FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date: For the period ending 30 June 2006
TELSTRA CORPORATION LIMITED
ACN 051 775 556
242 Exhibition Street
Melbourne Victoria 3000
Australia
Indicate by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Form 20-F þ Form 40-F o
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 o No þ
If Yes is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
|
|
|
17 May 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Transcript of presentation by Tarek Robbiati, Deputy Chief Financial Officer Telstra,
at the ASX Investor Hour Conference
In accordance with the listing rules, I attach a transcript of a presentation by Tarek
Robbiati, Deputy Chief Financial Officer Telstra, at the ASX Investor Hour Conference, for
release to the market.
Yours sincerely
|
|
|
Fiona Mead |
Acting Company Secretary |
On behalf of Douglas Gration |
Company Secretary |
|
|
|
|
|
Telstra Corporation Limited |
|
|
ACN 051 775 556 |
|
|
ABN 33 051 775 556 |
Copyright
in this document is reserved to the Crown in right of the
Commonwealth of Australia.
Reproduction of this document (or part thereof, in any format) except with prior
written consent is prohibited
NATIONAL
TRANSCRIPTION SERVICES PTY LTD
abn: 36 110 082 507
Level 6, 221 Queen Street, Melbourne 3000. Telephone: 1800 144 188 Fax: 03 9670 8582
Offices in: Brisbane, Darwin, Canberra, Sydney, Parramatta, Townsville and Newcastle
Email: transcripts@nattrans.com.au
TRANSCRIPT
TELSTRA CORPORATION LIMITED
ASX INVESTOR HOUR
SYDNEY 16 MAY 2006
TAREK ROBBIATI
DEPUTY CHIEF FINANCIAL OFFICER
FACILITATOR: Well, its still just good morning. Nice to see everybody down here again for
investor hour. As youre all aware, investor hour is brought to you by the Australian Stock
Exchange, the Australian Shareholders Association and the SDIA. We get together and pull our
collaborative
knowledge to bring together I guess speakers that we think youll find interesting.
Youve probably noticed we usually take a macroeconomic and then a microeconomic view,
sometimes the stocks to watch, sometimes a broad economic focus. But todays speaker is a
little bit different. Before I get into the introductions of todays speaker Id like to
just go through the
housekeeping very quickly, obligatory requirements.
Exits of course you know you came in through one just there. Theres others right at
the very back. Youll also see them off to the side. But when youre leaving the
premises we choose not to use these ones on the side. In the event
of some sort of evacuation theres a couple of different tones that they use. Theres a
beep-beep one, and thats just to let us know that something is amiss and if we do need to leave
there will be a whoop-whoop; easy, its fairly straightforward.
Next months topic is Ross Greenwood. Weve got fliers out there on the front to keep you
up to date. I always suggest visiting the ASX or the ASA web site to see whats going to be
on. If I could just ask its probably an opportune moment to ask you to turn off your
mobiles if youre with Telstra. Just even if youre not, in case it disturbs the speaker as
we go along. Can I
just have a quick show of hands, Im interested to know who is at investor hour for the first
time. So theres some regulars here. For those of you who found out about investor hour, can I
just see a show of hands those of you who found the information via the ASX web site. Lovely,
thank you very much.
Now, todays speaker, Tarek Robbiati, was appointed to the position of Deputy Chief Financial
Officer at Telstra in 2005. His responsibilities include the role of group financial controller to
the operations and program office and the finance structure supporting these areas. He also
provides corporate finance advice to the CFO and CEO and supports investor relation matters
including T3. I think todays talk will be quite insightful. Having had a quick look at the slides,
there were certainly some things of interest there to me. I wont say any more about the speaker. I
might let him give the background because hes probably more abreast of it than I am. So if you put
your hands
together and welcome Tarek to the state.
MR ROBBIATI: Thank you and welcome, everybody. Im Tarek Robbiati and Im here standing on
behalf of John Stanhope, my boss, chief financial officer of Telstra. He sends his apologies,
but he had to attend a pressing
family matter today, and thats the reason why you dont see him here and Im substituting
him. What were going to do today is to share some key elements of Telstras new strategy that
was outlined first on 15 November 2005. But before I do that, Id just like to give you a couple
of points about myself. I am
European, Im Italian. Ive worked in the telecom industry for 15 years, either
|
|
|
|
|
ASX 16/05/06
|
|
1
|
|
TAREK ROBBIATI |
as a consultant consulting for the vast majority of telcos in Europe, or as an equity
analyst, the one who publish research reports. I worked for Lehman Bros as an equity
analyst for four years and then my last two years in my career I spent at Orange in the
UK working for Orange and the France
Telecom Group. Now Im here in Australia and Im very much enjoying it.
So now back onto the real stuff. Lets talk about the strategy, but Im afraid before
we talk about the strategy elements I have to refer you to the disclaimer. So please
take a few seconds to read this because there are certain
things that we mention here that have to be put in the proper legal framework.
Thank you. Now, lets talk about our strategy. Telstra is a business that has strong
advantages. It is the largest telecom operator in Australia that offers the full suite
of services to capitalise on the trend of truly converged services which I will
describe in a moment.
First, we
have an existing customer relationship with 10
million fixed-line customers and nearly nine million mobile customers throughout the country.
We intend to leverage these relationships to drive penetration of newer products such as
broadband and the application and content we can bring to
customers to make businesses more productive and enrich consumers lives.
In addition, we have an excellent advertising and search capability via Sensis. Remember every
month more than 12 million Australians use a Sensis service. In the vitally important emerging
broadband market Telstra is the leading player and we are extending our lead. Over the last two
years our
retail broadband market share has increased from 37 per cent to 43 per cent and its growing
again.
We have the strongest brand name in the telecoms market in Australia, a name that just every
member of the community is familiar with. Along with our
leading domestic presence, we also have international presence through the recently
merged CSL and New World Mobility Group in Hong Kong, TelstraClear in New Zealand, and
Reach. Telstra has the scale and the scope in telecoms in Australia with a full suite of
products allowing us to drive economies of scale. This is a very important point because
this full suite of
products and ability to integrate them allows us to achieve cost reductions as we rationalise
platforms and streamline the business.
With this, were well-positioned to defend against emerging threats. If we look at overseas
experience, particularly the US, we are currently seeing
telcos reconsolidating to gain the advantages of an integrated model, that same integrated model
that we already have here at Telstra. In Europe its not different. We are seeing pure wireless
players who are at a disadvantage in certain markets push for integrated solutions on their own.
Finally, our financial position as a company is sound. We have an investment great credit
rating and this gives us the flexibility to fund the sweeping transformation of our business
that is necessary as we enter the broadband world.
Now, these were the good news. You may ask, if this is all so nice, why do we have to
change? Well, before I get into the details of our new strategic
|
|
|
|
|
ASX 16/05/06
|
|
2
|
|
TAREK ROBBIATI |
direction let me just take you back a step and explain why it is imperative that we
develop this new strategy and implement it and why we need to make some fundamental
changes. The reality is that the financial trends at Telstra have not been good and
they have continued from the last fiscal year.
Telstras top line growth rate has been decelerating. What is concerning is that PSTN
revenues the revenues from the traditional fixed telephony business are declining at
such a rate that the revenue base associated with our growth from broadband, mobile and
Sensis is not yet big enough to compensate for the decline of the PSTN.
Our telecom-related revenue makes a shifting towards lower margin products with PSTN
revenues now at 33 per cent of total sales compared to 40 per cent two years ago.
Broadband growth is strong and its margin will improve as we build scale and reduce
operating costs. It is essential that Telstra maximises
its market share in newer revenue streams to capture as much of the migration as
possible. On the cost side of the equation you can see that on the right-hand side of
the graph trends have also been concerning. With multiplicity of network elements and
rapidly rising traffic volumes, the cost of running the business is growing rapidly.
Multiple evolutions of mobile technology mean
that we are currently running three different wireless networks. We have multiple
evolutions of data services, most of which are still in the network.
This is clearly inefficient.
Now, how are we going to address this? Of course our objective is to create
long-term shareholder value. But what does that mean? Our vision is to do for customers what
no-one else has done in the past, and that is, creating a world of one click, one touch, one
button, one screen, one-step solutions that are simple, easy and valued by individuals,
businesses and governments alike.
We will get to know our customers in a way that was never done before
through market-based management. Market-based management is simply the discipline of making sure
that we optimise our ability to go to market and acquire customers.
We will also provided integrated communication services. We will invest to
take complexity out of our business and simplify our infrastructure. We must absolutely win
in broadband and wireless by doing it smarter around value-added and integrated services and not
just price. We will invest in new services and applications to differentiate ourselves in the
market. Ive said before Telstra had the breadth of products which is unique in the industry.
We will accelerate growth opportunities at Sensis. Sensis we refer to as our information
services, search and transaction business. And we will target
investment where we can create value for our shareholders. I will address all of these
points in the rest of the presentation.
Were going to deliver a value proposition to customers based on our competitive advantage
as Australias leading telecom company. Market-based management is the starting point in
our value proposition, and Ill speak about that shortly. The next plank of our value
proposition is our differentiated content. We are leveraging Telstras applications and
services
|
|
|
|
|
ASX 16/05/06
|
|
3
|
|
TAREK ROBBIATI |
and the exclusive content of BigPond, Australias leading ISP, and Sensis, our information
services, search and transaction business, to provide a richer customer experience. Not only we
have the differentiation of content, but also we can provide this over multiple devices to deliver
a truly seamless
integrated customer experience.
This isnt something that is out there in the future. It is here and now. Its available
now to our BigPond customers nationally and within our metro 3G coverage area. Upon completion
of our national high-speed 3G mobile
network these services will be available nationally for all mobile customers.
We have already successfully moved Sensis from being a pure print business 10 years ago to
being a market leader in online search. Were taking that integration step further and its not
only about enabling you to find what business youd like to buy from, or in the case of Trading
Post, enabling you
to find a product you might be looking for, but we are taking it one step further, which is
enabling you to actually do the transaction. We have already started this in our Trading Post
business.
This value proposition, in our view, is attractive to customers because it delivers to them
what they want, when they want it, and above all, does it in a simple way. This simplicity is
critical because you shouldnt have to be a technology expert to be able to do these things.
Customers simply wont use it if its going to take them 20
minutes to figure out how to do it. So our vision, our one click, one button, one
touch, one screen, one step simplicity is
what we are driving towards. The simplicity matched with our ability to integrate,
differentiate and know our customers better than anyone else will allow us to provide real
value to customers, value that theyll be willing to pay for. The result will be a change
in the current pricing dynamics from commoditisation of access to a model of value-based
pricing. Remember,
customer value drives shareholder value.
Now, let me talk about 3G. As you may know, were building a single national 3G network on
the 850 MZ spectrum. Currently, only Telstra Cingular in the United States and Rogers
Communications in Canada are
using the 850 spectrum. Cingular is launching their network in June of this year. There has
been a fair amount of press lately about closing down our
CDMA network. The CDMA network will not be turned off until the coverage of our 3G
network is at least as good. Around the world main carriers are moving away from CDMA.
