Telstra Annual
Report 2021
telstra.com/investor
We believe it’s people who give
purpose to our technology
So we’re committed to staying close
to our customers and providing
them the best experience
And delivering the best tech
On the best network
Because our purpose is to build
a connected future so everyone
can thrive
Our values
We are changemakers
We are better together
We care
We make it simple
We think big, set ambitious
goals and deliver them – for our
customers, shareholders and
communities. By speaking up,
being curious to learn and valuing
different perspectives we
challenge the status quo and
make change.
We’re one team and embrace the
value each of us bring. Our (super)
power lies in working together to
deliver for our customers. We’re
each accountable for our actions
and do what we say we’re going
to do.
We show care in all that we
do. We do the right thing
for our customers, our
communities, the planet,
ourselves and each other –
even when no one’s watching.
What we do is complex, but we
always make things simple for our
customers and each other. Simple
doesn’t necessarily mean quick.
We keep the simple, simple.
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Our 2021 reporting suite
We take our reporting
obligations seriously
and we provide concise
and up to date
information about
your company online.
In 2021 this information
includes our Annual
Report, our Corporate
Governance Statement
and our Bigger Picture
Sustainability Report.
Our 2021 Annual Report
Our Annual Report describes our
strategy, financial performance and
remuneration practices. The sections
of our Annual Report titled Chairman
and CEO message, Strategy and
performance, Our material risks,
Outlook, and Full year results and
operations review comprise our
operating and financial review (OFR)
and form part of the Directors’ report.
Our OFR, Directors’ report and Financial
report were released to the ASX on
12 August 2021 in the document titled
‘Financial results for the year ended
30 June 2021’ which is available at
telstra.com/investor.
Telstra Corporation Limited
ABN 33 051 775 556
Our 2021 Corporate Governance
Statement
Our 2021 Corporate Governance
Statement (CGS) provides detailed
information about governance at
Telstra and together with our
2021 ASX Appendix 4G (which
cross references the ASX
Corporate Governance Principles
& Recommendations to information
in our CGS and on our website), is
available at telstra.com/governance.
Our Bigger Picture 2021
Sustainability Report
Our Bigger Picture 2021 Sustainability
Report, which provides an in-depth look
at Telstra’s approach and performance
in relation to our most material social
and environmental topics, is available
at telstra.com/sustainability/report.
Chairman and CEO message
Strategy and performance
• FY21 Financial performance
Our material risks
Outlook
Full year results and operations review
Board of Directors
Senior management team
Sustainability
Governance at Telstra
Directors’ Report
• Message from the People and Remuneration Committee Chairman
• Remuneration Report
Financial Report
• Financial statements
• Notes to the financial statements
• Directors’ declaration
Shareholder information
Reference tables
Glossary
Indicative financial calendar
Contact details
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Chairman
and CEO message
Chairman and CEO message | Telstra Annual Report 2021
A turning point
Our focus in FY22
The 2021 financial year was significant
for Telstra in that it was a turning point
in our financial performance. Every year
for the last four years we have had to
face the very real challenge of the
financial headwinds associated with
the transfer of a material part of our
business to the nbn. This has meant we
have started each of the last four years
with our EBITDA going backwards by
up to $800 million.
This was happening at the same time as
competition in the market was reducing
returns from both our fixed and mobile
businesses and technology disruption
and significant structural change were
re-shaping our industry. In many ways
these dynamics were the catalyst for
the launch of our T22 strategy in 2018
to radically transform the business, in
conjunction with a conviction about
how technology innovation was going
to continue to accelerate.
After a decade of disruption following
the creation of the nbn, we can now
clearly see the path to underlying
growth ahead. Our investment in
innovation and technology, digitisation
and networks, improving our customer
experience and being disciplined in our
capital management, mean that Telstra
is in a strong position to grow.
The financial results detailed in this
report show the turning point we
have reached and underscore our
commitment to delivering long-term
value for shareholders.
Given the status of our proposed
restructure and in order for us to
manage our ongoing continuous
disclosure obligations, we believe that
it is prudent to suspend the Dividend
Reinvestment Plan. Our intention is to
reinstate it when circumstances allow.
We know how important our dividend
is to shareholders and this year our
financial performance enabled the
Board to resolve 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. This
brings the total dividend for FY21 to
16 cents per share and means we
will directly return $1.9 billion to
shareholders for FY21.
So, what of the year ahead? We remain
fully committed to finishing the job
with T22 and that includes continuing
to improve the customer experience,
progressing our proposed restructure,
and extending our leadership in 5G.
No one is more committed to regional
connectivity than Telstra, and we’ll
continue to work with our customers,
partners, stakeholders and
governments to ensure regional
Australia benefits from the increasing
digitisation of our economy.
