Telstra A
nnual R
eport 2018
Telstra Annual Report
2018
Our 2018 reporting suite
We appreciate that our
shareholders and other
stakeholders are looking
for concise and up to date
information about their
company and that they have
many and varied options and
digital platforms to enable
them to access information.
In 2018 our reporting suite
includes our Annual Report,
our Corporate Governance
Statement and our Bigger
Picture Sustainability Report.
Our 2018 Annual Report
Our Annual Report describes in a
concise manner our strategy, our
financial performance and our
emuneration practices.
The sections of our Annual Report
titled Chairman and CEO message,
Strategy and performance, Our material
isks, Outlook and Full year results
and operations review comprise our
operating and financial review (OFR)
and form part of the Directors’ Report.
Our OFR, Directors’ Report and Financial
Report were released to the ASX on
16 August 2018 in the document titled
‘Financial results for the year ended
30 June 2018’ which is available on
our website at telstra.com/investor.
Our 2018 Corporate
Governance Statement
Our 2018 Corporate Governance
Statement (CGS) provides detailed
information about governance at
Telstra. Our CGS, together with our ASX
Appendix 4G which cross references the
ASX Corporate Governance Principles
& Recommendations to information in
our CGS and on our website, is available
online at telstra.com/governance.
Our 2018 Bigger Picture
Sustainability Report
Our 2018 Bigger Picture Sustainability
Report provides an in-depth look at
Telstra’s approach and performance in
elation to our most material social and
environmental topics, is available online
at telstra.com/sustainability
eport.
Telstra Corporation Limited
ABN XXXXXXXXXX
Our business 2
FY18 highlights 2
Governance at Telstra 3
Sustainability 3
Chairman and CEO message 4
Strategy and performance 8
Our material risks 12
Outlook 14
Full year results and operations review 16
Board of Directors 26
Senior management team 28
Directors’ report 30
• Remuneration report 34
Financial report 58
• Financial statements 59
• Notes to the financial statements 64
• Directors’ declaration 140
Shareholder information 146
Reference tables 149
Glossary 152
Contact details and Indicative financial calendar 156
22
FY18 highlights
Total income
up by 3% to $29.0 billion
Reported EBITDA
down by 5.2% to $10.1 billion
FY18 total dividend of
22 cents per share
Net profit after tax
down by 8.9% to $3.5 billion
Financial
performance
Added 342,000 retail mobile
customers, 88,000 retail fixed
oadband customers and
135,000 retail bundles
Our
customers Added 67,000 Belong
mobile customers in
the price-conscious
market segment
Launched second generation
of Telstra TV,
inging together
free-to-air, pay TV and
on-demand streaming
2.3 million
Sports Live Pass users
– up by 73%
year on yea
Almost 4 million
active 24/7 App users
– up by 22%
year on yea
Reduced truck rolls in
2H18 by 7,000 with
NBN Get Help platform
307 new mobile base stations
under the Federal Government’s
Mobile Black Spot Program,
inging our total to more than 450
First Australian ca
ier to
offer both Na
owband and
Cat M1 IoT technologies
Opened 5G Innovation Centre
and launched world first precinct
of 5G-enabled Wi-Fi hotspots
World class
technology
Helped around
1 million vulnerable
customers
stay connected
24% reduction
in greenhouse gas
emissions intensity
from FY17
Sustainable engagement
score of 74 in Employee
Engagement Survey
Sustainability
Our business
Our purpose To create a
illiant connected future for everyone.
Our vision To be a world class technology company that empowers people to connect.
Our
and To create better ways to empower everyone to thrive in a connected world.
3
Governance at Telstra
Our governance framework plays an
integral role in supporting our business
and helping us deliver on our strategy.
It provides the structure through which
our strategy and business objectives
are set, our performance is monitored,
and the risks we face are managed.
It includes a clear framework for
decision making and accountability
across our business and provides
guidance on the standards of
ehaviour we expect of each other.
We comply with the third edition
of the ASX Corporate Governance
Council’s Corporate Governance
Principles and Recommendations.
Sustainability
Our goal is to embed social and
environmental considerations into our
usiness in ways that create value for
the company and our stakeholders.
Our Sustainability Strategy responds to the topics
that are most material for our business, the areas
in which we have the expertise to make a meaningful
impact, and where we see opportunities to use
innovative, tech-based solutions to help address
major societal challenges and opportunities.