For instance, if you look at carriers in
Korea, which represent 14 per cent of the worldwide CDMA market, they are all moving to
3G.
In addition, there is a significant number of operators considering building 3G
networks on the 850 spectrum. Some of these also involve swapping from
CDMA. Why is that? Well, its pretty simple. Theres a law of physics that says the lower
the spectrum the greater the area that can be covered. So for a landscape like Australia we
need a network that is going to cover a large distance without increasing the costs
associated with rollout and maintenance. With the coverage of 850 we have been able to
minimise the number of base
|
|
|
|
|
ASX 16/05/06
|
|
4
|
|
TAREK ROBBIATI |
stations we need, hence the capital we will employ, to service at least the same
population.
By building the 850 network we will have Australias only truly national 3G
mobile network. This will mean all Australians living in coverage areas will have access to
our superior coverage and content. For the bush, it is high speed wireless network. Its much
better than what currently CDMA provides. We talked about coverage, but this is not the only
advantage of 850.
850 also provides superior in-building coverage, which is of course critical to
customers when they are at home or in the office. With a truly national network we can
rationalise our platforms to bring greater economies of scale and reduce costs over time. And we
are currently in the process of acquiring a range of handsets and PC cards from vendors.
We are seeing a good range of handsets being developed. The handsets we will be able to
offer will cover a range of brands and bands, both for use in Australia and for roaming
overseas. But 3G is not just about handsets; its also about mobile broadband by either the
PC with PC cards or PCs having 3G antennas, the like of which Dell and Lenovo are producing
overseas. We
will have a number of cards available at launch.
Now, after 3G lets move onto the next major component of our transformation. This is
referring to the IT simplification. Our IT infrastructure is currently extraordinarily
complex. As you can see from the
slide, we have more than 1252 IT systems which we intend to reduce by at least 80 per cent over
the next five years. Were focusing on the implementation of fundamentally new capabilities in
both the BSS that is, the billing support systems and the OSS areas that is, the operating
support systems areas, which are needed to help us to manage the next
generation networks.
This dramatic simplification of platforms and products and plans will pave the way for
implementation of these new capabilities. There will be multiple benefits from that.
We will have less complexity, less outages, lower costs
and simplified processes for our front of house and back of house employees.
We do have an aggressive timeline. Therefore, this begs the question, how are we going to do
it? First, were going to have world-class partners, and second, were aiming to avoid custom
builds. Were aiming to avoid any custom software developments which is costly and expensive and
in the long
run difficult to maintain. Its a huge task that confronts us, but radical change is needed
here.
Now, lets talk about marked-based management. Youve heard the acronym a couple of
times by now. The goal of market-based management is for us to
know our customers like never before and deliver integrated services tailored to their needs.
Our strategic marketing initiatives are the key plank in changing Telstra into a very
customer-driven organisation. We are putting the customer at the centre of everything we do, and
this will be reflected through what we believe will be improved market shares resulting in
higher ARPU.
|
|
|
|
|
ASX 16/05/06
|
|
5
|
|
TAREK ROBBIATI |
ARPU stands for the average revenue per customer. And we will have a reduced churn.
There will be emphasis on profit and loss measurement at the customer segment level.
The market structure determined under market-based management drives the organisational
design of our business. We have created dedicated teams to deliver value to each segment.
Ultimately the real key to reinvigorating our top-line revenue growth is knowing our
customer intimately and delivering value that they will be willing to pay for. We continue
to focus on integrated
voice, video and data services to truly differentiate what we can do for customers.
Now, let me clarify a few points about regulation. Particularly Id like to clarify the
regulatory principles that we are seeking for existing and planned
investments. We all understand that there is substitution from fixed line to wireless, from
legacy services to IP-based services, from legacy services and networks to next generation high
speed networks, both fixed and wireless.
We recognise that in the instances where there is a clear bottleneck hotspot that regulation
is required to provide competitors access to the bottleneck
services.
However, when it comes to undertaking investments in new networks that will provide high
speed and improved services to customers at a significant cost to the company, the company needs
to be able to earn a return for undertaking
this investment. Our shareholders expect and are entitled to earn a return on significant
investments where their capital is at risk. Thats our argument for
Fibre to the Node. We do not want an access holiday. We will provide competitors
access only on commercial terms.
On mobiles the recent comments that the 3G network should be regulated we believe are
without foundation. Mobile has flourished due to the competitive nature of the industry,
not through it being regulated. We welcome, therefore, the comments of the Minister of
Finance that the government wants to ensure regulatory certainty and that he is quite
confident that access to new mobile
services will not be regulated.
Now, lets talk about our guidance for the end of this fiscal year 05-06. As we announced
back at our half-year results in February, we expect earnings before interest and tax to decline
7 to 10 per cent before the impacts of the
strategic review overlays. Including the strategic review overlays we impact
EBIT to decline by 15 to 20 per cent, that, is the second bar chart that you see on the chart.
This is due to the additional investment we need to make in order to achieve future growth and
simplify our business. This will increase to 21 to 26 per cent should we take a redundancy
provision in June 2006
which satisfies the appropriate rules. The regulatory caveat remains pending key decisions by
the regulator and/or the government. Notwithstanding this, we remain committed to improving
long-term shareholder value.
|
|
|
|
|
ASX 16/05/06
|
|
6
|
|
TAREK ROBBIATI |
To conclude, lets summarise what Telstras transformation will deliver. The
transformation of Telstra will deliver a needs-based solution to customers using the
concept of one click, one touch, one screen, one button, one step, which represents
truly integrated services in an easy to understand way. On
the network side were building a state-of-the-art national 3G wireless network delivering
speeds up to 14 mbps within six months of turning on the network with an average speed of 550
kbps to 1.1 mbps.
We are also building an IP core network which will deliver greater efficiency
through common standards and platforms, a simpler environment in which to operate and lower
unit costs. The flexibility the IP networks gives us will greatly improve our speed to market
in a rapidly changing world. BigPond, its a huge asset in the portfolio and represents the
future of this company.
And Im talking about broadband on both wireline and wireless platforms.
We will integrate BigPond content across Telstras full suite of products which will grow
access and content revenue. Our target is to further extend our lead in broadband by
targeting retail market share growth.
Another growth engine for Telstra is Sensis. Sensis offers Australians choice.
You can find what you need when, where and how you choose. Over 80 per cent of all Australian
online advertisers are Sensis customers, offering unparalleled opportunity in the world of
commercial search. Further integrating Sensis content search and transaction capability with
Telstras communication platforms will set us apart from highly vociferous competition
in this space.
Now, let me share with you a little bit more of a longer-term perspective than the
previous guidance that we talked about for FY06. Here are our stakes in the ground. In
closing, let me just reiterate these. We are committing to 2 to
2.5 revenue growth per year over the next five years with 20 to 30 per cent of revenue growth
from new services over the next three years. Our 2010 cost structure will be no higher than the
annualised number of the first half of the fiscal year 2006, that is, 1 January 2006 that we
reported in February. By fiscal year 10 we expect EBITDA margins will have recovered between 50
and 52 per cent.
We will also have 6000 to 8000 fewer employees and contractors on our payroll in three
years time. Were going to spend $2.5 billion to $3.5 billion in capital over and above our
original plan in the next three years to transform
the business. After transforming the business we expect capex relative to sales to fall to
12 per cent of revenues and from then on to grow in proportion to future revenue growth. We
expect to generate free cash in the order of 6 to
7 billion by 2010. I hope that what Ive said today helps you understand more of what
were doing with our transformation. I now thank you very much for
listening and turning on to the audience for questions.
Q: What EPS could be inferred in 2010 given the cash flow of 6 to 7 billion.
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
7
MR ROBBIATI: The question is, what EPS would be inferred in 2010 given the cash flow of 6
to 7 billion. In the EPS calculations there are many things that come in. At this stage we have
not issued such a precise guidance. We prefer to guide investors on the 6 to 7 billion number
that I gave you before,
because we think its a more appropriate view to look at the business today.
Its always better to talk in terms of free cash flow because, as you know, whenever
you talk about EPS you have other elements that come in like depreciation, et cetera.
At this stage we are not willing to provide any guidance on an EPS level. We stick to
the 6 to 7 billion we provided on the
cash flow basis.
Q: (Indistinct)
MR ROBBIATI: The question is, how can we defend our market against
voice over IP, the voice over internet protocol? Well, voiceover IP is a promising
technology. It is no doubt something that we have absolutely to be fully aware of. Having
said so, you have to look at the whole suite of services. Lets not forget that voice
over IP provides do not, for instance, offer emergency 000 services and they have to run
over an infrastructure
provided by a telco that does cover these. So it is not the only solution that will be the
panacea for the industry. It is just one set of services that we have to be very aware of and we
are aware of, but its not going to be the only game in town.
Lets not forget also that to operate a voiceover IP network you need an IP core network.
I talked about that before. We are preparing Telstra for an IP core network. We are
investing substantial amounts of money, we talked about $2.5 billion to $3.5 billion, part
of which goes into building an IP core network. So we are taking steps in that sense
because we see there is a cost
advantage. And some operators around the world have already done that.
Q: Can you outline what you are doing for training for technicians and other qualified
staff in the next five years, please, at grass level and at graduate level, please.
MR ROBBIATI: Im glad youre asking the question because its always hard to put on a chart
that youre letting 6000 to 8000 employees go without changing the way people do their jobs on a
day-to-day basis. We are investing very heavily in training. All our technicians we have
created a
training academy and we are investing more than $200 million in training our field
force to make sure that they are (a) equipped with the latest technology, but also that
they are aware about the latest practices that they have to employ in operations to
actually do their job properly. So this is a pretty substantial investment on any
benchmark you may want to pick worldwide. Its 200
million on training just for the field force is a respectable sum.
Q: (Indistinct)
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
8
MR ROBBIATI: We said 6000 to 8000 people over three and then 12,000 over five. We have
identified groups of individuals in the company that will be asked to leave, but this
is all I can say at this stage. We havent identified more specifically who these
people are.
Q: (Indistinct)
MR ROBBIATI: Yes, but dont forget its unfortunate, its very, very unfortunate,
madam, that we have to take that step. You would want never to
take such a step, but the reality is that unfortunately when your cost structure is
not commensurate to your revenues and this is what I kind of showed at the beginning of
the presentation then you have to take tough medicine. If we dont take these steps its
going to be a lot worse moving forward. I can tell you from my own experience I worked in
a large telco in Europe, which I
wont give the name. You have vast elements of the cost structure which remain
unaddressed. From my perspective it remains a time bomb waiting to explode. So as soon as
you know something in this business or in any other business, as soon as you realise that
your costs are outgrowing your revenues you have to take those steps. As painful as these
steps are, theyre less painful
to be taken today than if they were to be taken in the future and having missed on the fixes
that you can implement today.
Q: (Indistinct)
MR ROBBIATI: The question is, now many employees in percentage of the workforce? We have
approximately 52,000 employees and contractors today in Telstra. So 12,000 over 52,000 over
five years thats what youre talking about.