We remain focussed on growing the
core of our business as well as looking
for growth from exciting opportunities
in areas like health and energy. Telstra
Health has transformed substantially
over the past several years, leading to
a significant uplift in its capability and
its importance as part of our long-term
growth strategy. We want to complete
our work digitising and simplifying
our business and broadening our
new ways of working. All of this so we
can ultimately deliver on our financial
ambitions.
At the same time, we will also continue
to build on our work as a leading
responsible business.
As an iconic 150-year-old Australian
business, a key contributor to the
economy, a major employer, and a
significant user of resources we have
a responsibility to make contributions
to the betterment of society. That
means the obligations we have to our
customers should not just be defined
by the small print of our contracts
but by our purpose and values as an
organisation. It also means continuing
to take a leading position on key social
issues including climate change,
diversity, digital inclusion and working
to rebuild trust with First Nations
communities following inappropriate
sales practices by a small number of
our partner stores some years ago. We
encourage you to learn more about our
response to this issue, and our broader
approach to responsible business in
our 2021 Bigger Picture Sustainability
Report.
Great confidence in an
important year
As we move into FY22, we have
enormous confidence in our ability
to deliver our strategic ambitions.
We also look forward to sharing more
information about what comes after
T22 later in the year.
It is clear COVID-19 will remain with
us for some time but we will continue
to deal with the challenges this brings
and to play a leading role in the
interests of our people, our customers,
our shareholders and the economy.
The choices we are making and the
actions we are taking right now are
preparing Telstra to be the company
we need to be for the future.
Thank you
The Telstra Board and senior
management team would like to
sincerely thank you, our shareholders,
for your support during the year.
Thanks also to our millions of
customers for their ongoing support
because ultimately without them,
there would be no Telstra. Thank you
also to every Telstra employee for the
great job you have done in trying
circumstances and for your constant
willingness to step up and do what is
needed – for our business, our people,
our customers, our communities, our
country – and for each other.
Thank you for your continued support
of Telstra.
John P Mullen
Chairman
Andrew R Penn
Chief Executive Officer
and Managing Director
Dear Shareholders
Thank you for your continued support and investment in Telstra through a year where COVID-19
continued to have a profound effect on our lives, our society and the economy. All of us have been
impacted to some degree and we hope you and your families are in good health and are remaining
safe through the challenges of this unprecedented pandemic.
Through all of this Telstra has tried to set an example for our people, our customers and our country
as we all navigated through the challenging and largely uncharted waters.
Despite these extraordinary events, we maintained our operations and continued to deliver on an
ambitious strategy. Your business has performed well and we finished the year in a strong position.
We have many achievements to be proud of this year, including the progress we are making on our transformational T22 strategy.
As you will see, the many tangible benefits of T22 are now becoming clear and underpin our commitment to return the business to
underlying growth and position it for success in the future.
When we launched T22 we were very clear about the need to radically simplify and digitise our business, to remove customer pain
points, to remove legacy systems and processes, to introduce new Agile ways of working and to further extend our network
leadership including leading in 5G. In other words, to better prepare the business for the acceleration of the digital economy.
We have stayed absolutely disciplined and focused on delivering what we said we would, and three years into what has been one
of the largest and most ambitious transformations by a telco globally, we are now a vastly different company. We are extremely
well progressed and are on track to deliver our strategic objectives in the year ahead.
This includes our proposed legal restructure that will better position us to take advantage of opportunities as they arise and our
recent announcement of the proposed sale of 49 per cent of our InfraCo Towers business for $2.8 billion, of which approximately
50 per cent, or up to $1.35 billion, will be returned to shareholders during FY22 via an on-market share buy-back.
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CHAIRMAN & CEO MESSAGE Strategy &
performance
Strategy and performance | Telstra Annual Report 2021
FY21 Financial
performance
Total Income on a reported basis1
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
Underlying EBITDA on a guidance basis2
Net Profit After Tax (NPAT)
$23.1 billion
$7.6 billion
$6.7 billion
$1.9 billion
Total FY21 dividends 16 cents per share fully franked
$1.9 billion returned to shareholders
Maintained A-band credit ratings
$2.3 billion reduction in underlying fixed costs since FY16
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1. Total income excluding financial 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 the Reference table – guidance vs reported results on page 164.
STRATEGY & PERFORMANCE INCLUDING FY21 PERFORMANCE Strategy and performance | Telstra Annual Report 2021
Supporting our customers
While COVID-19 impacted our customer
experience, it provided us with the
opportunity to engage with our
customers in different ways. We scaled
our digital messaging channel, an
important change to the way our
customers interact with us. It allows
customers to contact us through the My
Telstra app to get the help they need
when it suits them.
We also made it easier for small business
customers to get connected to the nbn
network with dedicated connection
managers to take care of the process
end-to-end.
