Telstra’s Annual General Meeting AGM was held earlier today in Melbourne. Thank you to the hundreds of shareholders who took the time to join us in person, and to the thousands who watched our livestream.
Our Chairman John Mullen and CEO Andy Penn gave some important updates on our operations and performance for FY17, as well as an outlook for the coming year.
We sat down with the Chairman after the meeting to ask him a few questions about the meeting.
Click here to find more details about our financial performance.
The world is changing rapidly and business needs to adapt in order thrive. At Telstra’s landmark Vantage conference, CEO Andy Penn laid out the company’s vision for the future, and the strategy to achieve it. Here are the top three insights that he shared:
A history of innovation
Telstra has always been a company of technology optimists, with a belief that technology can bring tremendous benefits for businesses, society and the nation. For 100 years, that optimism has driven investment and innovation.
Whether it was building the first trunk telephone connections between Sydney and Melbourne; laying the first coaxial cables to carry telephone, TV, and satellite transmissions; launching the first mobile phones in Australia; or launching the first gigabit per second mobile device and the fastest in the world – Telstra has been at the cutting edge.
But the technology innovation seen to date is nothing compared to that which we can expect over the next decades, which is which is why Telstra, like other businesses, must transform to meet the challenges of the digital age.
Services of the future
There is no tech innovation today that’s not intended to be connected, from drones to driverless cars, cloud computing to online banking, ecommerce to IoT. These applications and services rely on a high-quality, fast, reliable and secure telecommunications networks.
Many of the applications and services leveraging Telstra’s networks today are disrupting traditional ways of doing business. In the process, new companies and competitors are capturing the increasing value technology is delivering across a range of industries.
Despite telecommunications companies around the wold investing tens of billions of dollars in networks to cope with increased demand, in some ways the industry has failed to capture the real value from this. Telstra sees this as an opportunity, not a threat, and remains a technology optimist.
A strategy for success
Two years ago, Telstra unveiled a vision to become a world class technology company that empowers people to connect.
Telstra’s success in this new age is not only good for shareholders and customers, it also helps underpin the success of other businesses across Australia’s economy.
In order to succeed Telstra needs to transform to become Australia's leading technology company with global reach, global capabilities and global partners.
We look forward to sharing this transformation, and the success it bring, with you.
Telstra has announced it has entered into an agreement with the Australian Securities Exchange (ASX) to become the connectivity partner for ASX’s international network services, ASX Net Global. The agreement will provide ASX Net Global customers access to Telstra’s EPL Express (Ethernet Private Line Express “EPLX”) solution, which offers some of the fastest network services on the market today for financial trading companies.
EPLX provides financial trading companies with a dedicated point-to-point service, which uses the shortest routes available to connect key financial centres to points-of-presence (PoPs) located in financial exchanges in these centres, thus minimising end-to-end transmission delays.
Brendon Riley, Group Executive, Telstra Enterprise, said the agreement extends the connectivity Telstra currently provides ASX and will directly connect ASX customers with exchange communities in some of the world’s leading financial centres.
“We currently connect ASX to our PoPs in the Chicago and Hong Kong financial exchanges. We will now connect to additional points in these cities, as well as to London and Singapore,” said Mr Riley.
“Financial services is an important industry for us and this partnership is testament to our commitment to delivering flexible, innovative solutions that help financial firms reach global markets with speed and reliability,” said Mr Riley. “In a world where a fraction of a millisecond matters, our EPLX service provides fast, point-to-point network connectivity between key data centres and trading hubs that will provide an edge in a competitive market.”
This service is backed by Telstra’s comprehensive low latency service level agreements that help customers mitigate unnecessary risks.
“Being the largest owner and operator of subsea cables in Asia with multiple connectivity options into the US and UK, we can offer more diversity and redundancy to our customers and the ability to quickly identify and address any network issues,” said Mr Riley.
David Raper, ASX’s Executive General Manager Trading Services, said “ASX’s partnership with Telstra will enhance the existing services we provide via our ASX Net Global communications network and enable us to offer new services to customers of our international hubs. We have the functionality and flexibility to cater for a variety of customer connectivity needs, including those seeking the lowest latency or simply wanting more bandwidth.”
Today we are releasing our financial results for FY17. This is our chance to explain to shareholders and customers how we’ve performed over the year and what we’re doing to help our customers thrive in a connected world.