Q: (Indistinct)
MR ROBBIATI: The question is, could you provide any comments about Telstras ongoing
role with Foxtel. We have an ongoing relationship with Foxtel and PBL. We continue to
value this relationship. We are operating the
pay-TV network together with them. So far so good; its business as usual, nothing more to
add on that Im afraid.
Q: Can I ask something relating to the morale of the employees with the knowledge that
the overall employment future seems to somewhat denigrated.
Does this emphasise any great morale problem, youve got a human resources nightmare
or something? Im just wondering do you have any emphasis on getting rid of older people,
which seems to be somewhat highlighted in the news today? The other thing is if the future
seems to be somewhat dim and if you can say 6 to 8 thousand percentage-wise for 52,000 I
suppose is within
reasonable expectation. But do you detect any sort of downgrade in attitudes of employees who
say, What the hell am I working for? Is that a reasonable question?
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
9
MR ROBBIATI: It is a reasonable question of course, you know. We are making sure that morale
is something we monitor. Lets not underestimate how radical the transformation is. The
transformation that were talking about is enormous, simplifying networks, reducing 1252 IT systems
by 80 per cent,
changing the work practices, as your colleague has asked before, investment in
training and in tools. The transformation is radical and therefore it is very important
that we mobilise our colleagues as much as possible to achieve the outcomes that we are
asking. We cannot do this by being four, five people in the headquarters. Everybody is
playing his role. What we are detecting is
that people are very engaged in this, they are really thinking that what we are doing is the
right thing for the business. There is a very strong esprit de corps in the company today and were
all driving in one direction.
Its only like that that we will be able to deliver our transformation. In any
big transformation plan and change plan you do have to create the sense of
formulisation, and we have invested time and time again and every day when I speak with my
team I spend an awful lot of time explaining to them, This is what were doing, this si
why were doing it. Every manager in the company, John Stanhope, everybody spends time
reiterating the purpose of
what were trying to do.
Q: Have you or the CEO any further information about the eventual takeover of the major
part of the government shares? The government at present moment is owning 51 per cent.
Right?
MR ROBBIATI: Yes.
Q: So obviously theyve got the major vote in everything we do.
MR ROBBIATI: The government has yes, its true the government owns more than 51 per cent
of the shares of Telstra, but Telstra is a company with its own board and its own
governance and we are operating in the frame of the law as far as the Telstra Corporate Act
is concerned, and we are as management working for all shareholders and not just the
government.
Q: (Indistinct)
MR ROBBIATI: The government is selling its own shares. The company doesnt have
anything to do with the government selling its own shares. We
are not issuing shares for funding the transformation. We can fund the transformation with
the cash that we generate each year. So these are two separate matters.
Q: (Indistinct)
MR ROBBIATI: If T3 doesnt take place, is Telstra going to procure some of the shares,
are we going to buy some of these shares from the government. Thats the question
youre asking. This is not something that is envisaged at this point in time.
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
10
Q: (Indistinct)
MR ROBBIATI: I can refer you because you read the slides very well I can
also refer you to this slide. But I will answer your question and not really leave
the question unanswered. We have given guidance for a fully franked dividends of 28 cents
per share. Now, as you know, we have to give due consideration to some financial
estimates as we decide on those dividend payments out. The board always evaluates the
appropriateness of any
dividend moving forward. For the moment it is our intent to pay 28 cents per share until 2008,
as you see on the slide. There are two asterisks there that say subject to appropriate board
considerations.
Q: (Indistinct)
MR ROBBIATI: Its the same answer youre going to get. If the financial parameters
permit and the board gives a due consideration, you know, this is what we have to go
through, dividends will follow based on that.
Q: (Indistinct)
MR ROBBIATI: Whats plan B? I think that the one thing not to forget Telstra is a company in
its own right and has a full suite of assets. We think that its very, very important that we seek
the regulatory outcome, which is
that we must be able to invest to provide a return to our shareholders. This is
irrespective of what network youre talking about. The reason why this is is that if not,
you are stifling the growth prospects of the company. No matter whether youre investing
on mobile or fixed or any network you may choose, you need to have certainty about
returns. Those returns have to be dependent
on our ability to recover our costs. So its a point of principle that were taking on
regulation.
Lets not forget if you follow the telecom industry how capital-intense it is. People tend to
forget this, but when you look at the capex to sales ratios in
telecoms and compare it, if you want, to a utility company, a gas provider or an
electricity provider, that ratio is much higher. Capex to sales ratio on normalised
telecoms is where were going to get to is this 12 per cent that you see here on this
slide. In utilities companies the life span of the investment is much longer because you
dont have the same technological obsolescence that
you have in telecoms. Therefore, knowing that it is becoming absolutely crucial to have some
sort of understanding that returns is what drives your investment decision.
Q: (Indistinct)
MR ROBBIATI: As I said to you, you can hypothesise as much as you want but its a point
of principle. Why would we invest without having the ability to generate some returns
for our shareholders? This doesnt make sense, irrespective of what plan you choose,
B, G, F, whatever you want.
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
11
Q: When you sort out your troubles with the ACCC, how do you plan to roll out Fibre to
the Node? Do you just plan to do it in selected areas or will this be a nationwide
event?
MR ROBBIATI: Right now the discussions with the ACCC are proceeding fairly well and I
think decisions about rollout are all subject to that outcome. So we dont have any
particular commitment as far as rolling FTTN in one area relative to another. It all
depends on the outcome of the discussions with
the ACCC, because, you see, a lot of things can happen in those discussions.
A lot of things can be altering the outcome and we cannot today make such decisions
without taking the outcome as a package. Once that is known and its set in print, then
we will make those decisions.
Q: (Indistinct)
MR ROBBIATI: Im glad youre asking the question. If you go back to this chart here you
could see that the last item on the right is labelled restructuring and redundancy
provision and this is where it will be taken. In
essence, if you look at the guidance of 15 to 20 per cent
Q: (Indistinct)
MR ROBBIATI: The question was, what is the ratio corresponding to the
redundancies and the potential reduction of staff of 6 to 8 thousand people.
The chart gives you a hint about what the answer is and you can see that you have one
element in the calculation here that shows that the restructuring and redundancy
provision would dilute EBIT by 6 per cent. So thats the answer.
Q: I noticed all those redundancies you had up there on the screen, I had an experience to get
serviced by Telstra. So I rang up Telstra. They referred me to a call centre and I rang that call
centre. They said, Well get somebody to ring you back. A company called Transfield rings me back
to make a service date and then the service man that arrived was from, say, ABC company
communications, those guys were ex-Telstra employees. So looking at that redundancy it seemed to
be the poor old servicemen went around in a large circle. Im just wondering are we paying more now
for the service for an ex-Telstra employee and is Telstra now only becoming a utility and not a
service company?
MR ROBBIATI: No, no and no. Telstra is not a utility company, its a service business.
Maybe youre right, our service is not perfect and we have to improve it, but were not a
utility company. As to whether redundancies go full circle to contractors, there is whenever
you lay off someone who has a
certain set of skills it is not unlikely that you see the same person who has the same set of
skills emerging in another organisation that services the industry as a whole. Telstra has been
servicing and representing the telecom industry in this country for a very, very long time.
Thats why you run up into this.
But there was another element in your question that was interesting, which is
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
12
are costs coming down knowing that some of the work goes outside the company and are we
not paying too much for contractors.
It is a very important question youre asking and there is absolutely in our
view the need to make sure that we bring the cost trend back in line with where the
revenues are. All the measures were taking are to bring down the cost base to a point
where you have a certain variable element of costs kicking in for a variable element of
revenues kicking in. Thats where were driving towards. So we will push this quite hard,
i.e. we will push the cost base down
quite hard.
Q: Were seeing a lot in the media at the moment concerning an alliance which Austar is
fashioning. Because there are technological issues involved, could you just explain what the nature
of the challenge is and then how you
propose to meet it?
MR ROBBIATI: Im not a believer in alliances in telecoms, Im really not. Let me be very clear
about this. If you really look back at the history of the industry there is always a very nice news
flow emerging from an
announcement, an alliance, et cetera. But at the end of the day, the proof is in the
pudding and its really about what investment goes in, what services will be provided, how
can the various members of the alliance differentiate among themselves. When you hit the
differentiation point what happens is that you realise that this isnt much
differentiation, that players feel constrained by the
alliance more than anything else and that therefore they want to be free to invest on their own
to achieve their own returns and be able to differentiate and compete properly.
So thats why every time I hear anything about an alliance I take this with a
pinch of salt. There are names that were very familiar to us, Unisource in Europe, large
alliances at the time of BT in the 90s. All of these have disappeared. Again compete with your
own means, invest in your own infrastructure and differentiate; that is the name of the game.
FACILITATOR: Tarek has been very generous with his time and his question and answers.
Were probably approaching the close of proceedings. We might have time for about three
more questions and then well probably wrap it up.
Q: (Indistinct)
MR ROBBIATI: I hope you heard the question, its an important one. It says any company who
loses statistically 22 per cent of its employee base stands to lose a lot of knowledge and what
are you doing to counter that. You
obviously have to develop new knowledge is the short answer to your question. This is what
the transformation is about. If you are taking out network elements, youre reducing mobile
networks from three to one, if you are also simplifying the IT systems to the extent we
mentioned, then all the processes, all the work practices will have to be redesigned. We are
investing
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
13
in this big time. Its part of the cost of transformation. On top of that we are also
making sure that we are investing in our field force to make sure that they are
equipped in knowledge, equipped in tools to be able to do their jobs on a day-to-day
basis. The knowledge shift is just going to be important. Things
that are done today in certain ways will not be done tomorrow. Thats what we have to keep in
mind.
Q: (Indistinct)
MR ROBBIATI: Sir, I would love to have many discussions with my mother, but unfortunately
she passed away 10 years ago. So its a bit difficult. But let me just give you an
analysts perspective about this. When I was an analyst I was asked exactly the same
question; would you invest in shares youre having a bi-rating on or would you not. Its a
case of damn if you do it and
damned if you dont pardon me the expression because if you dont invest, then people
retort to you youre not putting your money where your mouth is.
If you do, youre accused of conflict of interest. So from my perspective, I just
simply steer away from this. Im not investing in any of the shares of my employer, I
dont think its appropriate. Simply just as a matter of principle
Ive learned the lesson six years ago and I stick to what Ive learned.
Q: (Indistinct)
MR ROBBIATI: Two questions on your side. The first one is, is it wireless
or FTTN, basically one or the other. That was the first part of the question.
The second question is, what is the node? Dont forget that we will want to push
solutions that are platform-independent. So its not one or the other. It could be both
in some cases and it could be just one in one case, depending on what the customers
truly want. So its not there is no offsetting and hedging
between investments in platforms. Both provide different services that can be integrated and
that provide value to customers. The second part of your question is, what is a node? The best
way I can picture this for you is the green street cabinets that youre used to here in
Australia. Its very familiar in
Europe as well, is when you walk past a street corner you will find a green
cabinet that has a number on it that says dial 133-something if you think that there is a
problem with the apparatus.
