Financial Results | Telstra News |

Our HY22 financial results show we’re continuing our growth journey

By Telstra News February 17, 2022

Today’s results show how we’re delivering for our customers, shareholders and our employees. As the nation relies on digital connectivity more than ever, we’re well placed to deliver the infrastructure, technology and security needed for Australia’s aspiration to become a world leading digital economy.

We’ve built on the success of our FY21 results, recording a second consecutive half of underlying growth. We’re seeing strong performance from our business, and we’re making investments in our network and new businesses all while maintaining a strong focus on taking cost out of our operations.

Improving the experience for our customers

We’ve now transferred 100 licensee stores to the Telstra owned store network and we’re on track to have all consumer and small business calls answered in Australia by the end of this financial year.

We now have more than four million customers signed up to Telstra Plus – our loyalty program that gives members access to special offers on tech and even concert tickets.

And the Telecommunications Industry Ombudsman reported Telstra complaints in the last quarter of 2021 had fallen by half compared to the same quarter the year before.

Delivering for our shareholders

The Telstra Board has resolved to pay a fully franked interim dividend of 8 cents per share, comprising a 6 cent ordinary and 2 cent special dividend, that will return around $940 million to shareholders. Thanks for supporting us.

Here’s the numbers

On a reported basis, total income for the half decreased 9.4 per cent to $10.9 billion and EBITDA was $3.5 billion, down 14.8 per cent. NPAT decreased by 34 per cent to $0.7 billion, and earnings per share was down 35.9 per cent to 5.9 cents. Income was down due to declines in one off nbn receipts and one-off gains last year from the sale of our Velocity and South Brisbane exchange assets, as well as the sale and lease back of our Pitt St exchange.

Underlying EBITDA 1 increased 5.1 per cent to $3.5 billion, demonstrating the positive momentum in Telstra’s core business, with mobiles performance reinforcing our clear leadership in 5G.

Underlying earnings per share 2 was up 55 per cent to 6.2 cents. This growth represents a strong start against Telstra’s T25 ambition for underlying EPS target of high teens CAGR from FY21 to FY25.

Kicking off T25

We know our T25 plan for growth wasn’t supposed to start until July 1, but we’re getting ahead of the game. This month we announced two major telecommunications infrastructure projects – Viasat and the national fibre build – to support the nation’s digital economy and enable unprecedented levels of connectivity across Australia.

Telstra Energy received its final license approvals for Victoria In December. This adds to earlier licences in Queensland, New South Wales, and South Australia, and we’re now trialling the product with our first customers.

In November we announced our intent to form a new joint venture to bring together Quantium’s market-leading data science and AI capabilities with our customer, product and network data assets. This unique partnership is a key enabler for our T25 data and AI ambitions.

And Telstra Health reported a strong half and last month was selected to deliver 1800RESPECT for an initial five years at an estimated contract value of around $200 million.

Thank you

These results haven’t happened by themselves – they have happened because the hard work of every Telstra employee and the support of our shareholders.

Despite the many challenges over the past few years, we have built the capabilities we need to take advantage of the opportunities ahead, and Telstra today is a fundamentally differently business to what it was when we started T22.

Things you need to know

1. Underlying EBITDA excludes net one-off nbn DA receipts less nbn net C2C and guidance adjustments (guidance adjustments defined in footnote 3). FY20/21 underlying EBITDA also includes depreciation of mobile lease right-of-use assets.

2. Calculated as Profit After Tax after Minority Interests (PATMI) attributable to each share, excluding net one-off nbn receipts and guidance adjustments (guidance adjustments defined in footnote 3).

3. This guidance excludes material one-offs, such as mergers and acquisitions, disposals, impairments, spectrum, restructuring costs and such other items as determined by the Board and management. Refer to half year results and operations review – guidance vs reported results reconciliation which details the adjustments made for the current and comparative period to reflect performance on the basis on which we provided guidance to the market for FY22 (set out in our ASX announcement titled “Telstra Corporation Limited – Financial results for the half-year ended 31 December 2021” lodged with the ASX on 17 February 2022)​.