We know many customers value being
able to visit their local store. We
announced a plan to bring Telstra
licensee stores in-house, meaning we will
be able to offer a more consistent
customer experience across our online
channels and store network. We’ll be able
to respond more quickly to changing
customer needs and it means we will
have an increased number of frontline
team members who we can engage with
more directly.
We committed to answering all consumer
and small business inbound calls in
Australia by the end of FY22. This will
enable us to focus on customers who
call us for more complex issues while
supporting more customers to use
improved digital tools.
During the financial year we continued to
radically simplify our product offerings
and help create all digital experiences
with the launch of our first mobile and
fixed products on our new digital sales
platform. Customers on our new Upfront
Plans have no lock-in contracts, no
usage-based charges and automatic
monthly payments so each month they’ll
know exactly what they need to pay.
We made continued progress with the
digitisation of our business. This is not
just a game changer for our customers
but for our agents too as our new digital
platform allows them to have more
meaningful interaction with customers
with reduced provisioning times. For
example, our agents are able to enter
orders in less than five minutes when it
used to take almost three quarters of
an hour.
With the foundations of the new digital
platform complete, we are now focused
on the migration of existing services and
this will remain a focus in FY22.
In Enterprise, 28.1 per cent of our service
interactions were digital, up from 12.3
per cent the prior year.
Telstra Enterprise also focused on the
launch of new simplified product
portfolios and partnerships this year. One
example of how customers benefited
from simplified and flexible offerings was
with the launch of Adaptive Mobility and
Adaptive Networks solutions, providing
flexible plans, which allow them to
change or scale their services.
In New South Wales (NSW), students and
teachers at more than 2000 public
schools experienced the future of
education thanks to a big increase in
internet speeds being delivered through
an agreement between Telstra Enterprise
and the NSW Department of Education to
deliver high-speed fibre.
For many of us, the pace of change has never been faster. Even before COVID-19, digital
disruption meant that Telstra needed to act quickly and be bold. This disruption has created
challenges and opportunities for us, and for our customers.
The strong progress we’ve made on our ambitious T22 strategy means we are well-placed to
respond and lead in a world changed by the pandemic where digitised and contactless
experiences have become the norm, and reliable and secure connectivity is a priority.
Our continued progress on T22
Our T22 strategy was launched in 2018 and has four pillars:
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Radically simplify our product
offerings, eliminate customer
pain points and create all
digital experiences
Establish a standalone
infrastructure business unit
to drive performance and set
up optionality post the
nbn rollout
Greatly simplify our
structure and ways of
working to empower our
people and serve our
customers
Implement an industry
leading cost reduction
program and portfolio
management
The strategy leverages many of the significant capabilities that were already being built through our strategic investment of up
to $3 billion announced in 2016 in creating the Networks for the Future and digitising the business.
In FY21, we remained committed to
delivering against the strategy and the
hard work is paying off.
Our customers benefited from our ongoing
investment in world-leading technology,
helping to make things simpler and faster
when engaging with us.
Our people felt supported through a
difficult period. They adopted new ways
of working and a hybrid working model
which provided the flexibility to perform
at their best.
Our shareholders started to see the
tangible benefits of T22, as we made
clear the value of our world-class
infrastructure and financial strength,
with a commitment to return our
business to underlying growth.
T22 scorecard metrics as at FY21
Completed
On track for delivery
Progress but below target metric
Below target metric
At the end of the financial year, we had completed or were on track
to deliver around 80 per cent of our T22 scorecard metrics. We also
remained focused on progressing the other metrics as we close out
the strategy.
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STRATEGY & PERFORMANCE INCLUDING FY21 PERFORMANCE Over 3.5 million
Telstra Plus members
Telstra’s 5G footprint
covers 75 per cent
of the Australian population
More than
16,000 employees
now working in Agile teams
As more people found themselves looking
for entertainment at home, we expanded
our sports offering by partnering with
Kayo Sports to deliver a world-class
experience with more than 50 sports live
and on-demand, across multiple devices
and screens.
We continued to offer Australia’s best,
largest and most reliable mobile network.
We expanded our 5G footprint to cover 75
per cent of Australians where they live
and our 4G footprint to 99.5 per cent of
all Australians taking it to over 2.5 million
square kilometres.
We added even more value to our gaming
offerings with the new Xbox All Access
bundle, exclusive to Telstra, as well as
launching Game Optimiser to help
gamers prioritise gaming traffic in their
home and help curb lag spikes for a
better gaming experience.
To give some of our customers whose
fixed connection might not have been
capable of meeting their needs, we
launched 5G Home Internet, which we
saw deliver typical evening speeds
between 50Mbps to 600Mbps.
We continued to see strong support for
Telstra Plus, with 3.5 million enrolled
members who can now earn even more
rewards through our partnerships with
Booking.com and Huddle. We know that
customers who have joined Telstra Plus
are more satisfied with the services
they receive giving them more reasons
to stay with us.