So what it means, fibre to the node, is that the fibre in theory gets down to that
point. Thats what we refer to the node, and its servicing an area which is
around the perimeter, approximately one half, 2 kilometres around the perimeter of that green
street cabinet that you can refer to.
Q: (Indistinct)
MR ROBBIATI: No. The question was, do you have coaxial cable going from the node to your
house. No, we will not put coaxial cable from the node to your house because since you
brought the fibre close to the customer premises the rest of the distance can be covered
with copper and what is
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
14
known as being ADSL IPD slams. So thats the architecture youre going to have.
Q: (Indistinct)
MR ROBBIATI: No, Im not saying that we have reached agreement. I think that the
discussions are progressing, theyre progressing well. You know, in those circumstances
its never done until its done. There is no way you can predict how long it will take
Im afraid.
FACILITATOR: Just one more question down the front here.
Q: Just to return to the voiceover IP, I understand British telecom is going entirely
over to the Internet. It surprised me that you hadnt included that in
your suite of offerings that you have here.
MR ROBBIATI: We can start a very long debate about British telecom because Ive lived in
the UK for 15 years and I could tell you everything about them having scrutinised the company at
length. I think they are at a
cross-roads. The company itself it at cross-roads. One thing that people tend to
forget is how much of BT depends on wholesale revenue. If you look into analysts
reports you will see that more than 60 per cent of BTs value is in wholesale. That
value is coming down very, very fast. So they dont have much choice. They are pushing
and building an NGN network but I think
from my perspective, having seen how the market has evolved, this has been done way too late.
They are thinking about their 21 century network maybe five years behind schedule. Im not
saying it is five years behind schedule,
Im saying their thinking is five years behind when it should have been relative to
where the market maturity is.
They dont have much choice given where they stand today and the vulnerability of the
business to push voiceover IP. But, by the way, were not saying were not pushing
voiceover IP, I never said that. We are building an IP core precisely because we know
its coming. We will be ready for it. All
Im saying is dont think that voiceover IP is the panacea and that will provide the
ultimate solution from a customer standpoint. It is just one product, one feature, albeit
important, that will be part of the future, but not the whole future.
FACILITATOR: Many, many thanks. Thats probably the most generous Q and A time weve ever
had at investor hour. So Id like to thank you for your endurance there. If everyone could
put their hands together for our guest speaker today.
MR ROBBIATI: Thank you very much.
|
|
|
|
|
ASX 16/05/06
|
|
|
|
TAREK ROBBIATI |
15
|
|
|
22 May 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Appendix 3XInitial Directors Interest Notices
In accordance with the listing rules I enclose an Appendix 3X Initial Directors Interest Notice for Mr John Zeglis and Mr Peter Willcox.
Yours sincerely
Fiona Mead
Acting Company Secretary
On behalf of Douglas Gration
Company Secretary
|
|
|
|
|
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556 |
Appendix 3X
Initial Directors Interest Notice
Rule 3.19A.1
Appendix 3X
Initial Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
|
|
|
Name of entity
|
|
Telstra Corporation Limited |
|
ABN
|
|
33 051 775 556 |
We (the entity) give ASX the following information under listing rule 3.19A.1 and as agent
for the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
JOHN D ZEGLIS |
|
Date of appointment
|
|
17 May 2006 |
Part 1 Directors relevant interests in securities of which the director is the registered
holder
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
Note: In the case of a company, interests which come within paragraph (i) of the
definition of notifiable interest of a director should be disclosed in this part.
Number & class of securities
NIL
|
|
|
+ See chapter 19 for defined terms. |
|
|
|
|
|
11/3/2002
|
|
Appendix 3X Page 1 |
Appendix 3X
Initial Directors Interest Notice
Part 2
Directors relevant interests in securities of which the director is not the
registered holder
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
|
Name of holder & nature of
interest
|
|
|
Number & class of Securities |
Note: Provide details of the
circumstances giving rise to
the relevant interest. |
|
|
|
|
|
|
|
|
|
|
NIL |
Part 3
Directors interests in contracts
Note: In the case of a company, interests which come within paragraph (ii) of the
definition of notifiable interest of a director should be disclosed in this part.
|
|
|
Detail of contract
|
|
NIL |
|
|
|
Nature of interest
|
|
NIL |
|
|
|
Name of registered holder
(if issued securities)
|
|
NIL |
|
|
|
No. and class of securities to
which interest relates
|
|
NIL |
|
|
|
|
|
|
+ See chapter 19 for defined terms. |
|
|
|
|
|
Appendix 3X Page 2
|
|
11/3/2002 |
Appendix 3X
Initial
Directors Interest Notice
Rule 3.19A.1
Appendix 3X
Initial Directors Interest Notice
Information or documents not available now must be given to ASX as soon as available.
Information and documents given to ASX become ASXs property and may be made public.
Introduced 30/9/2001.
|
|
|
Name of entity
|
|
Telstra Corporation Limited |
|
ABN
|
|
33 051 775 556 |
We (the entity) give ASX the following information under listing rule 3.19A.1 and as agent for
the director for the purposes of section 205G of the Corporations Act.
|
|
|
Name of Director
|
|
PETER J WILLCOX |
|
Date of appointment
|
|
17 May 2006 |
Part 1 Directors relevant interests in securities of which the director is the registered
holder
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
Note: In the case of a company, interests which come within paragraph (i) of the
definition of notifiable interest of a director should be disclosed in this part.
Number & class of securities
NIL
|
|
|
+ See chapter 19 for defined terms. |
|
|
|
|
|
11/3/2002
|
|
Appendix 3X Page 1 |
Appendix 3X
Initial Directors Interest Notice
Part 2 Directors relevant interests in securities of which the director is not the
registered holder
In the case of a trust, this includes interests in the trust made available by the responsible
entity of the trust
|
|
|
|
Name of holder & nature of
interest
|
|
|
Number & class of Securities |
Note: Provide details of the
circumstances giving rise to
the relevant interest. |
|
|
|
|
|
|
|
Peter John Willcox
Superannuation Fund
|
|
|
10,000 Ordinary Shares |
Part 3
Directors interests in contracts
Note: In the case of a company, interests which come within paragraph (ii) of the
definition of notifiable interest of a director should be disclosed in this part.
|
|
|
Detail of contract
|
|
NIL |
|
|
|
Nature of interest
|
|
NIL |
|
|
|
Name of registered holder
(if issued securities)
|
|
NIL |
|
|
|
No. and class of securities to
which interest relates
|
|
NIL |
|
|
|
|
|
|
+ See chapter 19 for defined terms. |
|
|
|
|
|
Appendix 3X Page 2
|
|
11/3/2002 |
|
|
|
25 May 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
Company Announcements Office
Australian Stock Exchange
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
|
|
Level 41
242 Exhibition Street
MELBOURNE VIC 3000
AUSTRALIA
Telephone 03 9634 6400
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Cash Capital Expenditure Guidance
In accordance with the listing rules, I attach an announcement for release to the market.
Yours sincerely
Fiona Mead
Acting Company Secretary
On behalf of Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
|
|
|
Media Release
|
|
|
Cash Capital Expenditure Guidance
As part of Telstras 05/06 interim results announcement made on 9 February 2006, the company
advised that cash capital expenditure for the 2005/06 year was expected to be between $4.8bn and
$5.1bn.
After a review of end of year expected expenditure levels, this guidance has now been revised to an
expectation of between $4.1bn and $4.4bn. Of the $700 million reduction to guidance approximately
$200m is deferred to the 2006/07 fiscal year. Managements focus has been on optimising project
performance and contractual outcomes to deliver shareholder value during the transformation of the
company.
There are a number of factors that have driven this revised guidance and these are:-
|
|
lower costs for property, plant and equipment as an outcome of the companys tough procurement
contract negotiations and improved capital labour productivity across all projects; |
|
|
|
stopping
additional discretionary projects that were not aligned to the transformation strategy; |
|
|
|
efficiencies obtained from merging some transformation projects; |
|
|
|
lower program of work in some
areas; |
|
|
|
Transformation project deferrals representing; |
|
o |
|
minor delays (8-10 weeks) in the Business
Support Systems transformation due to some industry changes and some outstanding contract
negotiations. This is expected to be recovered next fiscal year; and |
|
|
o |
|
minor delays (4-5 weeks)
in the wireline transformation due to delays in the completion of key network architecture
design. This will also be recovered in the next fiscal year. |
All other aspects of the transformation strategy remain on track.
Capital expenditure for Fibre to the Node was not part of the initial guidance and is not part of
the revised guidance. The Fibre to the Node investment remains on hold.
All other elements of the guidance for 2005/06 given on 9 February remain unchanged.
|
|
|
John Stanhope
Chief Financial Officer |
|
|
|
|
|
Telstra Media Contact
|
|
Investors Contact |
Andrew Maiden
02 9298 5259
|
|
David Anderson
03 9634 2410 |
Telstras national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at:
www.telstra.com.au/abouttelstra/media
For news, views and discussion on telecommunications in Australia see
www.nowwearetalking.com.au
Telstra Corporation Limited
ABN 33 051 775 556
|
|
|
7 June 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41
242 Exhibition Street |
Company Announcements Office
Australian Stock Exchange
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
|
|
MELBOURNE VIC 3000
AUSTRALIA
Telephone 03 9634 6400
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra presentation to the UBS Media & Telecommunications Conference
In accordance with the listing rules, I attach a copy of a presentation by Justin Milne, Group
Managing Director BigPond, at the UBS Media & Telecommunications Conference, for release to
the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
UBS Media & Telecommunications Conference |
7th June, 2006
1 Title: 070606 UBS Conference |
The future will be about using multiple devices on one IP network
Communication Work
Entertainment Information
2Title: 070606 UBS Conference |
Telstra is focusing on developing a relationship with Australians in their digital homes... |
Family Zone
Premium Mail Hosting |
BigPond Movies BigPond Music Online Storage Anti-Spam Firewall & Security |
AFL V8 Supercars
VOBB
NRL BigPond Games |
3 Title: 070606 UBS Conference |
...and is positioning BigPond as a brand to win in a converged world |
4 Title: 070606 UBS Conference |
BigPond has developed a market leading suite of content services |
Mobile/Broadband Integration |
· Com Games coverage mobile DVD Rental mobile music download to PC |
Content enables BigPond to rely less on price as a differentiator and to focus on the value
proposition for customers |
5 Title: 070606 UBS Conference |
The Commonwealth Games was used to promote market leading content and functionality |
3G Phones to
support launch of
BigPond mobile
services |
· Video Telephony & Messaging |
· BigPond Mobile Client (TAM) |
· Stimulator for hero handset |
Samsung Motorola Z510 V3x
6 Title: 070606 UBS Conference |
Going forward we will increase content penetration and the number of transactions /
subscriptions per visitor |
· Leverage Telstra generic brand ads for Content |
· Content specific advertising to
increase awareness of on-line Content |
· Through Telstra call centres |
· Through retail outlets (pre-paid and non
prepaid) |
· Music dual-delivery (Broadband and mobile) |
· Viiv/Media Centre implementation |
Simplified transactions/billing |
Unified identification and billing |
Integration between mobile and Broadband |
7 Title: 070606 UBS Conference |
|
|
|
14 June 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41
242 Exhibition Street |
Company Announcements Office
Australian Stock Exchange
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
|
|
MELBOURNE VIC 3000
AUSTRALIA
Telephone 03 9634 6400
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Telstra presentation to the Citigroup Next Generation Wireless Communications in Australia
Conference
In accordance with the listing rules, I attach a copy of a presentation by Mike Robey, Telstra
Consumer Marketing and Channels, at the Citigroup Next Generation Wireless Communications in
Australia Conference, for release to the market.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
Next Generation Wireless Communications in Australia |
Mike Robey
Telstra Consumer Marketing and Channels
Citigroup, June 2006
Page 1 Version 1 |
Mobiles are now very much more than voice! |
From end-April 2005 to end-April 2006 |
a26% increase in SMS messages a34% increase in MMS
messages
a23% increase in active Mobile Browsing users a42% increase in Mobile Games
downloads aMobile data traffic more than doubled |
Our handsets are changing too! |
Telstra handset base technology penetration (%) |
WAP 22% 57% MMS 1% 45% Java 1% 41% |
Video Streaming is taking off |
Jan-06 Feb-06 Mar-06 Apr-06 May-06 |
$ Streams
0
Jan-06 Feb-06 Mar-06 Apr-06 May-06
Page 3 Version 1 |
Apr 06
63% active BigPond mobile users
19% active video callers |
40% had a chargeable event,... and carriage is
also charged |
Wireless Broadband
Strong growth during 2005 |
Acceptance by corporate and enterprise IT
groups |
aQuick issue resolution
aEasy collaboration with distributed work teams |
Applications community maturing |
aTransport Logistics
aMining aHealthcare |
aBetter resource utilisation
aImproved customer service |
Lifesaving will go mobile with broadband |
More content!