Financial Results | Telstra News |

Our FY21 financial results show our plan for the future is paying off

By Telstra News August 12, 2021

2021 was a significant year for Telstra, building momentum against our financial aspirations and tracking towards a return to full-year growth in FY22. We’ve achieved what we said we would deliver in transforming our organisation, we see green shoots in our growth businesses, and we have the capabilities in place to take advantage of the opportunities ahead.

We’re positioned for growth

We’re maintaining the momentum that’s been delivered by our T22 strategy and we expect our business to return to full year growth in FY22.

Our balance sheet remains strong, we’ve paid down debt, retained our A band credit rating and monetised more than $2 billion of assets.

We’re now in the final year of our four-year T22 strategy and the bold decisions we have taken to transform the business for the future have paid off.

More than just a telco

We’ve been on a journey to be more than just Australia’s leading telco. That’s why we’re focused on growing a number of other businesses in our portfolio.

Telstra Health recorded a six per cent increase in revenue and is expected to see revenue growth of high teens in FY22. Telstra Ventures is now one of the most successful corporate backed venture firms globally and we’ve seen our investment increased by almost $300 million. And we’re making progress on Telstra Energy’s entering the retail energy market.

Maintaining our 5G leadership and network strength

Our competitors like to talk up their 5G networks, but they’re not in the same class. Our 5G network is now more than twice the size of our nearest competitor.

We’ve rolled out 5G to more than 200 cities and towns in selected areas right across Australia. More than 75 per cent of the country’s population is now covered by 5G and around 1.6 million 5G devices are connected to the Telstra network.

Improving the experience of our customers

We have 8.8 million services on our new 20 simplified fixed and postpaid mobile Consumer and Business plans. These plans offer no lock in contracts and give customers the flexibility move between plans to suit their budget and needs.

More than 73 per cent of all service interactions are now handled through our digital channels and we’re on track to have all in-bound calls from our Consumer and Small Business customers answered in Australia by June next year.

Keeping an eye on costs

We’ve reduced operating expenses by more than 10 per cent for the year and fixed costs declined by $490 million. Since FY 16, we’ve achieved around $2.3 billion worth of net productivity gains and are on track to meet our target of delivering $2.7 billion by the end of FY22.

Here’s the numbers

On a reported basis Total Income1 decreased 11.6 per cent for the year to $23.1 billion. NPAT increased 3.4 per cent to $1.9 billion.

Reported EBITDA decreased 14.2 per cent to $7.6 billion. After adjusting for lease accounting on a like-for-like basis, EBITDA decreased 11.5 per cent to $7.4 billion.

On a guidance basis2 Underlying EBITDA decreased 9.7 per cent to $6.7 billion. Underlying EBITDA included an in-year NBN headwind3 of $650 million and an estimated $380 million financial impact from COVID. Excluding the in-year NBN headwind, underlying EBITDA in the year declined by approximately $70 million.

Delivering for shareholders

Shareholders will receive a fully-franked final dividend of 8 cents per share, including an ordinary dividend of 5 cents, and a special dividend of 3 cents. This brings the total dividend for the year to 16 cents per share, returning approximately $1.9 billion to shareholders.

We’ll also be returning up to $1.35 billion of the net cash proceeds from our recently announced Telstra InfraCo Towers transaction to shareholders in FY22 after receipt of proceeds upon completion of the transaction via an on-market share buy-back.

Restructure progress

We continue to make progress towards implementing the proposed corporate restructure of our organisation. It’s complex and involves the creation of separate subsidiaries and we continue to work very closely with our partners, our people and stakeholders throughout this process as we navigate the range of existing commercial, regulatory, and operational requirements.

We expect the restructure to be undertaken by way of scheme of arrangement. While it had been our intention to seek shareholder approval of the scheme at this year’s AGM on 12 October, we’re now aiming to do so at a separate general meeting before the end of the year.

So what’s next?

In FY224 we expect our underlying business to return to full-year growth with:

  • Total Income of $21.6 billion to $23.6 billion.
  • Underlying EBITDA5 of $7.0 billion to $7.3 billion.
  • Capex6 of $2.8 billion to $3.0 billion.
  • Free cashflow after lease payments (FCFal)7 of $3.5 billion to $3.9 billion.