Our technology leadership through
investment and innovation remained a
focus. We invested $277 million in 26Ghz
spectrum for mmWave 5G – a short-
range, high-frequency and very high-
capacity spectrum band that makes the
most of what 5G can do. In September we
used mmWave spectrum to achieve a
new network speed record achieving
peak download speeds of 4.2Gbps on a
5G mmWave data call.
This progress and other initiatives helped
deliver an overall increase in our strategic
Net Promoter Score (NPS) of seven points
against FY20, while episode NPS was up
nine points.
Empowering our people
For our people, continued progress on
T22 meant more than 16,000 employees
were working in Agile, an approach
that simplifies how we get things done.
It allows us to regularly review our
priorities and shift to meet changing
customer demands.
One example of our Agile workforce is our
Agents@Home program. What started as
a small pilot to see how our contact
centre team members could work from
home, scaled almost overnight as
COVID-19 took hold – and it’s
revolutionised our call centres, the way
we serve our customers, and the way our
contact centre team members work.
We now have 80 per cent of our contact
centre consultants in Australia choosing
to work from home on any given day –
and 100 per cent are able to do so.
We also completed the first ever
company-wide end-to-end planning
process that gives us a single view of all
the work we’ve prioritised for FY22 and
the people needed to complete it. It
means we can still deliver what’s needed
for customers and shareholders and
balance our workload to reduce excess
work pressure, especially when it comes
to quarterly planning.
Our employees remain highly engaged.
Our engagement result for FY21 came in
at 78 per cent and while this was five
points off our target of 83 per cent, we
have work underway to improve in areas
such as further simplifying our processes
and easing the workload for some of
our teams.
Strategy and performance | Telstra Annual Report 2021
Delivering for our shareholders
To unlock the true value of our
infrastructure, we reached a significant
agreement with a high calibre
consortium – comprising the Future
Fund, Commonwealth Superannuation
Corporation and Sunsuper – to sell 49
per cent of our InfraCo Towers business
for $2.8 billion.
We will retain 51 per cent ownership
and will still own the active parts of
our network, ensuring we can continue
to deliver the industry’s leading mobile
coverage and maintain our network
leadership.
Approximately 50 per cent, or up to
$1.35 billion, of net proceeds of this
deal will be returned to shareholders
during FY22 via an on-market share
buy-back. We’ll also be investing
$75 million of the proceeds to further
enhance connectivity in regional areas.
The remainder of the proceeds will
be used for debt reduction to ensure
we maintain balance sheet strength
and flexibility.
The progress we have made on T22
means we’ve also been able to operate
more efficiently. The simplicity T22
delivered helped us reduce our costs
and we’re on track to achieve our $2.7
billion net cost reduction target by the
end of FY22.
Returning
to growth
During FY21 we delivered results in line
with our guidance.
On a reported basis Total Income3 for
the year decreased 11.6 per cent to
$23.1 billion and NPAT grew 3.4 per
cent to $1.9 billion.
However, in spite of continued
impacts from the nbn headwind,
strong competition and the COVID-19
pandemic, we began to see growth
in our underlying business – an
important inflection point.
Underlying EBITDA on a guidance basis4,
which excludes one-off nbn income and
restructurings costs, decreased 9.7 per
cent to $6.7 billion. This included an
estimated $650 million of in-year nbn
headwind5, and approximately $180
million of negative year-on-year impacts
related to COVID-19.
Free cashflow for FY21 was up 11.6 per
cent to $3.8 billion, above the top end
of our guidance, due to working capital
improvements more than offsetting
lower EBITDA.
During the year, we reduced our total
operating expenses by 10.2 per cent
including a $490 million or 8.1 per cent
decline in underlying fixed costs. This
took our cumulative cost reductions to
$2.3 billion since FY16.
We remain focussed on driving growth
in our core business through new
services and innovation, as well as
from our growth businesses like health
and energy.
Staying focused
to complete the
transformation
We remain fully committed to finishing
the job on T22, which continues to
position us well and set us up for the
future.
We know the investments we are
making in digitisation will make a
difference when it comes to improving
customer experience. As we migrate
more customers over to our new digital
platforms it will help us simplify our
customer service, including a reduction
in the number and types of plans we
offer, the way customers shop and talk
to us, and the way they pay for their
services.
In the short-term this may cause some
disruption, but it is critical to help us
ensure quicker, easier service.
In the year ahead, we will extend our
leadership in 5G including continuing
to lead in 5G population coverage.
We’ll also deliver on our plans to create a
workforce for the future. Our people will
continue to benefit from our investments
in ways of working now that we have one
of the largest Agile workforces in
Australia and we are working with a
number of top universities to create our
suite of micro-credentials to upskill and
reskill our people.