Example : AFL / NRL
Broad range of AFL / NRL content to
our 2G and 3G customers
Access to exclusive mobile video
including AFL /NRL match highlights
News, Q4 news desk, tribunal, fixture,
player profiles, club pages & results
Good example of next generation
technical and business challenges
Page 8 Version 1 |
Device manufacturers improving in device usability |
Walk Out Using Telstra initiative to enable all devices
out of the box |
aRequires close cooperation |
with key device, application and infrastructure
partners |
One Click, One Touch, One Button, One Screen, One Step |
Telstra Technology Roadmap |
3G City To Country
A game changing move |
Most pervasive, homogeneous, high capacity wireless
network in Australias history |
Once the new HSDPA network is complete, it will provide:
aGreater than 98% population coverage a1.6 million square kilometres
of coverage aConsistency of services in metropolitan and country areas |
Orange areas combined represent City to Country coverage equal to CMDA
coverage today |
3GSM family of technologies |
a82% of the global digital mobile market a1.8 billion
mobile users globally |
Average data rates between 500kbps and 1Mbps at launch of
the new HSDPA network |
Simplified integration
aApplications developed for one technology
Page 13 Version 1 |
Significant platform simplification |
3GSM 10 Mbps
& 2 1 Gbp peak (WCDMA )100 Mbps peak
550-1100 Kbps (target goal)
220-320Kbps (target goal)
GSM GPRS EDGE
9Kbps 30-40 Kbps 100-130 Kbps Telstra Today |
Wide Area Wireless Retaining option |
Short Range IP pursuing
WiFi
Wireless
Page 14 Version 1 |
Customer benefits
For city-based customers: |
Significantly improved coverage compared to their
GSM service today |
Improved city coverage, wireless broadband and 3G
services |
For all 3G850 customers:
Better in-building coverage |
Much improved international roaming |
Available across a national network! |
Network deployment progressing |
Good range of handsets for all segments |
Exciting service portfolio in development |
Communication with our CDMA customers well progressed |
- Mobile internet coverage will reach 98% of all Australians when the new HSDPA
network is complete, with the vast majority of customers receiving broadband speeds |
- Applications & content use growing fast |
- Tipping point in next generation mobile is here |
|
|
|
29 June 2006
|
|
Office of the Company Secretary |
|
|
|
The Manager
|
|
Level 41 |
|
|
242 Exhibition Street |
Company Announcements Office
|
|
MELBOURNE VIC 3000 |
Australian Stock Exchange
|
|
AUSTRALIA |
4th Floor, 20 Bridge Street |
|
|
SYDNEY NSW 2000
|
|
Telephone 03 9634 6400 |
|
|
Facsimile 03 9632 3215 |
ELECTRONIC LODGEMENT
Dear Sir or Madam
Transcript of Telstras Chief Executive Officers address to the National Press Club in
Canberra
Attached for release to the market is the transcript of a speech by Telstra CEO Sol
Trujillo to the National Press Club in Canberra today.
Investors should note that references made in the transcript by the CEO to payment, funding
and borrowings for future dividends related specifically to special dividends which Telstra
announced on 15 November 2005 that it would cease to pay in 2006/07 and would instead direct
those funds to our transformation program.
No decision with respect to the payment or funding of future ordinary dividends has been made.
The Board will make these decisions in the normal cycle having regard to, among other factors,
the companys earnings and cash flow, as well as regulatory decisions.
Yours sincerely
Douglas Gration
Company Secretary
Telstra Corporation Limited
ACN 051 775 556
ABN 33 051 775 556
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: 29.06.06
Page: 1 |
Transcript
|
|
|
|
|
|
|
|
|
Event:
|
|
NATIONAL PRESS CLUB
|
|
Date:
|
|
|
29.06.2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time:
|
|
12:30 PM
|
|
|
|
|
|
|
|
|
|
Item: |
|
ADDRESS TO THE NATIONAL PRESS CLUB OF AUSTRALIA |
|
|
|
|
|
|
|
|
|
|
|
SPEAKER: SOL TRUJILLO, CHIEF EXECUTIVE OFFICER TELSTRA CORPORATION |
Female Speaker: Today at the National Press Club, the Chief Executive of Telstra, Sol Trujillo.
With the telecommunications giant brawling with the government over regulation and at the same time
being readied for sale, the company faces an uncertain end to the year. Live from the National
Press Club in Canberra, Telstra CEO, Sol Trujillo.
Male Speaker: Ladies and gentlemen, good afternoon. Welcome to the National Press Club and todays
National Australia Bank address from Sol Trujillo, Chief Executive Officer of Telstra. Sol Trujillo
has just completed his first year in this job in my view, one of the most demanding and the most
scrutinised and most discussed jobs in the whole of the Australian corporate sector. Its been an
eventful year for him and for many of us too, and theres much more to come with the constant rapid
changes in technology and the development of new regulatory regimes that cover the whole of the
telecommunications and media sector.
Telstra, of course, is a central player in this area of converging technology and it now affects
our lives in ways that many of us couldnt have even imagined relatively few years ago. So thats a
main reason to welcome Sol here today, but there are others in the case of the National Press Club.
Telstra was our first principal sponsor and filled that role for 12 years and remain one of our
major supporters, especially through a program of special interest to rural and regional Australia
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 21994 Fax: 02 6121 2188
For private research and not to be disseminated.
Every effort made to ensure accuracy but no legal responsibility is taken for errors or omissions.
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 2 |
which well be able to tell you more about in the very near future. Weve also enjoyed regular
briefings in previous years from Sol Trujillos predecessors, first Frank Blount, a fellow
American, and then Dr Ziggy Switkowski. So for a whole variety of reasons were very pleased to see
him here today and I hope youll all join me in welcoming Sol Trujillo.
Solomon D Trujillo: Thank you, Ken. It truly is a pleasure to be here and I want to thank Morris
for introducing some of my mates sorry, my amigos Bruce and John and Phil and some of the
others that are here, Senator Minchin, Senator Conroy, distinguished guests and members of the
media. Im here and we have a chance to talk today, and to talk about one of the most important
companies in Australia and that is this company called Telstra. So I really do appreciate the
invite, to be able to come, share a little bit about this company. Unfortunately, we dont have
three days this afternoon here, so I will get on with this notion of this company called Telstra
and the transformation that were undertaking today.
As Ken mentioned, I came here in July of 2005 because I believed Telstra offered a unique
opportunity to become the worlds best media comms company. I also came here to help the board
transform Telstra into what I call a world-class company. Early on I said that our leadership team
would be driven essentially by two guiding principles. The first one is about customers: putting
them clearly at the centre of everything that we do within the company. The second principal is
associated with our shareholders, and that is about creating shareholder value. Stopping the things
that dont create value or destroy value and only focusing on those things that really do.
A year on I still hold to that vision for Telstra, and everything that we are doing is driven by
those principles. Customers and shareholders, and thats what were about.
But to
get there we at Telstra have to change as it has many times in
the past from the old
PMG, to Telecom Australia, to what we now know as Telstra.
Telstra is changing again. Why? Clearly technology is changing. Consumer preferences are changing
and the competitive environment is always changing.
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 3 |
We are one year into a fundamental transformation so I like to talk about the fact that if you put
a sign up in front of Telstra today youd see a sign that says under construction, because a new
Telstra is emerging. Telstra is no longer a government agency. Telstra is not community property.
Telstra is no longer just a telephone company.
Telstra is a communications company that is preparing to combine high-speed transport with digital
content to meet the changing needs of our business and consumer customers no matter where they
live here in Australia.
Telstra is becoming a new kind of company what I like to refer to as a media communications
company. This notion of convergence is real and it is happening. Im here today to tell you about
the progress we have made over the past year.
In the first few months as Telstra CEO, I undertook probably the most comprehensive review of that
company that has happened. Here is what I found:
|
|
|
First, an organisation hamstrung by silos, driven by products and technologies and not customer
needs. |
|
|
|
|
Second, our leaders in the business who are managing to try to appease and please the
regulatory processes that exist here in this country, rather than the customer. |
|
|
|
|
Third, an urgent need for investment in new networks to make sure Australians receive the
full benefits of the digital revolution. |
|
|
|
|
Fourth, duplication everywhere in infrastructure, IT, billing systems. Too many products; too
many vendors; no integration. The result look like a poorly planned home extension where the
doorways dont quite meet. |
|
|
|
|
Finally and most disturbingly I found 1.6 million mums and dads who had invested in Telstra
and had seen their share value fall from $7.40 in 1999 to $5.00 when I arrived last year and
had a stock that was being propped up also by some special dividends in which we had to borrow
to pay. |
The old Telstra we found a year ago was a company with also:
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 4 |
|
|
|
Sharply declining revenues from our fixed line business. Our phone business was bleeding from
the core. |
|
|
|
|
Flat retail revenues with costs increasing around 10 per cent a year. |
|
|
|
|
A company known by the market, again, to be borrowing money to pay dividends and again a share
price underpinned by the dividend policies. |
To address these findings I announced a strategy to transform and revitalize Telstra from what I
call a 20th century telephone company in decline, to a 21st century digital
communications powerhouse providing truly integrated services.