And on September 16 we’ll tell the market about our plan for the future beyond our T22 strategy focusing on growth and leveraging the strong foundation we have built.

1. Total income excluding finance income.
2. FY21 guidance assumed no impairments in and to investments or non-current tangible and intangible assets, and excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum, and excluded the impacts of Pitt St exchange sale and leaseback. The guidance was based on management best estimates of nbn impacts including input from the nbn Corporate Plan currently published at time of issue of this guidance. Refer to Full-year results and operations review – guidance vs reported results reconciliation (set out in our ASX announcement titled “Financial results for the full year ended 30 June 2021” lodged with the ASX on 12 August 2021).
3. In-year nbn headwind defined as the net negative recurring EBITDA impact of the nbn on our business for the reporting period.
4. FY22 guidance excludes material one-offs, such as mergers and acquisitions, disposals, impairments, spectrum, restructuring costs and such other items as determined by the Board and management.
5. Underlying EBITDA excludes net one-off nbn DA receipts less nbn net C2C and guidance adjustments. FY20/21 underlying EBITDA also includes depreciation of mobile lease right-of-use assets.
6. Capex is measured on an accrued basis and excludes spectrum and guidance adjustments, externally funded capex, and capitalised leases.
7. Free cashflow after lease payments defined as ‘operating cash flows’ less ‘investing cash flows’ less ‘payments for lease liabilities’, and excludes spectrum and guidance adjustments.

Telstra News |

Say hello to the new Telstra store network

By Michael Ackland February 11, 2021

It’s fair to say Australians are embracing digital technology like never before. We can order dinner or have a consultation with a GP wherever we are, and we’re pretty used to having virtual meetings from our phones.

It’s also becoming the predominant way our customers interact with us.

Two years ago, around 43 per cent of service transactions (things like checking your data or paying a bill) were made across our digital channels. Now that’s risen to more than 70 per cent.

And we expect that to continue as we’re recording almost five million transaction on our digital channels every month.

Growing this capability is part of our T22 strategy. But we know there’s still times when you prefer to get help face to face and that’s why our physical retail stores will continue to be a critical part of how we serve our customers.

Today when you enter your local Telstra store (and we have more than 300 across the country), you may not realise that some of our stores are owned by Telstra and some are operated under a licensee agreement.

This is a model that has served us and our customers well for many years, but the way customers shop with us and how they will interact with retail stores in the future is changing.

This is why today we’ve announced that it’s our intention to move to full Telstra ownership of all our retail branded stores.

This change means we will be able to deliver a more consistent offering no matter which store you visit.

It also gives us the flexibility to better serve you if things change quickly. At the height of the COVID-19 pandemic when we needed to close our stores and had major impacts to our contact centres internationally, our employees in Telstra owned stores were able to quickly pivot to assist customers online and on the phone.

Ideally, we would be able to do this across our entire retail branded store network should something like this happen again.

It gives us flexibility and means we can further embed our responsible business practices by having more direct engagement with employees.

We know how important the local Telstra store is for many people, particularly in remote and regional areas and our commitment to those customers doesn’t change.

It’s making sure we continue what our customers value, and that’s locals helping locals.

Our intention is to offer employment to a majority of current store team members where individual licensees agree a transition with Telstra, and that means you can expect to see the same familiar friendly faces when you’re visiting a Telstra store across our network from Bunbury to Ballarat.

Financial Results | Telstra News |

Building momentum towards growth: what you need to know about our half-year 2021 financial results

By Telstra News February 11, 2021

Telstra’s financial results for the first half of FY2021 show us building momentum towards growth in our underlying business.

Here’s what you need to know about our financial results for HY21.

Building momentum and maintaining our dividend

On a reported basis Total Income(1) for the half decreased 10.4 per cent versus the prior corresponding period to $12.0 billion, while NPAT decreased 2.2 per cent to $1.1 billion.

Reported EBITDA decreased 14.7 per cent to $4.1 billion. After adjusting for lease accounting on a like-for-like basis(2), EBITDA decreased 11.7 per cent to $4.0 billion.

