TELSTRA ANNUAL REPORT 2013 Online Shareholder Services Annual Report Global Reporting Initiative Telstra’s Investor Centre www.telstra. Telstra’s 2013 Annual Report is available We develop our sustainability reporting with com/investor has all the latest news and to all shareholders on our Investor Website reference to industry and sustainability standards information available for shareholders. at www.telstra.com.au/annualreports. including the United Nations Global Compact Communication on Progress, and the Global Shareholders can also easily To receive a hardcopy of the Annual Report Reporting Initiative (GRI) G3 Sustainability manage their shareholding online at (free of charge) you can call our Share Registry on Reporting Guidelines and Telecommunications www.linkmarketservices.com.au/telstra. 1300 88 66 77 and request the report be sent to you. Sector Supplement (pilot). 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Telstra Corporation Limited ABN 33 051 775 556 CONTENTS Key Highlights 2 Our Business 3 Chairman and CEO Message 4 Strategy and Performance 6 Improving customer satisfaction 6 Retaining and growing customer numbers 7 Simplifying the business 8 Developing new growth businesses 9 Future outlook 10 Managing our risks 11 Full Year Results and Operations Review 12 Sustainability 20 Our approach 20 Responsible business 22 Customer experience 23 Our people 24 Community impact 26 Environmental impact 28 Board of Directors 30 Senior Management Team 32 Corporate Governance Statement 33 Directors’ Report 42 Remuneration Report 46 Financial Report 69 Financial Statements 70 Directors’ Declaration 197 Shareholder Information 199 Reference Tables 201 We have changed the format of our Annual Report this year to provide shareholders with key information (including who we are, our business strategies and goals, our governance structures and our results for the current financial year) in a way we hope shareholders will find more helpful and easy to use. The sections of our Annual Report Our Business, Chairman and CEO Message, Strategy and Performance and Full Year Results and Operations Review comprise our operating and financial review (OFR) and form part of the Directors’ Report. Telstra Annual Report 2013 1 KEY HIGHLIGHTS SALES $25.5B REVENUE NET $3.9B PROFIT $3.5B IN DIVIDENDS NEW DOMESTIC RETAIL 1.3M MOBILE CUSTOMERS NEW RETAIL FIXED 173K BROADBAND CUSTOMERS INVESTED IN THE WIRELESS $1.2B NETWORK (EX SPECTRUM) INVESTED IN SPECTRUM $0.8B LICENCE RENEWALS COMMITTED TO $1.3B ACQUIRE NEW MOBILE SPECTRUM LICENCES ONLINE CUSTOMER TRANSACTIONS, UP 10 40% PERCENTAGE POINTS EMPLOYEE ENGAGEMENT SCORE, FOUR PERCENTAGE POINTS ABOVE 79% THE AUSTRALIAN NATIONAL NORM TOTAL VALUE OF $231M SOCIAL AND COMMUNITY CONTRIBUTIONS REDUCED CARBON 33% EMISSIONS INTENSITY 2 Telstra Annual Report 2013 OUR BUSINESS Telstra is Australia’s leading networks and managed services business WHO WE ARE telecommunications and information and Telstra’s China-based search and services company, offering a full range of advertising businesses. EVERY DAY WE HELP communications services and competing We understand our customers want in all telecommunications markets. In MILLIONS OF CUSTOMERS technology and content solutions that Australia we provide 15.1 million mobile are simple and easy to use – that’s why CONNECT TO THE PEOPLE services, 7.8 million fixed voice services we’ve built networks like Australia’s and 2.8 million retail fixed broadband largest fully integrated IP network and AND THINGS THAT MATTER services. Telstra’s international Australia’s largest and most reliable businesses include Hong Kong mobile MOST TO THEM national mobile network. operator CSL New World, Telstra Global’s The way people communicate, share Technology has evolved. Devices and INDUSTRY CONTEXT their lives and consume entertainment networks can adapt to their users’ is changing. needs, rather than the other way around. OUR INDUSTRY Improvements in mobility and the growth The digitisation of information, of cloud computing mean users’ content IS EXPERIENCING entertainment, videos and photos means and services can seamlessly follow we are increasingly accessing content RAPID CHANGE people wherever they go and customer and services previously delivered over expectations have changed accordingly. one network to one