Delivering these priorities are key to
finishing T22 but it’s not all that we are
doing. Above and beyond our T22
strategy there are ways that we are
supporting our people through a time
of change and challenge.
We have introduced paid leave for
vaccinations and offered health and
wellbeing support via a dedicated
Mental Health Hub, a range of online
webinars and interactive sessions as
well as continued access to initiatives
such as discounted health insurance.
Internationally we have provided ongoing
support including access to
vaccinations, telehealth services and
insurance coverage.
We have learnt even more over the last
18 months about how important flexible
and supportive workplaces can be to
employees. The disruption from
COVID-19 has only accelerated our
adoption of hybrid working which has
seen a substantial increase in the
number of our people working regularly
from home.
In addition to renewing our flexible
working policies and implementing
location agnostic recruitment, we have
invested in tools and technologies to
help our people stay connected with
each other when working in different
locations. This includes greater
functionality in our myWorkplace
solution – a custom designed booking
system for COVID-19 safe work in the
office, the introduction of Microsoft
Teams and Cisco interoperability in
meeting rooms, and the supply of
essential office equipment, from
monitors to sit-stand desks with a self-
service toolkit solution, for employees
wherever they are working.
We’re already seeing benefits with
people saying they’re feeling more
productive.
3. Total income excluding financial income.
4. 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 the Reference table – guidance vs reported results on page 164.
5. In-year nbn headwind defined as the net negative recurring EBITDA impact of the nbn on our business for the reporting period.
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STRATEGY & PERFORMANCE INCLUDING FY21 PERFORMANCE Strategy and performance | Telstra Annual Report 2021
Maintained carbon
neutral status across
our operations
Helped one million
customers
in vulnerable
circumstances
stay connected
Doing business
responsibly
As the world continues to change
around us, we remain purpose-led
and values-driven.
This year we refreshed our values
with input from our people to guide us
into the future. Values play an important
role in an organisation because they
help guide us through both the easier
times and decisions, as well as the
harder ones.
As a purpose-led and values-based
organisation, we are committed to
being leaders on responsible business.
This year we introduced a Responsible
Business Strategy aimed at embedding
responsible business principles into
every aspect of what we do. Along
with promoting trust in our operations,
our aim is to draw on tech expertise
to play a leadership role in promoting
digital inclusion and environmental
action.
Climate change is one of the biggest
challenges facing society and is already
impacting our business, our customers
and the communities in which we
provide services.
This year we became a signatory to
the United Nations Business Ambition
to limit climate change to 1.5 degrees.
We also maintained our position as
Australia’s largest carbon neutral
organisation by purchasing more than
two million carbon credits and
maintaining our carbon neutral
certification with Climate Active.
We invested in our third power purchase
agreement, which contributes to our
ambition to enable renewable energy
generation equivalent to 100 per cent
of our energy consumption by 2025.
We also made progress against our
target to reduce our absolute emissions
by 50 per cent by 2030 through programs
including energy efficiency projects and
network upgrades.
Along with delivering on our existing
climate targets, this year we introduced
three resource efficiency targets as part
of our broader Environment Strategy.
These include a commitment to increase
reuse and recycling of mobile phones,
modems and other devices and to
transition our branded packaging to use
only renewable or recycled materials,
and to be fully recyclable, by the end of
2022. We have also committed to
increase our network waste recycling
rate to 85 per cent by 2025.
Making Australia a leading digital
economy must remain a national
priority. But with more people relying
on technology for working, learning
and staying connected, an ongoing
and shared commitment to digital
inclusion is essential.
Through the research we support as part
of the Australian Digital Inclusion Index,
we know there is more to be done to
close the digital divide in Australia and
we remain committed to ensuring our
customers and communities can enjoy
the benefits of being connected.
We are committed to helping those
with lower levels of digital inclusion
to not only participate in, but also
benefit from the digital economy.
Our position as a global leader on
digital inclusion was recognised this
year, taking out top spot in the first-ever
corporate World Benchmarking Alliance
Digital Inclusion Benchmark.
In FY21 we helped one million
customers in vulnerable circumstances
stay connected6 by providing services
for people on low income, financial
hardship support and access to safe
and secure communications for
victim-survivors of domestic and
family violence, as well as ensuring
products and services are accessible
for people with a disability. We also
delivered digital ability training for
seniors and First Nations communities
across Australia.
More work to do on meeting
expectations
While there have been many positives
over the past year, we acknowledge that
there have been some challenges and
a number of times where we haven’t
met our own expectations.
This included reaching an agreement
with the Australian Competition and
Consumer Commission (ACCC) over the
mis-selling of products to Indigenous
customers. It also included being
penalised by the Australian
Communications and Media Authority
(ACMA) for failing to provide customers
with the opportunity to keep their
existing local phone number when
changing providers during the first
global wave of COVID-19.