Underlying EBITDA decreased 14.2 per cent to $3.3 billion. The largest two contributors to this decline were the estimated impact from the in-year nbn headwind of $370 million and estimated $170 million impact from COVID-19. Excluding these impacts, underlying EBITDA was broadly flat compared to the first half of FY20.

These results show our financial performance at a turning point ahead of an anticipated return to growth in underlying EBITDA. “After a decade of disruption following the creation of the nbn, and with its rollout now declared complete, we can clearly see the path to underlying growth ahead of us,” said CEO Andrew Penn.

“To ensure our future success, we must recognise this moment for what it is – the time to be bold and seize the opportunities we have been patiently building towards. There is a lot of work ahead of us, but I remain confident we can achieve our financial ambitions including for underlying EBITDA of between $7.5 and $8.5 billion and ROIC of around 8 per cent by FY23,” said Mr Penn.

The Board resolved to pay a fully-franked interim dividend of 8 cents per share, returning approximately $950 million to Telstra’s shareholders. The Board also said it expected to pay a fully-franked final dividend of 8 cents per share, bringing the total dividend for FY21 to 16 cents per share(3).

Our mobile strategy is continuing to deliver growth

During the half, we added more than 80,000 postpaid handheld mobile services, with a healthy performance across all segments and brands. We also added more than 46,000 unique prepaid handheld users, and more than 163,000 wholesale mobile services across prepaid, postpaid and IoT services.

“The financial performance of our mobile business has reached an exciting turning point with EBITDA growing sequentially in 1H21. Our investment in world-leading 5G means we are able to offer our customers a combination of speed, capacity and coverage that is far superior to our competitors. We remain confident that mobile EBITDA will continue growing sequentially in 2H21 and return to full-year growth this financial year,” said Mr Penn.

We have continued to extend our leadership in 5G, with our network expanding to cover more than 50 per cent of the Australian population and with coverage in more than 100 cities and towns across the country. There are now around one million 5G mobile devices connected to our network, and we also recently achieved a world-first with a download speed of greater than 5Gbps on a commercial network using mmWave spectrum.

We’re on track with our T22 transformation strategy

We’re now less than 18 months from completing our T22 transformation, and more than 80 per cent of milestones on that strategy are now delivered or are on track to be delivered.

“Our discipline in delivering T22 has brought enormous change for Telstra which is supporting the turnaround of the company. Having said that, the hardest part of any transformation is often seeing it through to the end, and we have more to do in customer experience in particular,” said Mr Penn.

“I am confident that the many initiatives we have taken under our T22 program, particularly in simplifying the business and the digitisation program, will further improve customer experience. But I know not all aspects of our customer experience are where we need them to be and we have more work to do.“

“To get the real benefits from all the effort we’ve already made, we need to be bold. I’ve set an aspiration(4) for mid to high single-digit growth in underlying EBITDA in FY22 and $7.5 to $8.5 billion of underlying EBITDA in FY23. I am confident we can deliver this if we remain focused,” said Mr Penn.

During the half, Consumer & Small Business digital sales increased to account for 40 per cent of our transactions, while over 70 per cent of service interactions happened digitally. Telstra Enterprise reduced its number of active products by 45 per cent compared to FY18, and launched Adaptive Mobility to give customers more flexibility.

We’ve also continued to make progress on our productivity target, reducing underlying fixed costs by a further $201 million and increasing productivity targets to $450 million in FY21 and from $2.5 billion to $2.7 billion by the end of FY22. Around $2 billion has already been delivered under this program.

Progressing our legal restructure

The proposed legal restructure of the Telstra group of companies into three separate entities – InfraCo Fixed, InfraCo Towers and ServeCo – is well underway since we updated the market in November 2020. The restructure will drive greater transparency, increase focus across our

operating businesses, create a platform for growth and innovation, and enable long term valuation realisation from our infrastructure businesses.

We expect to complete the Group restructure by the end of calendar year 2021, subject to any requisite approvals. We’ll share a further update on our progress in March 2021.