Our 2018 Corporate Governance
Statement, which provides
detailed information about
governance at Telstra, is
available on our website at
telstra.com/governance
Our 2018 Bigger Picture Sustainability
Report, available online at telstra.com
sustainability
eport, provides a
transparent overview of our progress
and performance in relation to our
Sustainability Strategy over FY18.
The report also details the work we are
undertaking in support of the United
Nations’ Sustainable Development
Goals (SDGs).
Our governance
framework includes:
• open, clear and timely
communications with
our shareholders
• a skilled, experienced, diverse
and independent Board, with a
Board Committee structure
suited to our needs
• clear delegation, decision
making and accountability
frameworks
• robust systems of risk
management and assurance
• Telstra Values, Code of Conduct
and policy framework which
explain what we stand for as
an organisation and how we will
conduct ourselves as we work
together to deliver our strategy.
Telstra Board
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
Chief Executive Office
Our People
Shareholders
We are committed to excellence in corporate governance, transparency and accountability.
This is essential for the long term performance and sustainability of our company, and to
protect and enhance the interests of our shareholders and other stakeholders.
Everyone
connected
Networks
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En
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Ethics and governance
Digital futures
En
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Thriving in a digital world
Responsible business
Tec
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4
Our financial results
Despite the challenges in the market in
FY18 our results are in line with guidance
and show strong subscriber growth in
oth fixed and mobile.
The Board announced a fully franked final
dividend of 11 cents per share
inging
the total dividend for the financial year to
22 cents per share, comprising an ordinary
dividend of 15 cents and a special
dividend of 7 cents, in accordance with the
dividend policy announced in August 2017.
On a reported basis our Total Income
grew by 3.0 per cent, Earnings Before
Interest, Tax, Depreciation and
Amortisation (EBITDA) reduced by
5.2 per cent, and Net Profit after
Tax (NPAT) reduced by 8.9 per cent.
We saw strong customer growth for
the year and good progress on our
productivity program, but the continued
downward pressure on EBITDA and
NPAT caused by the further rollout of
the nbn and lower Average Revenue Per
User (ARPU) reinforced the importance
of our T22 strategy.
During the year we added 342,000
etail mobile customers, 88,000 retail
fixed
oadband customers and 135,000
etail bundles. However, challenging
trading conditions are expected to
continue in FY19, including ongoing
pressure on ARPU and further negative
impact of the nbn network rollout on
our underlying earnings.
Choosing to lead – T22
On 20 June 2018 we announced our new
T22 strategy to lead the Australian market
y simplifying our operations and product
set, improving customer experience and
educing our cost base. T22 will deliver
six key outcomes covering customer
experience, simplification, network
superiority, employees, cost reduction
and strengthening the balance sheet.
We have already made strong early
progress on the new strategy, launching
new mobile plans with no excess data
charges, announcing a new organisational
structure, leadership team and operating
model. Telstra InfraCo has also been
established as a standalone business
unit with pro-forma financials provided
as part of the financial results. For more
information on T22, please refer to the
Strategy and performance section of
our Annual Report.
Andrew Penn (CEO), John Mullen (Chairman)
Chairman and CEO message
Dear Shareholders,
Companies are defined
y how they respond in
challenging times and there
is no doubt Telstra, and the
telecommunications industry
globally, is operating in times
of enormous challenge
and change.
On one hand demand for
our core products and
services continues to grow.
Telecommunications networks
have become some of the
most important pieces of
infrastructure in the world today.
On the other hand, competition
has never been more intense,
our market dynamics are
shifting rapidly, and customer
expectations are changing.
These challenges are not
unique to Australia or to
Telstra. However, a unique
challenge we do have is the
nbnâ„¢ network. This is having
an enormous impact on our
usiness – wholesale prices
have risen, meaning we and
other industry participants are
facing a fixed-line market where
eseller margins are rapidly
educing. At the same time,
competition in the mobile
market is increasing with the
expected entrance of a fourth
mobile network operator.
These factors have influenced
our performance this year and
underpinned our decision to
take bolder steps to transform
the business through our new
Telstra2022 (T22) strategy. We
are determined to meet the
challenges we face, and to
continue to lead in the market,
just as we have always done