We have confirmed that we met the guidance we provided to the market, and announced the outcomes of the capital allocation review we commenced in November 2016. Here are six things you should know about our financial results.
1. The numbers
On a reported basis from continuing operations our Total Income increased 4.3 per cent to $28.2 billion, and our Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) increased 2.0 per cent to $10.7 billion, and our basic earnings per share increased 2.8 per cent to 32.5 cents.
On a guidance basis total income increased 4.3 per and EBITDA increased 4.5 per cent to $11.2 billion. Our Free cash flow was $4.3 billion and our Net Profit After Tax (NPAT) from continuing operations increased 1.1 per cent to $3.9 billion.
2. Our FY17 dividend
Shareholders will receive a fully franked final dividend of 15.5 cents per share, bringing the total dividend for the financial year to 31.0 cents per share.
Combined with the $1.5 billion on and off market share buy-backs completed during the year we returned $5.2 billion to shareholders in FY17.
3. Our capital allocation strategy review
In November 2016 we announced that we would review our Capital Allocation Strategy, to look at the future of our balance sheet structure and settings, investment decisions, returns to shareholders including dividends, buy-backs and other forms of returns, and the best way to manage receipts from the nbn.
As a result of this review we will have a new dividend policy, which will commence in FY18, to move us away from a historical practice of paying out almost 100 per cent of profits. We will adopt an ordinary dividend payout ratio of 70 – 90 per cent of underlying earnings and return in the order of 75 per cent of net one off nbn receipts to shareholders over time through fully-franked special dividends.
We are also making changes to our capital management framework and potentially monetise a portion of locked-in recurring nbn receipts.
4. Customer growth
Our highest priority remains improving customer experience and we are pleased that our key customer measure, our Net Promoter Score, recovered strongly in the second half of the year.
We saw continued customer growth, with 218,000 additional retail mobile services (including 169,000 postpaid handheld services) and 132,000 new domestic retail fixed broadband customers.
Our nbn connections increased to 1,176,000, bringing our total market share to 52 per cent (excluding-satellite customers).
Almost 90 per cent of our retail fixed broadband customers are now on a bundle, with 224,000 adds on the back of the popular ‘Best Bundle Ever’ and ‘Hottest Entertainment Bundle’.
5. Our products
In FY17 we are able to offer our customers great services and products including:
The Telstra Live Pass™ which lets customers watch every AFL, NRL and National Netball game live, fast and data-free. Live Pass now has 1.45 million subscribers.
The Netgear Nighthawk M1, Australia’s fastest mobile hotspot, developed in partnership with Netgear, Qualcomm and Ericsson.
Telstra TV®, with 827,000 devices in market and a growing number of apps including Netflix, BigPond Movies, Stan, Foxtel Now and Yupp TV.
The Telstra Gateway Frontier™® hybrid modem, designed to get customers connected sooner using our mobile network while we complete a fixed network installation or migration to the nbn network.
During the year we announced our intention to invest up to an additional $3 billion over the next three years. So far we’ve focused that investment predominantly on our network, investing around $750 million since November.
This means we’ve been able to:
Doubled the download speed capability of standard 4G for 89 per cent of the population
Prepared for 5G trials early in 2018
Rolling out of Cat M1 capability across the 4GX coverage footprint, opening the country for the Internet of Things
Commenced the rollout of the next generation optical fibre transmission network.
For more information on these points and the rest of our financial results, please visit Investor Relations.
You can watch a livestream of our results presentation from 9:15AM AEST on Thursday 17 August. You’ll also be able to read our media releases, letter to shareholders, and other material.
 Excluding finance income.
 This guidance assumed wholesale product price stability and no impairments to investments, and excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The guidance also assumed the nbn rollout was in accordance with the nbn Corporate Plan 2016. Capex to sales guidance excluded externally funded capex. Guidance excluded the Ooyala impairment in FY16 and restructuring costs in FY17.
 Underlying earnings is defined as NPAT from continuing operations excluding net one off nbn DA receipts less nbn cost to connect less tax.
 “Net one-off NBN receipts” is defined as NBN one off receipts (consisting of PSAA receipts and Infrastructure Ownership receipts) less nbn cost to connect less tax.
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