Updating our approach to retail

We’ve announced our intention today to transition to full ownership for all of our branded retail stores across Australia, to enable us to keep pace with the growing digital economy and to provide greater flexibility to respond consistently to customer needs.

Currently, we own and operate over 60 Telstra stores, with another 166 branded stores run by individual licensees and a further 104 stores operated by Vita Group Limited. Vita Group and individual licensees are being notified of the plan with discussions and transition arrangements expected to progress over the coming months.

Looking forward to the year ahead

We have also today issued revised financial guidance for several aspects of FY21 that were first announced at our FY20 results briefing on 13 August 2020.

The range for Total Income was adjusted from $23.2 billion – $25.1 billion to $22.6 billion – $23.2 billion, a $1.2 billion reduction at the mid-point from prior guidance. The large majority of the change was due to low-margin hardware and other equipment sales.

We also provided guidance for second half Underlying EBITDA in the range of $3.3 billion – $3.6 billion, compared to $3.3 billion in the first half. Flowing this to the full year means the range for Underlying EBITDA was narrowed from $6.5 billion – $7 billion to be $6.6 billion – $6.9 billion.

The Underlying EBITDA guidance assumes an in-year nbn headwind of approximately $700 million. The estimated COVID-19 impact in FY21 was unchanged at approximately $400 million.

The guidance range for Free cashflow after operating lease payments was increased from $2.8 billion – $3.3 billion to $3.3 billion – $3.7 billion, up $450 million at the mid-point, due to working capital management and the impact of lower hardware revenue.

We expect to be at the low-end of the net nbn one-offs range due to factors including NBN Co’s decision to pause HFC-based connections of new customers.

Guidance for Capex remains unchanged from the disclosures made at our FY20 results briefing on 13 August 2020.

Things you need to know

(1) Total income excluding finance income.

(2) Reported lease adjusted EBITDA includes all mobile handset leases as operating expenses, and all rent/other leases below EBITDA.

(3) Any return is subject to no unexpected material events, Board discretion having regard to financial and market conditions and maintenance of financial strength and flexibility consistent with Telstra’s capital management framework.

(4) While we do not provide financial guidance beyond the current financial year, our Board and management team understands the importance of achieving EBITDA in this range and the actions required to deliver it. Telstra’s ambition for its Underlying EBITDA in FY22 and FY23 is not guidance and there are greater risks and uncertainties in connection with this ambition.

Financial Results | T22 | Telstra News |

A transformative and challenging year: what you need to know about our 2020 financial results

By Telstra News August 13, 2020

“2020 is proving to be an enormously challenging year for everyone – for governments, businesses, communities, and for all of us as individuals. The emotional, mental and economic stresses as a result of the COVID-19 pandemic and necessary restrictions are profound.

“Through this extraordinary disruption – both the COVID-19 and bushfire crises – Telstra was challenged to adapt, to find new ways of supporting our customers, our people and the country in a time of need. I am very proud of the way our team responded, while dealing with the implications on themselves personally.

“The COVID-19 period has also highlighted that connectivity has never been more critical. We have witnessed a huge acceleration in the digital economy, an area now critical to fast economic recovery where Telstra has a key role to play. The reasons we introduced T22 two years ago – a need to rapidly simplify and digitise, to remove customer pain points, to remove legacy systems and processes – have never been more relevant and necessary.

“Importantly, it says a lot about the strength of our business and strategy that through all this we were able to meet guidance, maintain the dividend and provide guidance for the year ahead. We have also retained our strong balance sheet and A-band credit ratings.”

– Andrew Penn, CEO

Here’s what you need to know about Telstra’s financial results for FY20.

Meeting our financial guidance and market expectations, and maintaining our dividend

On a reported basis Total Income(1) for the year decreased 5.9 per cent to $26.2 billion and NPAT decreased 14.4 per cent to 1.8 billion. Reported EBITDA was $8.9 billion. After adjusting for lease accounting on a like-for-like-basis(2), EBITDA decreased 0.3 per cent to $8.4 billion.

On a guidance basis(3), underlying EBITDA declined 9.7 per cent to $7.4 billion. Excluding the in-year nbn headwind(4) – which gives the clearest view of the long-term business – underlying EBITDA grew by approximately $40 million, with growth in the first half of the year offset by a second half decline.