device, on multiple devices over a range of networks. We aim to help our customers change the Our vision is to take advantage of this OUR VISION way they live and work through improved connectivity evolution by providing our and more convenient connection. The way customers the products and services they TO IMPROVE THE WAY people are connecting with each other, want, where and when they want them in PEOPLE LIVE AND WORK and with the content and services they a simple and convenient way. use, is becoming more individualised and more sophisticated every day. Our mission is to build technology We are building a culture based on MISSION and content solutions that are simple customer service, collaboration and and easy to use. We understand the innovation, and leading in the market. WE STRIVE TO SERVE connectivity evolution and we are working We are building this new company culture OUR CUSTOMERS BETTER to stay ahead of the curve. We have to put around the most powerful person in the the customer at the centre of everything new digital economy – the customer. THAN ANYONE ELSE that we do. Telstra Annual Report 2013 3 CHAIRMAN AND CEO MESSAGE Dear Shareholders, 9Wf[njeiWb[ihWj_ee\'*$/f[hY[dj"m_j^ '-)"&&&Òn[Zh[jW_bXheWZXWdZ YWf_jWb[nf[dZ_jkh[e\)"-/(c_bb_ed1WdZ Ykijec[hi"jeWjejWbe\($.c_bb_ed1 We are pleased to present you with this review of our operations for financial <h[[YWi^ÓemZ[Yh[Wi[ZXo)$)f[hY[dj ()."&&&XkdZb[ZYkijec[hi"jeWjejWb year 2013. or $173 million to $5,024 million. e\'$,c_bb_ed1WdZ This year we made good progress on our We continued to lead in mobile growth *(+"&&&>ed]Aed]ceX_b[Ykijec[hi" journey to change our company and put the with total domestic retail mobile customers jeWjejWbe\)$/c_bb_ed$ customer at the centre of everything we do. increasing to 15.1 million and mobile J[bijhWÉi*=d[jmehaXk_bZWYY[b[hWj[Z h[l[dk[h_i_d]Xoi_nf[hY[djje/$(X_bb_ed$ We have been able to deliver the third during the year, and since launch we consecutive year of significant customer We invested $1.2 billion in our mobile have activated more than 2.8 million growth as a result of our focus on network during the year. This investment *=Z[l_Y[i$ improving customer service as well as _dYbkZ[Z[nfWdZ_d]j^[h[WY^e\ekh*= FIJDYkijec[hiZ[Yh[Wi[ZXo(.-"&&& continued investment in the network. d[jmeha"m^_Y^demYel[hi,,f[hY[dje\ eh)$,f[hY[djje-$.c_bb_edWdZFIJD the population and is on target to reach Our strategy around improving customer h[l[dk[Z[Yb_d[ZXo/$+f[hY[dj$ 85 per cent by the end of the year. service as well as focusing on our growth businesses is working. We are pleased We also continued to build momentum in SIMPLIFYING THE BUSINESS we have once again delivered on our ekhD[jmeha7ffb_YWj_ediWdZI[hl_Y[i I_cfb_ÒYWj_ed_d_j_Wj_l[iZ[b_l[h[Z commitments and met our guidance at D7Ifehj\eb_e$D7Ih[l[dk[_dYh[Wi[Z $1 billion of productivity benefits, which the same time as continuing to simplify by 17.7 per cent for the year and included were reinvested into the business to our business. We also confirmed a j^[Yecc[dY[c[dje\W'$'X_bb_edi_no[Wh support growth in our customer base, 14 cent fully franked dividend bringing YedjhWYjm_j^j^[:[fWhjc[dje\:[\[dY[ customer satisfaction initiatives and the total dividend to 28 cents per share as well as international agreements with development of new growth businesses. for financial year 2013, a return of @[jijWhWdZ<_jd[ii<_hij$ 7_Z[ZXoYeijYedjhebWdZfheZkYj_l_jo $3.5 billion to shareholders. _cfhel[c[dji"ef[hWj_d][nf[di[]h[m IMPROVING CUSTOMER by only 0.5 per cent. KEY OUTCOMES SATISFACTION Productivity benefits were delivered We delivered revenue and profit Telstra remains committed to improving by continued process improvement, growth as well as adding 1.3 million customer service as our number one including supply-chain efficiencies, new domestic retail mobile customers strategic priority. improving online sales and service during financial year 2013. The reported 9ecfbW_djijej^[J[b[Yecckd_YWj_edi capability and effective credit financial results for the 12 months to ?dZkijhoEcXkZicWd^Wl[\Wbb[d\ehW management. Productivity benefits 30 June 2013 are: third consecutive year and we are Yedj_dk[jeÓem\hecYkijec[hi JejWb_dYec[_dYh[Wi[ZXo'$/f[hY[dj focused on implementing key customer transacting online, with more than eh*--c_bb_edje(+"/.&c_bb_ed1 service initiatives.