The New Telstra would have all the hallmarks of a modern, new economy enterprise. A company that we
could describe as employers and our customers would feel is:
|
|
|
Fast |
|
|
|
|
Flexible |
|
|
|
|
Focussed |
|
|
|
|
Customised |
|
|
|
|
Networked, and |
|
|
|
|
Global. |
We are now on a mission to build that New Telstra.
The New Telstra is again about the customer giving customers the products and services THEY say
THEY need, not the products WE want THEM to buy.
The new Telstra is modernising its networks, bringing Australia into the 21st century with
high-speed platforms and digital content.
The New Telstra is taking out costs and reducing complexity in our business.
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 5 |
The New Telstra will be tough on competitors. We will take market share, and I have no apologies
for saying that.
The New Telstra is innovating in every function at every level of the company.
Let me give an example. Because of the scale and the speed that were building the New Telstra, we
gave early attention to obviously the composition of the management team.
We have quadrupled the number of women on the CEOs senior leadership team. Weve expanded our
talent base to include tried and tested global talent, including experienced managers I have
recruited from Europe, North America and Australasia. A couple of those leaders that I have
recruited are sitting here today. Bruce Aykurst and Jon Stanhope, who come from this country and
are part of the team here leading this business. Now, the people are working together with the best
that we can find here in this country and working with suppliers and other providers around the
world so that we can deliver those services, those capabilities, the customer experience, on time
and under budget. We are doing that.
Theres been progress everywhere in the transformation of Telstra. For example, if you heard me
talk when I first came I talked about this notion of Market Based Management. The new Telstra now
does, in fact, put the customer first using modern market research to determine customer segments
and differentiate Telstra from its competitors. For example, Telstras new subscription-based
pricing plans released last week which include untimed STD calls and local call charges in one
single price. Were simplifying, reducing complexity, because thats what our customers have told
us.
Well over half of the national high-speed next generation wireless broadband network is already
being built. Let me tell you, when we get to that point of this 3G 850 network, which I said we
would do and have built by the 1st of 2007, when it is in place it will reach 98% of all
Australians. Not just five cities, not just limited bills, because we at Telstra are extending and
expanding to serve virtually all Australia. But when its complete the 3G network will deliver peak
speeds of 3.6 Mbps, migrating to 14 Mbps by mid-year 2007, giving Australians again everywhere -
both urban and rural high-speed wireless access to the network. Nothing to do with regulation;
nothing to
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 6 |
do with anything other than Telstra shareholders deciding to invest in a competitive context to
earn returns in a competitive market. This new 3G network will be second to none in the world.
Those of us here in Australia will be able to go anywhere in the world and say and experience the
fact that we will have the best. This will be the most advanced network, not only because of the
speed, not only because of the reach, not only because of the quality, but because of some of the
services and capabilities we will deliver associated with it.
So for those that have been concerned about: is there disparate treatment in investment in
Australia between the cities and the rural parts of the country? Theres one company only one -
thats stepping up to invest in all of Australia.
The deployment of our new IP core equipment is also advancing on schedule. This is critical because
the IP core when we talk about IP, the Internet Protocol is at the heart of the integrated
network and will greatly reduce for us the cost of installing new applications. But it wont only
reduce cost, its going to enable us to do more and to do more quicker, faster and across all the
parts of the country that we operate in.
So were focused on that. But thats not all. Beyond that were taking a One Factory approach in
terms of how were running this business called Telstra. This One Factory model is allowing us to
eliminate 80 per cent of Telstras 1,252 business and operating information technology systems over
five years, and basically upgrading those that remain. Now, think about that 1,250 operating
systems that have evolved over the last 20, 30, 50 years in this business, and the complexity
thats associated with that. That shows up in terms of how we deal with our customers. Well, were
upgrading them, were eliminating them and reducing the complexity.
We are building partnerships with vendors. We have decided on a strategy where were going to focus
on strategic partners. Not 1,000 partners but a few, because were about speed, were about
efficiency and were about cost. Fewer vendors. Vendors with strong track records, such as Alcatel
and Ericsson that supply the worlds leading telcos. In the case of Ericsson obviously theyre our
primary supplier in helping us build out this network that were building that were building in
the fastest time you will find anywhere on the planet anywhere and Ive been around the planet.
The case of Alcatel they have now been selected by the five largest telcos in the world to
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 7 |
do the same thing that we are doing, because they are world-class in terms of what they do.
Vendors with commercial off-the-shelf packages is a focus for us because were going to reduce
costs. Were choosing vendors with speed and decisiveness while acting in full compliance with
corporate procurement policies. In just six months we have saved $70 million in our procurement of
mobile handsets through a strategic agreement with this company called Brightstar in just six
months. Speed does pay.
We have exited more than 25 buildings, cutting the size of our property portfolio, saving more than
$14 million annually and totals nearly 45,000 sq metres more than seven international-sized
football pitches. And theres more to come because we are just starting.
We have achieved big reductions in customer service waiting time. For example, by 62 per cent in
fixed broadband as we call it here, ADSL and by 20 per cent in fixed line phone services. We
have reduced fault detection times by up to 25 percent while were taking costs out of this
business. Were achieving service delivery innovations that cater to the needs of our customers by
also providing online billing. In fact, we now have more than 750,000 online billing customers
scheduling payments, managing the status of their accounts in ways not possible 12 months ago. And
now were considering more flexible and customer-friendly service calls by visiting customers -
guess what? when they want to be served. Sometimes its in the evenings, sometimes its on
weekends, because we are organising ourselves around the customer.
We are making progress. We do have momentum. Ive got to tell you, I could spend probably another
day here listing all thats happening, but Ken wont let me. So well move on.
I do want to say one other thing: that Im not going to give you any numbers beyond those that I
have today because I cant. We have disclosure requirements. But all I can say to all of you here:
stay tuned for our full-year results that well announce on August 10.
Let me focus now on the integrated services that are a key part of our strategy, because its not
just enough to do things better than weve done before. Weve got to create a new value proposition
as we think about it in the marketplace. That is around this notion of integration. Our plan to
integrate services for the consumer was in full view at the Commonwealth Games in
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 8 |
Melbourne this year. Using BigPond, the Games were only one click away on our 3G mobile phones,
with eight real-time channels of the games supplied by Channel 9. So on here you had two words. All
I had to show you was two words. They say Big and Pond and you press that button right
underneath those two words and you could get on and watch the Commonwealth Games. Thats how
simple, but thats a sign of how were integrating our business, because the silos no longer exist
inside this company.
But Bruce is sitting here and I do have to say this: that you will find our Sensis brands and
capabilities. Whether it be Ghost Day, Whereis, whatever it might be, you will find Telstra as an
integrated company because thats what our customers are telling us. Make it simple, make it better
and make it quick for me in terms of what I want to do. But theres a lot more that were doing in
terms of our business because we are going to integrate every piece that we can, including how we
think about Foxtel and our relationship with our business coinvesting with News Corp and PBL. But,
again, we dont have enough time today for me to talk about that any more, because I think its
also important to talk about what Telstras transformation really means for Australia.
Because of Australias vast distances, small population and difficult terrain, Australia has a lot
to gain from the deployment of high-speed broadband services. There is also a flipside Australia
has a lot to lose if high-speed broadband infrastructure doesnt get built. The Australian
Governments own broadband advisory group found evidence that nation-wide adoption of
next-generation networks could deliver economic benefits in the range of $12 to $30 billion per
year. Where I come from thats not small change it clearly is not. Its not unique to Australia.
Its happening everywhere in the world because this is part of the economic fabric of virtually
every country.
Broadband infrastructure directly affects Australias future in many ways in education, in health
care services, telework, fleet management, many other ways that are still on the drawing boards but
were working on. A recent example of what broadband can do was found in the experience of composer
Nigel Westlake, who was able to see and hear the Sydney premiere performance of his Percussion
Concerto from London courtesy of BigPond. He wrote to us:
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 9 |
Yes we saw the webcast in full stereo. There were no drop outs or interference of any sort.
The sound was also excellent. It was the next best thing to being there. An engaging and
exciting experience! I wouldnt have missed it for anything!
Now, if you are in the media comms business, it doesnt get much better than that, to hear that
kind of feedback from people who are learning the new way of how were all going to be conducting
our lives.
Finally, broadband gives even small enterprises the ability to do business around the world. For
example, a few months back I met with the CEO of an online flower business in Armidale, New South
Wales. Its called Petals Network. Petals was founded in 1992. Petals has 21 international
websites. Petals also allows buyers to send fresh flowers overnight to more than 70 countries
around the world.
Petals Network demonstrates how broadband
|
|
|
creates new opportunities for people and enterprises in rural and regional
Australia, |
|
|
|
|
expands geographic markets for business, |
|
|
|
|
helps stem the brain drain, and, |
|
|
|
|
improves productivity. |
It also helps keep families together by eliminating the need to relocate for employment.
Australia is currently riding the crest of a resources boom. A decade of strong economic management
has led to growth rates that are the envy of many other developed economies also with a $10
billion Commonwealth budget surplus.
Now is the time to set the foundations for future growth, by putting in place the infrastructure
required by a dynamic, international, competitive economy. We must fix the roof while the suns
shining, or we will squander the opportunity our geography and resources have given us.
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 10 |
So where does this leave us? Our vision of the New Telstra is about building new infrastructure,
about creating new integrated services that make things simple for our customers including what I
like to refer to as that 1 click, 1 button, 1 touch, 1 screen, 1 call capability.
To achieve Telstras vision we need to invest in infrastructure. The Telstra network I found when I
came to Australia was falling behind the rest of the world. Service problems had been dealt with
through patches and work-arounds. Fault rates were high and rising and the networks capabilities
were constrained by the widespread use of pair gain systems and other quick fixes often referred to
in the industry called broadband blockers.
If Australia is to have world-class telecom investment, it truly is needed to rebuild the
infrastructure so that we do have a 21st century standard here.
As part
of the solution we are proposing to build out a next generation Fibre
To-The-Node (FTTN)
wireline network. This investment is worth more than $3 billion.
Under our proposal wed build what we are calling the High-speed Access Network, initially in five
big cities here in Australia Sydney, Melbourne, Brisbane, Adelaide and Perth with expansion
thereafter to other cities and towns. The new High-speed Access Network would initially cover about
four million households more than half of all Australian households. This network would be
available at commercial rates to competitors.
Our FTTN proposal in five cities does not mean that we have forgotten the rest of Australia. Its
actually just the opposite. And if investors are assured they can earn the competitive returns that
they need to justify their investment in building out the FTTN, then over time, we expect to expand
the FTTN footprint to additional communities around Australia. But let me be clear. It is all about
economics, it is about returns and it is about our shareholders getting competitive returns.
You know, since Ive been here I really have found that Australia is what I would call an inventive
nation, with a strong economy, truly educated workforce. My belief is that Australia can be a
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 11 |
world leader in any space enabled by this media comms sector where the payoffs can be huge for a
nation whose few people are spread over wide open spaces. To achieve this potential Australia needs
to invest, I believe, into this kind of broadband infrastructure now, not later.
