Telstra Annual Report 2017 Telstra Telstra Annual Report 2017 WorldReginfo - 0d488df9-3394-4d37-84d6-bfe66228f894 The sections of our Annual Report titled Chairman and CEO message, Strategy and performance, Our material risks, Telstra Corporation Limited Outlook and Full year results and operations review comprise our Operating and fi nancial review (OFR) and form part of ABN 33 051 775 556 the Directors’ report. Our OFR, Directors’ report and Financial report were released to the ASX on 17 August 2017 in the document titled ‘Financial results for the year ended 30 June 2017’ which is available on our website at telstra.com/investor. An overview of selected aspects of our corporate governance arrangements is set out in the Governance at Telstra section of this Annual Report. A copy of our full Corporate Governance Statement and ASX Appendix 4G was lodged with the ASX on 17 August 2017 and is available on our website at telstra.com/governance. Our business 02 FY17 highlights 03 Chairman and CEO message 04 Strategy and performance 08 • Deliver brilliant customer experiences 10 • Drive value and growth from the core 12 • Build new growth businesses close to the core 14 Our material risks 16 Outlook 18 Full year results and operations review 20 Sustainability 28 • Digital futures 29 • Environmental solutions 30 • Responsible business 31 Board of directors 32 Senior management team 34 Governance at Telstra 36 Directors’ report 39 • Remuneration report 44 Financial report 69 • Financial statements 70 • Directors’ declaration 148 Shareholder information 152 Reference tables 154 Glossary 158 Contact details and Indicative financial calendar 160 Annual Report Telstra’s 2017 Annual Report is available to all shareholders from our Investor Centre at telstra.com/annualreport. To receive a hardcopy of our Annual Report (free of charge), you can call our Share Registry on +61 1300 88 66 77 and request a report be sent to you. You may also update your communication preferences online at www.linkmarketservices. com.au/telstra to change the way you receive future copies of our Annual Report. B WorldReginfo - 0d488df9-3394-4d37-84d6-bfe66228f894 Our business FY17 highlights Our purpose To create a brilliant connected future for everyone. Financial 1, 2 Net profit after tax performance Total income from continuing Our vision To be a world class technology company that empowers up by 4.3% to people to connect. operations up by $28.2 billion 1.1% to $3.9 billion Our brand To create better ways to empower everyone to thrive in a connected world. $5.2 billion returned What we do Telstra is a leading telecommunications and technology to shareholders via FY17 total dividend of company. We offer a broad suite of connectivity, media and dividends and share 31 cents per share content to customers in Australia, as well as connectivity buy-backs and enterprise services globally. We curate innovative technologies and capabilities from around the world to deliver exceptional experiences for our customers. Customer Episode Net Strategic Net growth Promoter Promoter 218,000 additional Score (NPS) up Score (NPS) domestic mobile by 3 points on stable on customers last year last year Who we are Recognised as Over 32,000 staff Over 350 Telstra Stores and nbn market Australia’s most in 20 countries 70 Telstra Business Centres share (ex-satellite) valuable brand, of 52% 78th most valuable globally Mobile network >400,000km More than World class Launch of of subsea cables covering more than 800,000 Telstra technology world-leading Exclusive launch of connecting to 2.4 million square kms ® the first Pixel smartphone +2,000 points of presence TVs in market 1Gbps Nighthawk M1 mobile hotspot as a partner of Google Joint owner of Providing AFL, NRL and Netball content 1.4m 4G mobile network data-free to customers shareholders Launch of Australia’s largest Pay TV service now reaches 99% of the Australian population Telstra Smart Home Our customers Sustainability 460 million calls and Over 5,000 petabytes of Nearly two million 430 million data connections data on our fixed network customers activated made over our mobile and mobile network each to use more than 1.1 million Sustainable 68% reduction Helped more network each day day, increase of 40% Telstra Air® hotspots engagement in greenhouse than 1 million score of 71% gas emissions vulnerable in Employee intensity customers stay 5.4 million Engagement from our connected 1,176,000 nbn™ connections, Survey baseline year retail fixed voice services 17.5 million domestic 88% of retail fixed data retail mobile services customers on a bundled plan 3.5 million retail fixed data services 1. On a reported and guidance basis. 