The Board resolved to pay a fully-franked final dividend of 8 cents per share, comprising a final ordinary dividend of 5 cents per share and a final special dividend of 3 cents per share – bringing the total dividend for FY20 to 16 cents a share. This will see $1.9 billion returned to Telstra shareholders for the year.

Good progress at the midway point of our T22 strategy

“T22 remains our biggest focus and the things we set out to achieve when we launched the strategy – radically simplify and digitise, remove customer pain points, remove legacy systems and processes – remain just as relevant as the day they were announced. We are now past the halfway point in delivering T22, and while we expect to see challenging conditions continue in FY21, our strategy means we’re well-positioned to respond to whatever lies ahead.”

– Andrew Penn, CEO

Nearly three-quarters of the measures we use to measure progress against our T22 strategy are either now completed or on track for delivery. Highlights from the most recent year of our transformation journey include the early success of Telstra Plus and the My Telstra app and rapid movement on digitising our business to meet future demands.

Telstra Plus, our rewards program for customers, has passed one year in operation and 4.3 billion points have already been redeemed for discounts on devices, accessories and more. More than two million customers have already joined Telstra Plus – a milestone that was achieved ahead of schedule. We also launched Telstra Plus for small and medium businesses to reward our business customers who continue to choose us for their needs.

The My Telstra app, which replaced our 24×7 app and has already been downloaded 3.7 million times, gives our customers a new two-way in-app messaging service for customer service enquiries. It also tracks orders, shows outages and faults in your area, and provides easy access to billing and payment options. The success of the app contributed to a growth in digital engagement, accelerated by the impacts of the COVID-19 pandemic – over 71 per cent of our service transactions happened via digital channels, up from 53 per cent at the end of FY19.

“This acceleration to digital channels and the workforce capacity challenges we have faced offshore have also provoked our thinking on our customer service model for the future. As a consequence, we will be investing even more in digital including messaging.

“Under our T22 strategy, our aspiration had been to reduce the number of calls to our call centres by two thirds by FY22, and we are very close to that run rate now. This means that over time we will need a smaller call centre workforce for our consumer and small business customers, and our aspiration is that by the end of our T22 program all in-bound calls from these customers will be answered in Australia. Today we are already at more than 60 per cent.”

– Andrew Penn, CEO

Continuing to lead and progress on 5G, and strong growth in numbers of mobile services

We know that 5G will shape the 2020s. More than 10 million people now live, work or pass through the 53 cities and towns in our 5G footprint every day, and approximately a third of Australia’s population is covered with 5G. We’ve exceeded our FY20 target of deploying 5G in 35 cities, and we are the clear leader in 5G in Australia as well as being at the forefront globally.

In FY20 we also invested in extending our network to provide more coverage in regional and remote areas, including deploying a world-first technology that effectively doubled the range of a 4G mobile base station increasing it to up to 200km, as well as deploying a technology that extended the range of our NB-IOT coverage to nearly four million square kilometres across the country. In the five years to end of June this year, we have invested $7.5 billion in our network, with $3 billion of that invested in regional areas alone.

“Earlier this year we decided to bring forward $500 million of capital expenditure planned for the second half of FY21 into calendar year 2020. This is enabling us to accelerate our 5G rollout further while injecting much-needed investment into the economy. As a result, late last month I announced that we have increased our ambition and plan to cover 75 per cent of the population with our 5G network by June next year.”

– Andrew Penn, CEO

We continued to grow our customer base in FY20. At the end of June, we announced refreshed plans for mobile customers that included increased data allowances and saw 5G included on most plans. Our multi-brand strategy delivered subscriber growth, adding 240,000 retail postpaid handheld mobile services including 154,000 from Belong. We also added 171,000 retail prepaid handheld unique users, 347,000 wholesale services, and 652,000 IoT services. Overall mobile revenue declined $461 million in FY20. Reported postpaid handheld ARPU declined 8.2 per cent, or 6.8 per cent excluding the impact of COVID-19 on international roaming.