We cooperated with both the ACMA
and ACCC in relation to an issue where
we failed to notify some customers
about the maximum attainable nbn
broadband speeds and the remedies
available to them.7
Even in these moments when we haven’t
met expectations, we have aimed for
transparency and accountability.
Each year the Bigger Picture
Sustainability Report provides more
detail on circumstances where we
haven’t met the expectations we set for
ourselves, or those set by our customers
and regulators.
Maintaining
momentum
In periods of rapid change, the most
important question companies have to
ask themselves is, are we the company
we need to be for the future?
We know there is more work to do, but
the choices we are making and the
actions we are taking give us confidence
that we will get there.
Our success in delivering T22 means we
have strong momentum behind us. We
have confidence we can finish the job.
As the world continues to deal with rapid
change, we are ready to seize
opportunities that arise.
6. Calculated based on the number of instances in which we provided specialised programs, products and services to support customers in vulnerable circumstances, and may include
instances where a customer has accessed multiple mechanisms.
7. Refer to Contingent Liability Disclosure.
10
11
STRATEGY & PERFORMANCE INCLUDING FY21 PERFORMANCE Our material risks
The importance of continuing to identify, measure and
monitor the most material risks to our business is more
heightened than ever, particularly as we deal with the
challenges and pressures of the ongoing COVID-19
pandemic and climate change-induced extreme
weather events.
Managing our material risks well is an important part of
ensuring the success of our strategy, as well as enhancing
customer experience, our reputation, financial position
and capacity to pay dividends.
Below we describe the material risks that could affect
Telstra, including any material exposure to environmental
or social risks, and how we seek to manage them. These
are not listed in order of significance, nor are they all
encompassing. They reflect the most significant risks
identified at a whole-of-entity level through our risk
management process.
Our material risks | Telstra Annual Report 2021
Group restructure
The proposed legal restructure of the
Telstra group will see the establishment
of a new holding company and the
creation of three key separate
subsidiaries, ServeCo, InfraCo Fixed
and InfraCo Towers.
The establishment of InfraCo Towers
is currently underway, in line with the
InfraCo Towers transaction announced
on 30 June 2021. The establishment of
the new holding company and the
transfer of assets into ServeCo are
proposed to occur by way of a scheme
of arrangement that we intend to seek
shareholder approval for.
We also intend to establish our
international business under a separate
subsidiary and transfer our international
assets to that new subsidiary over time,
subject to relevant approvals and
engagement with appropriate
stakeholders.
While we continue to work hard on the
restructure and to engage with the
Government, regulators and other key
stakeholders on it, there is a risk it may
be delayed or not successfully complete,
reducing the optionality and opportunity
we have to realise additional value from
our infrastructure assets.
To mitigate these risks, we have a
dedicated team committed to ensuring
our efforts to realise further value
from our infrastructure continue.
We also have a comprehensive
consultation program to explain the
many benefits this restructure delivers
to our stakeholders, including our
shareholders, the Government,
suppliers, customers, and our people.
Transformation and market forces
Through our T22 strategy we are shaping
our future to keep pace with the rapid
rate of change around us. We are now
less than twelve months from
completing T22 and more than 80 per
cent of metrics in that strategy are now
delivered or are on track to be delivered
by the end of FY22.
We have simplified our offerings to
our customers, established Telstra
InfraCo as a standalone business unit,
embraced agile ways of working and
strategically invested in new IT
platforms and retired many of our
legacy systems, while simultaneously
building networks for the future with
5G and IoT.
The challenge now is to see this
transformation through to its conclusion
amid the uncertainty created by the
COVID-19 pandemic, such as the
acceleration of shifts to digital business
models leveraging automation,
balancing resiliency and efficiency of
supply chains and business models, and
our customers’ needs for flexibility and
reduced costs.
To manage these risks, we regularly
monitor business performance and
forecasts against changes in the
external environment and stress test our
approach against various market
scenarios. We have also performed
several assessments to monitor our
reliance on key suppliers and their level
of resilience to mitigate against the risk
of suffering downstream impacts if their
business continuity is impacted.
We continue to have a strong focus on
maintaining effective governance and
leadership so that we can identify,
escalate, and manage transformation
risks, and risks within the market
segments that we operate in.
Responsible business
Telstra has continued to work to ensure
that our business practices are in line with
our purpose and values and the
expectations of the broader community. We
recognise that there has never been a more
important time for businesses to think
deeply about the role they play in society.
We know that our responsibility to do the
right thing goes all the way to the core of
our operational practices, particularly
those that have the potential to impact
customers in vulnerable circumstances.
We acknowledge that we have not
always gotten this right. Further details
of this are provided in our 2021 Bigger
Picture Sustainability Report.
The risks associated with not conducting
our business responsibly are extensive.
