will access HFC or
FTTN, if its built, and it will do everything, driven by three key experiences that determined
the relationship between people, time and the place, integrated experiences across devices and
platforms, real time on demand experience for instant information gratification, overcoming time
and distance boundaries. And the ability for individuals to control the experience with
information on their terms and in their format.
The future is about knowing customer preferences, anticipating future wants and satisfying them by
reaching customers real time on their time and on their preferred device in their preferred format.
Thats the future, but this future is dependent on high speed fixed line Broadband.
As you can see, we understand the future and weve had a plan for the future. We have a plan for
Australia. Our plan involves investing around $4 billion in fibre-to-the-node network. The network
will be open to our competitors, so not like what you read in some of the press, Telstra wants to
return to the monopoly, the network would be open to our competitors provided we can earn a
competitive return for our shareholders. We have held that position, now, for nearly two years.
So why fibre and not wireless? You just heard me say that wireless can get up to 40 megabit
speeds. Well the speeds consumers will demand to access content applications and services over the
Next Generation platforms can only be delivered consistently on fibre.
For example, on demand high definition TV requires between 6 to 10 megabits per second, recording
for high definition TV requires 6 to 10. High definition gaming requires about 5 megabits. And by
the way, multi-channel IPTV takes about 25 megabits per second. So when you multiply those
requirements by the average number of users in a household, you can imagine that average household
speed requirements can easily surpass 50 megabits per second.
However, our ability to invest in nation-wide high speed fixed broadband network and deliver a
broadband future for all Australians, is in the hands of the Australian Government and regulators.
We are being left behind the rest of the world. To end the broadband drought we have launched the
Broadband Australia Campaign, which we call BACK, which aims at educating the Australian public.
Weve set flyers to our customers and to our shareholders over the past few months, and yes, it is
designed to put pressure on both sides or all sides of politics. Because we do believe this is
what Australia needs as a nation.
Australians like being number one, but when it comes to broadband were not even in the top 20 for
broadband speeds and we just make up the top 20 for broadband customers per 100 people.
So I encourage you all to join the Broadband debate. Its on the front page of The Australian.
Since the half year results the same questions keep arising from investors and analysts, so Im
going to just address some of those.
CDMA migration. Okay, so youve built a Next G. What about this CDMA network? As part of the $427
million redundancy and restructuring provision that we raised at the last full year, over $100
million related to CDMA migration. But people ask me, Well, how can you migrate 1.7 million CDMA
customers for only $100 million? It cant be done.
What is important to remember is we have CDMA customers coming out of contract during this year
and as a result we will re-contract those customers out of the current year budget and not the
provision, and they wont be offered CDMA. Were not selling CDMA any more. So there is a natural
migration taking place.
Not only this. The migration has already started. I wont tell you how many numbers per week. Its
a high number and increasing. And people are migrating because they see the value that Next G has
to offer and what it provides them, in terms of the breadth and depth of coverage, the applications
and content and how easy it is to use compared to CDMA.
The 850 handset range is also another question often raised. We launched Next G in October with
four handsets and one PDA. We now have 13 handsets and 13 data devices. So I wouldnt say weve
got a limited handset range. In fact our range is only going to increase, as you will have seen
with the recent launch of the Samsung Blackjack, and we should have a 7.2 megabits per second
device available by June this year.
The other question we get as well, Okay, so youve built the network at 14.4 megabits per second
speeds, but youve got no devices at 14.4 megabit speeds. As Ive said, the Next G network is the
fastest wireless broadband network in the world and you may be sitting there trying to reconcile
the difference between that network speed and the handset speed.
Our current network speed of 14.4 megabits per second just simply allows more of our customers to
experience the higher network speeds. And if handsets today this handset today is operating at
3.6 megabits per speed, obviously four times that is 14.4, and thats the speed with which the
data goes through the network.
Fibre-to-the-node. Lots of questions about fibre-to-the-node. Lots of questions being asked in
press articles. We are still talking to the Government, the Opposition and others. But let me be
clear. There is no change in Telstras position. If there is not a competitive return for our
shareholders, then we will not invest.
So before I close and open for questions, just let me re-cap.
We still face risks, such as regulation in particular and execution, of course, of the
transformation, and transforming to a new media comms business. But we are moderating these risks,
and obviously were moderating them by ticking off the proof points.
We saw this last week with the launch of Next IP network, and its slightly ahead of time, and
back in October the launch of the Next G network. And well further reduce this risk with our IT
transformation release at the end of 07.
We are not only building networks, we are also changing the game in the market, and winning in the
key areas of mobiles, on line and broadband. Were also delivering, and this is important, on our
financial performance, theres evidence at the half-year results we lifted our fiscal 07 revenue
and earnings guidance and weve not changed our 2010 long term management objectives.
By 2010 we will be firmly established as Australias leading, fully integrated media
communications company. Thank you. Ill open it for questions.