Telstra remains, without question, the only media comms company in Australia with the scale and
scope to deliver advanced, modern 21st century telecom services to all of Australian.
However, Telstra shareholders expect a competitive return on their investments. Thats why we will
not invest in FTTN unless we achieve regulatory settings that will permit Telstras 1.6 million
shareholders to earn a competitive return that they expect and they deserve.
To use an Australianism I have learnt, were fair dinkum about protecting shareholder interests
and investments. Standing up for the shareholder is not rhetoric. It is a principle of leadership
and management in the New Telstra that not only management but also the board of Telstra believes
in as it should be, I think, for every publicly-listed company in a free market economy. A pledge
not to build out the FTTN unless shareholders can earn a competitive return on their investment.
I want to be clear about something I keep on reading about that were bluffing. If theres any
belief in the room let me dismiss that belief. This is serious. Were talking about our
shareholders money. It is a board-approved policy that is already guiding all of our capital
spending decisions. These positions are not about fighting the government or failing to cooperate
with governing authorities. These positions are what I call globally accepted free market
principles that are essential to preserve and to advance a healthy, growing enterprise economy that
is central to a healthy and prosperous political democracy.
While there is a lot that management can do and is doing on its own to give life to the New
Telstra, others have a critical role in shaping the investment climate in which we and others work.
We management can improve the services we offer, but whether we can provide a new
infrastructure that enables our product and service development potential to be fully realised,
requires regulatory settings that will encourage shareholder investments in a new high-speed
broadband network.
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 12 |
Governments in the US, Germany, Canada, South Korea, Japan, understand the critical link between
jobs, growth and broadband deployment and theyre doing something about it.
Now, youve seen in our case, we are building a high-speed broadband wireless network, and its a
decision that management and the board have made because its not tied to regulation. We know that
we go compete in the marketplace and we can go earn competitive returns in the marketplace, but we
risk capital. Well, we believe I believe Australia does need a pro-consumer, pro-jobs,
pro-investment climate that encourages and rewards those who are willing to risk shareholders
capital to build the critical broadband infrastructure that will advance Australias future
economic performance.
Unlike our competitors, Telstra stands ready to make these investments if the regulatory settings
do not require us to give away our assets owned by our shareholders, and enable a reasonable
commercial return.
This is an investment that this country needs. Its an investment that is well and truly in
Australias national interest. We cannot afford to let this opportunity pass because of a mindless
continuation of a regulatory regime that has passed its use-by date. Future generations of
Australians, I believe, will not thank us if we allow that to happen.
Thank you very much for having me here today.
Male Speaker: Thank you very much, Sol Trujillo. As usual, we have a period of questions for our
media members starting with David Humphries.
David Humphries: David Humphries from the Sydney Morning Herald, sir. Youve been criticised in the
past by some analysts as being overly aggressive with your main shareholder and regulator. With
20/20 hindsight, would you have changed your approach at all?
Solomon D Trujillo: Well, the answer is no, because we are driven, as I said in my speech, by
principles and the principles are clear. We will not do things that are value destroying to our
shareholders and the regulatory settings and regulatory process to date have been just that. So we
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 13 |
have to stand up, we have to discuss, we have to debate, but were creating the discussion. Its
not just about fighting because, actually, were engaging in a lot of dialogue because we want to
make improvements and we want to make improvements not just for Telstra but for all of the
competitive marketplace and also for all Australians.
Mark Riley: Mark Riley from the Seven Network, Mr Trujillo. I was jolted a little bit by your
observation that you need to mend the roof while the suns shining, and my mind went to the 1.6
million mum and dad shareholders you referred whove watched their share price plummet to $3.65
thereabouts whod be thinking, If this is what happens while the suns shining, God save us if it
ever rains. But, sir, I think you know that Australia is moving towards a performance-based labour
market and your performance in the last year is a share price thats dropped by about 27 per cent
while the rest of the market has gone up by 25 per cent. Why should you and your executive team
here not accept a 25 per cent performance pay cut on the basis of that abysmal share market
performance?
Solomon D Trujillo: Well, I think first of all, its important to get facts right and understand
causes of share price performance. So you start back at 1999 and share price was at $7.40. Before I
got here the price had dropped from 7.40 to $5.00. So its important to say: why would that happen?
The answer is because there is in part a regulatory climate here that is about destroying value in
terms of the company and its assets. Also, since I came, we have done two things which would cause
the share price to fall further but for a purpose. Number one is that we also had a special
dividend in place that we had to borrow to pay. I dont know of many private/publicly owned
companies that spend their time borrowing to pay dividends. So when you take away that dividend,
that special dividend, share price will fall and it did fall. But the most important thing right
now is that management and the board made certain decisions to change our prospects for the future.
That was about not trying to temporise fixes, not trying to just worry about the next quarter, but
to really invest notice I say invest in this company for the long term. The board was
committed and management is committed to fix Telstra so that shareholders can grow value, not just
next quarter or next year but on into the future. So when you do rebuild, you dont do it overnight
and you do it with cost. There has been some cost in the short term but I am confident, as long as
were allowed to execute our plan without a lot of intervention and a lot of noise and a lot of
offsets, we will create value for our shareholders.
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 14 |
David Crowe: David Crowe from The Financial Review. Youve been in talks with the ACCC for months
now on the fibre network. Whats the obstacle that youve got to clear before you can put out some
kind of public document about your plans? What do you think the timeframe is going to be on that
and doesnt the delay in issuing this leave you open to suggestions that youre holding the
government to random over T3?
Solomon D Trujillo: Well, first of all, in terms of timing, the first part of your questions,
obviously weve had a lot of dialogue with the ACCC. Mr Burgess, whos sitting here in the
audience, along with some of our staff people have spent a lot of time, had lots of discussions,
shared lots of information in terms of the process. We have not reached any kind of resolution at
this stage. Some of that is associated with the processes that the ACCC has to go through and has
to follow because they have some fiduciary duties of their own. Now, we have articulated our view,
our policy, and our policy at Telstra has not changed one iota since last July and August. That is
anything we do in terms of building new needs to be shareholder friendly cannot be shareholder
value destroying. So when we talk about new ideas and I think were talking about an exciting new
idea that is both shareholder friendly to Telstra but also pro competition, if we can reach
resolution, that will be a good thing. If we dont, itll be sad, itll be a shame, because weve
both invested a lot of time. I would say, you know, if it wasnt both of those I dont think the
ACCC wouldve spent three months. I cant speak for them and I wont speak for them but we both
invested a lot because were talking about very important issues here.
Catherine Murphy: Mr Trujillo, Catherine Murphy from The Age. Youve used your speech again today
to attack the current regulatory regime in which you operate. Could you tell us what your ideal
regulatory regime would be, and do you accept that part of the reason for the current regulatory
process is that Telstra has the dominant position in the market and its beneficial for consumers
to have more than one media telcos company? Or dont you accept that that is a reasonable
proposition on which to base a regularly regime around?
Solomon D Trujillo: Okay. First of all, Im a very pro competitive person. I love competing. Its
just I like when we get into the ring to compete or on the field to compete, were competing on
equal terms. So thats point number one. Point number two, I think this morning there was some sort
of
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 15 |
announcement by I guess the so-called gang of nine that was proudly talking about the fact that
they had almost 60 per cent share of broadband. Now, to me, if they have 60 then that must mean we
have 40, which means that were not dominant. Right? Isnt that the way the math works? So I think,
you know, the point is that there is a lot of competition that exists today. Actually, theres
almost 700 ISPs, theres many different facility-based players here in Australia. The punch line is
that we need to get to a regulatory environment where the rules are fair for everybody. And one
that Telstra is not the sole risk taker in terms of investing in infrastructure. Because we at
Telstra have a very clear policy today and that is we allow access to our copper loop
infrastructure, which is where the monopoly used to be, and everybody has equal access to that.
Everybody has the same access as Telstra to those copper loops.
Now, if we happen to be better at innovation, if were willing to risk capital to grow even further
and create differentiation, Telstra should not be penalised. They should not be told, the mums and
dads that have invested in this company should not be told, You invest your money but well share
it with those investors in Singapore or those investors in Hong Kong or those investors in London.
I dont think thats right, I dont think thats fair, and thats consistent with the positions
that were taken.
Tony Boyd: Tony Body, Financial Review. Sol, at the strategy day in November last year you said
that if you didnt get $30 access prices for your copper loop from the ACCC then your revenue would
suffer by $1 billion or more and you wouldnt be able to pay your dividends thats the 28 cents a
share dividend. Youve said today youre already borrowing to pay the current dividend and I think
youre going to keep borrowing for a couple of years. So when you said that were you bluffing, or
will you cut the dividend?
Solomon D Trujillo: Well, lets make sure that the facts of what we said in November are correct.
What we talked about was in November that we were advocating for a $30 unbundled local loop because
thats what our costs are. You or anybody else or any of us in this room could pretend that theyre
different, but we write cheques every day, every week, every month, covering the costs of what we
do. So were not into academic conversations here; were talking about real cash and real peoples
moneys meaning our shareholders. What we said in November was We want to make sure that
unbundled local loops cover our costs so that were not subsidising Singapore
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 16 |
Telecom, were not subsidising anybody else. What we also said was that if the regulator imposed
the proposed prices of the staff in terms of de-averaged unbundled local loop prices, that it would
affect our cash and our revenue generation to the tune of 800 to $1 billion per year as they built
out and took more share. That is what we said. But not if we didnt get $30 it was about what
they would impose at that point in time. Just to be technically correct.
Tony Boyd: They have imposed that.
Solomon D Trujillo: They have not yet imposed a de-averaged unbundled local loop price regime that
was discussed last December/November/October timeframe not yet. Thats why were having
conversations today because obviously that will dramatically change many things. If they impose
that kind of decision it can affect dividend policy, it can affect revenues, it can affect
earnings, it can affect a lot of things. So its an important issue.
James Grubal: Mr Trujillo, its James Grubal from Reuters. Youve previously said that the fixed
line revenues are going to be an area where revenue was going to be falling as more people moved to
mobile. Im just wondering if your forecasts for that are on target, or is the takeup of mobile
phones in favour of fixed line revenue? Is that going a little bit slower than expected?
Solomon D Trujillo: Well, I mean, there are some phenomenons that have been affecting Telstra, but
theyre also affected other telcos around the world. One of them is this what we call PSTN revenue
stream, which is kind of your old core telco revenue stream that we announced with our mid-year
results that had declined 7.6 per dent. That is the most profitable part of our company and it is
affected, to a large extent, by lots of competitors that have offerings of calling plans and
substitution for services that we provide. The second thing thats affecting our revenue stream is
this shift that you referred to of a lot of us are using mobile phones and making calls there
instead of on the fixed line network. That is also happening. What we talked about back in November
is as management we needed to be more aggressive in terms of fighting, trying to stem some of those
losses that we were experiencing in terms of what this PSTN revenue stream. We needed to be more
innovative on our pricing. I think youve seen here in the last two or three months were in
market, were fighting, and well announce results on August 10th.