We risk eroding community trust in us as a
responsible corporate citizen and our
reputation with stakeholders, and potential
regulatory and financial implications.
We are committed to conducting our
business responsibly through a range of
measures. These include fair sales
practices, providing products and plans
that meet our customers’ needs,
enhancing the way we resolve customer
complaints, providing a well-considered
approach to hardship and the
embedding of a broader culture that
supports our people to act responsibly.
People and culture
It is essential that we continue to
attract, develop, and retain a skilled
and engaged workforce.
We seek to build an agile, enabled
culture focused on simplicity and
accountability, and to build a workforce
that can pivot dynamically in response
to change.
We are also focused on maintaining a
purpose and values-led culture that
reflects the expectations and standards
of the broader community in line with
our commitment to responsible business
practices, which we have identified as
a priority as part of our sustainability
strategy. Our refreshed corporate values
have been integrated across our
business and embedded into our
behaviours and decision-making. Our
Appreciate reward and recognition
program recognises our people who
bring these values to life through their
everyday actions.
We have several mechanisms to
manage our people and culture risks,
including our employee engagement
surveys, monitoring our capability
coverage in key talent segments and
ensuring we have critical role succession
coverage. Where behaviour occurs that
is not in keeping with our values, we
have processes in place to identify and
deal with it appropriately, including
through our whistle-blower process
and our internal investigations team.
We continue to evolve our operating
model and have recently stated our
intent to be operating fully agile
at scale by the end of calendar year
2021. We invest heavily to reskill and
upskill our people, complementing
our comprehensive suite of technical
training with additional micro –
credentials and a focus on building
FutureReady capabilities.
Health, safety and wellbeing
The effective management of health,
safety, security, and wellbeing is a
fundamental priority due to the
risks they present our people (both
physically and / or mentally), our
assets, the environment and the
communities in which we operate.
The nature of this risk is continually
evolving, as our business and the
environment in which we operate
changes.
12
12
13
OUR MATERIAL RISKS Our material risks | Telstra Annual Report 2021
We actively monitor and manage a
diverse range of health, safety and
wellbeing outcomes, including the
physical safety in our varied workplaces
(especially as more of our people work
more often from home), the security of
our people and places of work, our
people’s mental health and wellbeing
(including the wellbeing risks associated
with transformation) and the potential
for harm to our environment and the
communities in which we work.
We continue to support our global
workforce to keep them safe and well
during the COVID-19 pandemic, in what
remains a challenging and changing
global landscape. Our approach has
enabled our business to continue
to operate effectively and to do
what we can to keep our people safe
and informed.
Climate change
Climate change is one of the most
important issues of the decade. As one
of the largest consumers of power in the
country, we have a responsibility to play
a leading role in addressing this.
The increasing frequency and severity of
natural disasters (including bushfires,
cyclones, floods, and the threat of more
frequent and severe weather events)
show that climate change poses a
significant and ongoing challenge to our
people, our customers, our
infrastructure and networks, and our
supply chains. We understand the
economic and reputational risks
associated with climate change and
transitioning to a lower-carbon economy.
As part of our response, we have been
certified carbon neutral in our
operations since July 2020. We are
committed to enabling renewable energy
generation equivalent to 100 per cent
of our energy consumption by 2025
and reducing absolute greenhouse
gas emissions by at least 50 per cent
by 2030.
Starting in 2020, we have aligned our
reporting to the Taskforce on Climate-
Related Financial Disclosures (TCFD)
framework. Our 2021 TCFD reporting
can be found in the climate change
and energy section of our FY21
Sustainability Report and the
accompanying TCFD Appendix.
Network IT and resilience
One of Telstra’s competitive advantages
is the scale, speed, and resilience of our
network. The importance of access to
seamless and high-quality connectivity
has been highlighted recently by the
changed nature of work and education
due to the COVID-19 pandemic.
Given so many customers depend on our
network and its quality, we recognise
the potentially significant impact of
network congestion and outages. These
events are disruptive and frustrating for
customers, and significant for us in
terms of reputational risk and the trust
people have in our brand.
The resilience of our network can be
undermined by natural disasters,
unforeseen spikes in demand, the
activity of malicious actors, human
error, equipment failure, data quality, or
failure in the underlying electricity grid
that powers our network. We raise and
assess such risk scenarios through our
mature risk management approach and
respond to them through a range of
strategies and processes that seek to
prevent, respond to, and recover from
service and network disruptions. We
have several indicators in place to
dynamically monitor network and IT
performance and resilience, and we
proactively track risk remediations and
improvements in our network over time
to progressively reduce our risk
exposure. Further, the digitisation of our
systems and processes is a key enabler
of our T22 strategy and is helping us
simplify our products and reduce
complexity.
We continue to implement a cross-
company approach which manages end-
to-end resilience of key products and
services, considering all elements that
can potentially impact customer service,
including disruptions to our network and
IT technology.