ANDREW LEVY: Thanks a lot John. I might just kick it off with a question, unpredictably on
fibre-to-the-node, but the Opposition have a plan, if they come into power, that would see them
co-own a new network with yourselves or somebody else if they bid for it successfully, I was just
wondering what Telstras opinion on the viability of that is and how favourably or otherwise youd
see that?
MR STANHOPE: Well let me firstly say we welcome the Opposition raising and having a position on
fibre-to-the-node or broadband in Australia. We welcome it because it has raised the debate and
its clearly put it on the table as an election issue, so thats great.
We dont like the aspect of the proposal which is part public, part private. As you can imagine,
Ive spent the last 10 years trying to get out of public ownership and we dont really want to go
back there.
Now we think the right way to do it is to incent private enterprise, thats now us, and others, to
build this with a regime that incents the investment. And, you know, if that takes us to
uneconomic areas, there are other ways to address uneconomic areas other than the Government
owning the network. The current Government has been doing that by, you know, broadband connect
programs and so on. And we think thats still an appropriate mechanism. So we dont like the
public/private ownership element of their proposal.
ANDREW LEVY: There are a couple of microphones around the room, so well take questions from the
floor.
AUDIENCE MEMBER: John, youve spoken, obviously, today about the very large capital investment
that Telstras currently going through. Analysis would suggest that at the moment that capital
investment, after dividends are paid, are causing Telstra to cash burn, to raise an old term.
Could you give us some view as to when you would think that capital investment relative to cash
flow might equalise and we might actually start to see some improved cash flows after dividends?
MR STANHNOPE: Yes, Ill say two things about it. We have said that this fiscal year, 06/07, is
the biggest cash burn year. And then our free cash position, or our cash position will improve.
Weve also said that fiscal year 2010 we believe that we will be back at levels of between $6 and
$7 billion free cash flow.
Now Im not going to tell you exactly when that cross-over point is that we stop borrowing, but
you know, we are borrowing, as you suggest, fairly substantially this year because we have got a
five and a half billion dollar Capex program going on this year. But that will decline next year
and we will start to be cash self-sufficient soon.
AUDIENCE MEMBER: Sorry, could I just follow up with that question. Is the current level of cash
burn, given those plans, as you would have expected?
MR STANHOPE: Yes.
AUDIENCE MEMBER: Are you prepared to answer, better or worse?
MR STANHOPE: It is as expected so, you know, there is no variation to our guidance on capital
expenditure for this fiscal year, which was between $5.4 and $5.7 billion.
AUDIENCE MEMBER: John, over the next 12 months, I suppose, where should we really look for the
cost outs of the business, as you start going through transformation and switching off different
systems and networks and those kind of things, but you know, come, I guess, your next two results,
which are the main areas do you think that the costs will start to be coming out?
MR STANHOPE: Yes. Look, I tried to give some indication at the half year results announcement of
the sort of time sequence of the costs coming out. You know, whilst we have done the IP core and
weve announced Next IP and it does allow you to take out all the Ns that I was talking about,
ISDN and so on, you just cant switch them off the day you launch your new network. And the reason
is a customer reason. You really have to migrate your customers across to the new services. And,
you know, as CFO of the company, I also want to make sure the migration is at least revenue
neutral and/or better. And in my view it ought to be better because we are actually offering more
value to the customers with the new network offerings that weve got, both Next G and Next IP, and
why would the customers want to pay more? Because the savings that they get from the
simplification, Hey, lets share them. It sounds fair to me.
So it takes a little bit of time, is what Im saying. So I still would we are still on track to
get our head count reduction. Remember our guidance is 6,000 to 8,000 by the end of this next
fiscal coming up, 07/08. Were still on track to do that, and most of that will come from
productivity, that were still doing some IT things. While I say to you, the main release is at
the end of this calendar year, were still taking, you know, the smaller systems out and so we
still can get productivity improvement. And it will mostly be from that before we get the big
chunks out from less operating and support costs of systems and networks.
ANDREW LEVY: Is there time for one more from the floor? I might throw one up then. Id be
interested, John, in your thoughts on Telecom New Zealands recent comments that theyd be willing
to sell part of their network to their competitors. (a) is that something that Telstra would look
at as an investment, but just generally, you know, the concept of what theyre trying to do?
MR STANHOPE: Well wed have a look at anything thats worthwhile. It depends what part of the
network they want to sell. Obviously, you know, were building towards a new Next Generation
network here. I wouldnt see too much sense in buying an old run-down network. So, look, I dont
know what the offer is, but you always have a look at whats on the table.
ANDREW LEVY: All right. Thank you very much, John, for your support at this Conference again and
your time today.
MR STANHOPE: Youre welcome. Thank you.
TABLE OF CONTENTS
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
Name: Douglas Gration
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Title: Company Secretary |
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Date: 31 May 2007 |
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