In our fixed business, revenue continued to be impacted by nbn migration alongside the continued decline of voice and legacy services and operational issues. We continued our market-leading share with 46 per cent of the estimated nbn market excluding satellite through a focus on differentiated customer experiences like our award-winning Telstra Smart Modem.

“nbn wholesale pricing remains the largest negative impact on our fixed business. Without some sort of long-term change leading to improvement in RSP economics, the risk of retail price increases, reduced customer experience or customers moving onto other networks such as 5G will increase. In Telstra’s case the profitability of reselling the nbn is negligible at best – that is not sustainable.

“Notwithstanding these comments I do want to acknowledge and applaud nbn’s response to COVID. nbn acted swiftly to increase capacity to RSPs during this time at no charge enabling RSPs to support their customers as they moved quickly to work and study from home.”

– Andrew Penn, CEO

Reducing underlying fixed costs in our business

During the year we reduced underlying fixed costs(5) by $615 million or 9.2 per cent, bringing underlying fixed cost reductions achieved since FY16 to $1.8 billion. This puts us on track to achieve our $2.5 billion net cost reduction target in FY22.

Since we launched T22 in June 2018, we have announced 12,000 indirect role reductions and 7,300 direct workforce role reductions. At the end of June 2020, the direct workforce was around 5,700 lower than two years ago – this figure includes 1,600 new roles recruited in areas like software engineering and cyber security and some roles brought on board in response to COVID-19.

“In March we put all job reductions on hold for six months to give our people certainty during this difficult time. As we approach the end of that pause, it is clear that the impacts of COVID-19 will be with us for some time.

“We have therefore made the decision to keep our T22 productivity role reductions on hold for permanent Telstra employees in Australia and internationally until February next year. We know many are doing it tough at the moment, and we hope this decision will give some certainty to our people in what is a very challenging time for Australia – and many of the countries in which we operate.”

– Andrew Penn, CEO

Taking decisive action on COVID-19

In March, we provided employees with pandemic leave, shifted our office-based workers to working from home, and put further job reduction announcements on hold. We also put assistance measures in place for customers, helped small businesses shift online or go into hibernation, recruited temporary employees for customer service roles in Australia, and extended all sponsorship agreements that would have expired during 2020. We estimate the financial impact of COVID-19 during FY20 was approximately $200 million in underlying EBITDA.

“The enormous, ongoing disruption and pain caused by the COVID-19 pandemic has made the past few months extraordinarily challenging for everyone. However, we have been thoughtful about the best ways we can make a difference and have taken strong and decisive action to support our employees, our customers, and the community.”

– Andrew Penn, CEO

Leading the way as a responsible business

Through 2020 we have battled devastating bushfires and the COVID-19 pandemic as a country, and we have stepped up to support the community in many ways. During the bushfires, we provided critical infrastructure for emergency services and community evacuation centres, answered more than 55,000 calls from customers making enquiries and seeking support, and paid the mobile phone bills of around 10,000 firefighters and SES volunteers over December and January. Telstra also provided free access to our nationwide payphone network and Telstra Air Wi-Fi hotspots. These investments in supporting customers and restoring bushfire damage to infrastructure will amount to $44 million across FY20 and FY21.

During the year, we became carbon neutral in our operations and Belong became carbon neutral in its products and services, while we also made progress on our commitment to sourcing 100 per cent renewable energy by 2025 and reducing absolute emissions by 50 per cent by 2030. To be a responsible business means taking meaningful action, and climate change is a perfect example of where we can think deeply about the role business should play in society.

This period of COVID-19 has provided a chance to experience our world as a quieter environment and under clearer skies. If ever there was encouragement for bolder and more significant action on climate it is now.

Telstra is currently cooperating with the Australian Competition and Consumer Commission (ACCC) as they conduct an investigation into Telstra’s sales, complaint handling and debt collection practices, to determine whether there has been misleading or deceptive conduct, unconscionable conduct, or false or misleading representations. Having considered all the information available, Telstra has made a provision of $50 million in its FY20 accounts for any penalties.