2. Total income excludes finance income. WorldReginfo - 0d488df9-3394-4d37-84d6-bfe66228f894 02 03 Chairman and Chairman and CEO message | Telstra Annual Report 2017 CEO message Dear Shareholders, Almost 90 per cent of our retail fixed We have increased our target by a Our commitment to gender equality broadband customers are now on a further $500 million in cost savings In 2017 technology and bundle, with 224,000 adds on the back and we plan to deliver more than We remain committed to gender equality across our company. In 2017 we innovation continued to of the popular ‘Best Bundle Ever’ and $1.5 billion in net productivity by FY22. ‘Hottest Entertainment Bundle’. As previously advised, we expect the introduced a Global Recruitment Equality transform industries, benefits to accrue roughly equally Procedure which requires recruitment and Access to the best content is critically businesses and the way in over the life of the program. interview shortlists for all roles to include important to us as demand for media at least 50 per cent female representation. which we live our daily lives. continues to grow. At the same time For more detailed discussion of the This applies to all current open roles and This transformation is the media market is changing with new progress we are making to deliver on our all new jobs, except in some specified particularly significant for participants and increased competition. purpose, vision and strategy please refer roles where a 25 per cent requirement Telstra as the traditional worlds We remain committed to Foxtel and to the Strategy and Performance section. applies due to a known significant gender we continue discussions with our imbalance in the job market. For the of telecommunications and partner News Corp regarding the best third year running, Telstra also received computing are converging, as arrangements and structure to support Building world-class culture the Employer of Choice for Gender # are many other technologies. Foxtel’s success into the future. and capability Equality citation from the Workplace In an evolving market, we are seeing The culture and capability of our Gender Equality Agency (WGEA). During a time of change, we new entrants into the both mobile and workforce is an essential part of For FY18, the Board’s diversity objective continue to put the customer fixed markets as well as pricing pressure delivering our vision to be a world class is that there will be at least four women at the heart of everything we in all sectors through price reductions, technology company that empowers on the Board, representing a female value enhancements and increased people to connect. More than 32,000 gender representation among non- do and we have seen continued data allowances. Digital disruption is talented employees working in over executive Directors of at least 40 per strong customer growth across continuing to accelerate, not just for 20 countries contribute to our success. cent, recognising that the level of gender us but also for our customers, and we all key segments of our business. Our efforts to further build a world class diversity of the Board may be temporarily are entering a significant point in the workforce in FY17 included a number affected during periods of Board renewal. transformation of the telecommunications of changes to our Senior Management market with the nbn rollout reaching scale. team and the roles they play. We also These changes confirm why we announced a number of structural Delivering on our purpose, must increase the speed of our changes to bring some of our most sustainably Andrew Penn (CEO), John Mullen (Chairman) transformation. It is for this reason that important growth activities closer to In our increasingly connected world, last year we announced during FY17 the rest of the business to maintain digital technology is disrupting traditional our intention to invest up to $3 billion our support and align them with their operating models and helping society in additional capital expenditure over most relevant channel to market as they respond to major issues in a more agile the next three years to achieve a further mature. These changes are designed to and scalable way, from managing the Our financial performance We also announced the outcome of the The changes to our strategy were not step change in our strategic positioning. help us fully realise the long-term value impacts of climate change to making capital allocation review that commenced major, however they send an important This is in addition to our usual capital these opportunities represent. healthcare and education more universally Our strong performance in the context of in November 2016. This included a change signal that we will be very focused spend and takes our expected total accessible. That is why we have a multi- a highly competitive and dynamic market to our dividend policy4 to reduce the on delivering customer experience The Board has reviewed the current capital investment including spectrum year vision for a more holistic approach enabled us to increase Total Income, payout ratio to 70-90 per cent of our improvements and disciplined in how CEO and Group Executive remuneration over the three years to FY19 to more to sustainability that informs and EBITDA and NPAT.