NATIONAL
PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 17 |
Matt Price: Good day, Mr Trujillo, Im Matt Price from The Australian. You painted a really
rosy picture of Telstra. I thought I was in Xanadu for a while, not the Press Club. Im a bit
confused because about three minutes up the road theres a building often full of politicians and
the Liberals dont like you much, the Labor people up there like you even less, the Dems and Family
First and the Nationals definitely dont like you and the Independents like you even less than all
them. Why do you think that is so? Whats your impression after a year here of the political
debate? Do you regret not sending one of the very senior management to Senate Estimates recently
where everybody cross party regarded it as an act of contempt that you didnt?
Solomon D Trujillo: Well, first of all, the board didnt hire me to run for office, so let me be
clear about that. Number two, in terms of how do our customers think about us, all of our brand
survey research is only going up. So to me the voters for us are those that buy our services, those
that use our services, because theyre the poll that counts for me because they drive our earnings,
they drive our results. Now, do I regret not showing up at Senate Estimates? My understanding is
theres never been a CEO from Telstra thats ever gone go Senate Estimates?
Matt Price: Burgess (inaudible).
Solomon D Trujillo: You were asking about me.
Matt Price: And senior management.
Solomon D Trujillo: In terms of senior management, Mr Stanhope, many other people, Douglas
Gracents, senior management, secretary of the board, have appeared there at Senate Estimates. We
have experts that go there. Theres a myriad of questions that get asked. Now, Id assume people
want answers and they want the people there that can give them the answers. I dont know every
detail about the company. I cant know every detail about the company. But you ask me about
strategy, you ask me about the major strategic thrust, where were allocating capital, that sort of
thing, thats why Im here today. I can answer those questions.
Michael Sainsbury: Good day. Sol, you like to talk a lot about your successes and obviously youre
had a few. I think even these days youre time at Graviton was left off you CV. You spent two
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 18 |
years there and the company collapsed. Can you tell us what happened there and is there any
danger thats going to happen at Telstra?
Solomon D Trujillo: Absolutely. Number one, again getting facts straight, it is on my CV. Because
Graviton was a two year period of time in my career where one of the large venture capital firms
asked me to go oversee a start up company. It was actually in the year 2000 and in the year 2000
those of you . . .
END SIDE A
Solomon D
Trujillo: (continuing) . . . industry. You know that it was the equivalent of the Great
Depression. Trillions of dollars in invested capital for most start ups and existing companies that
had started up within the last five or ten years lost significant shareholder value. You can look
at Sun, you can look at Cisco, you can look at Microsoft you can look at virtually every company
in that period of time, they lost value. In the case of Graviton, we built a great product, ready
to go to market. The problem is in that period of time post Y2K nobody was buying it. So what
happened was the board, which included myself, we decided to fold it into another company so that
it could continue living on. I moved on because it wasnt worth my time in terms of the
opportunities I had, as well as the compensation that I required to be associated with a company of
that size. So thats what happened. Not hiding it in any fact its on the CV. I think it was an
important experience for somebody like me because running big companies sometimes small decisions
get massed in terms of their importance. In our case, here at Telstra, were paying attention to
every single decision so that we can leverage the opportunities as best we can.
Chris Hamer: Chris Hamer from SBS Stateline. You say youre looking after every detail. One of the
details that some people have been concerned about are some of the strategic alliances that you
alluded to in your speech Alcatel, Ericsson, Brightstar. Particularly theres been some criticism
about the alliances with Alcatel, with whom youve had a past association, and Brightstar, that
these didnt go through a normal kind of tender process, a transparent process. Whats your reply
to those sorts of criticisms? Is it a difference between corporate culture here in Australia and
the ones youre used to overseas?
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 19 |
Solomon D Trujillo: Well, first of all, the answer is those allegations are completely
incorrect. If there was the chairman of the board or any one of our board members standing here
today I can assure you they would say that theres full transparency in every major procurement
that weve done in this company. So the facts are transparency is alive and well and not only
inside the company but outside the company, because weve been more disclosing at Telstra in the
last year than in the history of this company, because I want the markets to know, I want our board
to know, I want our employees to know.
Now, in terms of the relationships, I think its important to get this out because somebody that
chose not to pursue facts didnt really understand the relationship that I had with Alcatel. I was
on the advisory board. Now, I dont know if any of you are on advisory boards, but in the case of
Alcatel we met once a year. We had a nice dinner. Its a bunch of global political leaders,
business leaders. We had a nice dinner, we saw a presentation from Alcatel in terms of things that
theyre doing. They asked for feedback in terms of hows the economy going in the US, in Asia, you
know, wherever. What do you think about the technology? What do you think
about the direction? We give feedback. You say au revoir and you go. Thats what being an advisor
is. No fiduciary responsibility, no decision making authority, so you dont affect anything really
in terms of that process. To say there was a relationship okay, there was a relationship.
However, the most important thing is people should ask me: is Alcatel the best potential supplier
for us, given the strategy that we have? That should be the question thats asked. And the answer
is yes.
Now, since weve made that decision, if you go to Deutsche Telekom youll find that theyre using
them. If you got to British Telecom, theyre using them. If you go to ATNT, theyre using them. Go
to China Telecom, theyre using them. Now, what would that say? Is it a bad decision; good
decision? Now, I will say one other thing. Part of what weve been doing is trying to move with
speed, because taking two years to tender and end at a decision that you could get to in six months
versus two years means a year and a half of benefit that you can derive in the market. This
management team, this board of Telstra, is focused on results and thats what were going to do.
Glen Milne: Glen Milne, sir, from New Limited Sunday publications in The Australian. Im sure
everybody in this room is gratified by the fact that youre fair dinkum. I just wanted to really
test
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 20 |
your understanding of that phrase. You say in your speech We are not bluffing. I wonder if
you cant get the regulatory regime fixed on your terms whether you would walk away from this job?
Solomon D Trujillo: Well, the board asked me to come here. They recruited me. They asked me to help
them pick the right strategy and transform the company. Ive committed to the board that Im here
to do that. Now, theres many elements to how we think about transformation of this company. Now,
last week I had an interview with Michael Sainsbury. He said, you know, Hows this political stuff
going and how much of your time is taken with doing that?. I said, I spend very little time on
the politics of the regulatory process. Some of it is process, some of it requires expertise from
people like Tony Warren and Phil Burgess and others. But where I spend my time is the big machine.
How our go to market strategies are working, the infrastructure choices. How were changing our
processes. How were going to pick the right technologies. How were going to change our IT
infrastructure. I spend my time doing that. Thats 90 per cent of the transformation. Does the
transformation get capped and limited to some extent by this fibre to the node issue? Absolutely.
But is it the defining element of our transformation strategy?
Absolutely not. What does fibre to the node mean? Let me say it again. It limits our ability to
provide broadband but, more importantly and this is the sad part for me it limits the access to
services for all of Australia. I think that would be a tragedy for all of Australia. For a set of
policies that are from the past, that do not recognise the changed future, not to enable that
future to happen, I think that would be sad.
So were advocating hard, were being outspoken about it and were being fair dinkum.
Jason Kutsufis: Mr Trujillo, you talked about nice dinners just before and it takes me back to a
very nice dinner I had with your colleague, Mr Burgess, here at the National Press Club, just above
where were standing now. He made the somewhat memorable remark that he wouldnt recommend Telstra
shares to his own mother. Now, with the government set to put about six billion Telstra shares on
the open market later this year, can you confidently say to the mums and dads of Australia that
they buy those shares, that its a good value for money investment?
Solomon D Trujillo: Well, let me say first of all that I have spent in the last probably month or
so . . . Ive been on three different continents. Ive had a conversation with the minister. The
minister has said we, the government, are committed to T3. He said, Sol, are you committed? and
we
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 21 |
said yes. How do I demonstrate that? I go out and I talk to potential investors, and including
some existing shareholders. Ive probably had meetings with, I dont know, 25 or 30 in the last
month or so, talking about Telstra, talking about the market, talking about the transformation,
talking about some of our results that are public and talking about also those issues that they
want me to address in person as the CEO of the business. Do I recommend the shares? That is not my
duty, that is not my job and I legally cant do that. But do I talk about the prospects? Yes. Do I
talk about the prospects in a full disclosure way? Yes. Which means I talk about the upside of the
business and I also talk about the downside of the business, because thats my duty and I will
always do that. I have been doing that because Im proud of this company that I work for and Im
proud that it is Australias biggest, best and most innovative company as we transform this
business.
Steve Lewis: Mr Trujillo, Steve Lewis from The Australian. I also want to reflect on that memorable
dinner. I was there as well. I want to argue that Mr Burgesss comments and the comments that have
been made by yourself and your management team over the past 12 months has helped, in a sense, talk
down the share price of Telstra, which has dropped from $5.00 to $3.65. Sir, after one year how
much responsibility should you take as chief executive for the drop in shares, for the fact that
1.6 million mums and dads shareholders have lost vast sums of capital that they have invested in
Telstra? Shouldnt you apologise for that drop in the share price and take responsibility?
Solomon D Trujillo: Well, right now, you know, I think again the fact, as I said before, is the
share price and whats happened to the share price, some of that I do own. But its with a promise
on the other end of a transformation. Now, what I dont take responsibility for is the share price
drop from $7.40 to $5.00 because thats all part of a regime and a process that exists here in
Australia that needs to be fixed, and will have continued negative impacts to drive share price
negatively in terms of value creation further. What we also did as a board was we decided that it
was not appropriate any more to borrow to pay the dividend. That caused a share price drop. Was I
here before when that dividend policy was created? The answer is no, I wasnt. But is it the right
thing not to borrow to pay the dividend absolutely? Until you generate the cash or until you have
line of sight that youre going to generate enough operating cash flow to pay for dividends. What
we have articulated on November 15 is a plan, a real plan that is publicly viewable in terms of
five
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
|
|
|
|
|
|
|
|
|
|
|
|
|
Page: 22 |
years, how were going to spend some money in the first two years which depresses share price
but is going to improve earnings, is going to create value over the following three, four, fifth
year in terms of the process. I stand behind that. So I do take responsibility for the part of the
share price thats dropped because we are spending more and near term earnings do go down. I own
that and Im proud of it because I know Im going to drive returns from that. The other stuff in
terms of the settings, the regulatory process, all of that, that existed before I got here. I dont
own it but what I do own is trying to change it and trying to improve is so that the mums and dads
dont see their $7.40 continue to sink because its got to go the other direction. Thats my
pledge. Thats what were doing and were going to be fair dinkum about it. Thank you.
NATIONAL PRESS CLUB 16 National Circuit Barton ACT 2600 Tel: 02 6121 2199 Fax: 02 6121 2188
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.
|
|
|
|
|
|
|
|
|
TELSTRA CORPORATION LIMITED |
|
|
|
|
|
|
|
|
|
|
|
/s/ Douglas Gration |
|
|
|
|
|
|
|
|
|
Name: Douglas Gration |
|
|
|
|
Title: Company Secretary |
|
|
|
|
|
|
|
|
|
|
|
Date: 30 June 2006 |
|
|