“I strongly believe that being a responsible business – supporting our people, customers and the economy – creates long-term value for shareholders. Central to this is how we live up to our organisational purpose and values, not just what is in our contracts. Despite our aspirations and hard work, we know we don’t always get things right. Our practices have also let down some of our customers in Indigenous communities. The lessons we are learning from this are helping us re-define our understanding of what responsible business looks like and we must hold ourselves accountable to these standards.”

– Andrew Penn, CEO

Looking ahead to FY21

Telstra provided financial guidance for FY21 on a range of metrics(6). For FY21 Total Income is expected to be in the range of $23.2 to $25.1 billion, underlying EBITDA in the range of $6.5 to $7.0 billion, net one-off nbn DA receipts (less nbn net cost to connect (C2C)) in the range of $0.7 to $1.0 billion, capital expenditure of $2.8 to $3.2 billion, and free cashflow after operating lease payments of $2.8 to $3.3 billion. The in-year nbn headwind for FY21 is expected to have a negative impact on underlying EBITDA of approximately $700 million. To achieve growth excluding the in-year nbn headwind in FY21, underlying EBITDA will need to be around the mid-point of the guidance range. Guidance for FY21 underlying EBITA assumes an estimated negative impact from the COVID-19 pandemic in FY21 of approximately $400 million.

Telstra also adjusted its T22 target for Return on Invested Capital (ROIC) to be greater than 7 per cent by FY23. Several things have changed since we set our ROIC ambition as part of the launch of our T22 strategy. We have experienced deeper competition across products and slower return to growth, especially in mobile. In addition, AASB16 was implemented resulting in a 1 percentage point reduction in ROIC, which previously caused us to push out our target by a year. In this same period our Weighted Average Cost of Capital (WACC) has also reduced by approximately 1.5 percentage points. We have invested, and will continue to invest, for long-term returns and opportunities, especially in mobile and our T22 strategy, the benefits of which will be realised over time. Our long-term ambition is to grow ROIC.

More information on our financial results is available on our Investor Relations website.

Things you need to know

(1) Excluding finance income.

(2) Reported lease adjusted EBITDA includes all mobile handset leases as operating expenses, and all rent/other leases below EBITDA.

(3) FY20 guidance assumed wholesale product price stability and no impairments in and to investments or property, plant and equipment and intangible assets, and excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The guidance also assumed the nbn rollout and migration in FY20 was broadly in accordance with the nbn Corporate Plan 2020. Guidance was provided on the basis of AASB16 Leases and assumed impacts consistent with management estimates. Capex was measured on an accrued basis and excluded expenditure on spectrum and externally funded capex and capitalised leases under AASB16 Leases. Underlying EBITDA excludes net one-off nbn DA receipts less nbn net C2C, one-off restructuring costs and guidance adjustments but includes depreciation of mobile lease right-of-use assets. In-year nbn headwind is defined as the net negative recurring EBITDA impact on our business based on management best estimates including key input of the nbn Corporate Plan 2020.

(4) See note 3. As at 30 June 2020, the in-year nbn headwind was ~$830 million.

(5) Underlying fixed costs excludes one-off nbn DA and nbn net C2C, one-off restructuring costs and guidance adjustments.

(6) FY21 guidance assumes no impairments in and to investments or non-current tangible and intangible assets, and excludes any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The guidance is based on management best estimates of nbn impacts including input from the nbn Corporate Plan currently published at time of issue of this guidance. Total income excludes finance income. Underlying EBITDA excludes net one-off nbn DA receipts less nbn net C2C, one-off restructuring costs and guidance adjustments but includes depreciation of mobile lease right-of-use assets. Guidance for FY21 underlying EBITDA assumes an estimated negative impact from the COVID-19 pandemic in FY21 of approximately $400 million. This estimate is approximately $200 million greater than the estimated negative impact from the COVID-19 pandemic for FY20 underlying EBITDA. In-year nbn headwind is defined as the net negative recurring EBITDA impact on our business. Capex is measured on an accrued basis and excludes spectrum and guidance adjustments, externally funded capex, and capitalised leases. Free cashflow is defined as ‘operating cash flows’ less ‘investing cash flows’ less ‘payments for operating lease liabilities’ and excludes spectrum and guidance adjustments.