Privacy and cyber security
With the growing demand for, and
dependence on, being able to live, work
and learn online, the information and
cyber security threat environment has
increased. This is one of the reasons we
put data privacy, information security and
cyber security at the forefront of
everything we do. We understand that the
failure to do so presents a material risk
that has the potential to allow crime,
espionage, and errors to happen at an
unprecedented pace, scale, and reach.
While it is not possible to mitigate all
cyber risks, it is critical that we take
action to help our customers trust in the
connectivity we provide.
We use a range of technologies and
security controls to minimise the
likelihood and impact of unauthorised
access to our networks and systems.
These include logging and monitoring
capabilities to pre-empt and proactively
prepare for internal and external
threats, and industry-standard
infrastructure configuration.
We continuously invest in our security
capabilities, including maintaining and
enhancing our existing technologies to
continue to stay ahead of new security
threats. We also deploy new
technologies to ensure we can adapt to
the range of changing security and
scamming threats.
As part of our Cleaner Pipes initiative,
which focuses on further reducing
instances of customer data being
compromised through malware,
ransomware and phishing, we are
blocking around 13 million suspected
scam calls a month on average before
they reach end customers and
potentially defraud them.
Our approach to cyber security risk
management processes ensures
appropriate ownership, oversight and
ongoing risk management is applied to
IT systems, data, and risks. We also
have security processes that include
technical reviews of projects and
solutions and due diligence of third
parties, to test the presence and
effectiveness of security controls at
critical points. We deliver programs
designed to foster a strong cyber security
culture, including mandatory annual
training for all employees and contractors
and regular phishing drills. As technology
continues to evolve, we are conscious of
emerging issues in relation to artificial
intelligence and machine learning and
have governance programs in place to
monitor these risks.
We regularly review and update our
privacy statements and procedures
so that we remain compliant with
our legal obligations and consider
society’s expectations in relation to
collection, storage and use of our
customers’ personal information.
Please refer to the Corporate
Governance Statement for more detail
on how Telstra manages privacy.
We also continue to work with the
Australian Government as it executes its
2020 Cyber Security Strategy, with our
CEO Andrew Penn chairing the Industry
Advisory Committee.
Regulatory change and stakeholder
engagement
Telstra’s products and services and
the way we deliver them are subject
to constant scrutiny from a range of
regulators and agencies.
To ensure we comply with these
regulations it is important we continue
to maintain proactive and transparent
relationships with all relevant
regulators, consumer and community
groups and policy makers in an effort
to ensure fair, balanced and socially
appropriate policy and regulatory
decisions are made.
The key regulatory matters currently
relevant to Telstra arise in an
environment of heightened expectations
and relate to regulatory compliance,
responsible business practices,
establishing a new retail energy
business, NBN Co regulation and policy,
consumer safeguards and service
standards, spectrum allocation,
government security and digitisation
policy, connectivity for regional and
rural communities, and universal
service policy.
These and other regulatory and policy
matters may directly impact our
strategy and business model as well
as raise the risk of additional regulatory
cost and complexity being imposed on
our business.
We have a strong framework to manage
these risks, and proactively engage
with regulators, government bodies,
industry and customer groups and
other stakeholders.
Further detail on our risk
management framework
and our overall approach to
managing risk is provided in our
2021 Corporate Governance
Statement available at
www.telstra.com/governance.
Further information about our
sustainability related risks is
provided in our 2021 Bigger
Picture Sustainability Report,
available at telstra.com/
sustainability/report.
14
15
OUR MATERIAL RISKS Outlook | Telstra Annual Report 2021
Outlook
As we enter the last year
of our T22 program, we
are in a strong position
to return to growth as
our transformation work
has enabled us to take
advantage of continued
disruption, emerging
technology shifts and the
growing digital economy.
FY22 is a pivotal growth year in
our financial trajectory as we move
past the FY21 inflection point,
complete T22 and build strong
momentum into FY23-25.
For FY22 guidance1, we expect
Total Income to be between
$21.6 and $23.6 billion, underlying
EBITDA2 between $7.0 and $7.3
billion, capital expenditure3,
between $2.8 and $3.0 billion and
free cashflow after lease payments4
of $3.5 and $3.9 billion.
Growth in underlying EBITDA is
expected despite remaining in-year
nbn headwinds of approximately
$350 million.
Underlying EBITDA in FY22 also
includes approximately $50 million
of non-cash accounting headwind
from insourcing our retail channel,
and no return of revenue from
international mobile roaming.
We have already reached
cumulative cost reductions of
$2.3 billion since FY16, and we are
confident in our ability to deliver
our $2.7 billion target by the end
of FY22.
With our ongoing discipline on
cost reductions, continued strong
performance in our mobile
business, and a diminishing
financial impact from the rollout of
the nbn, we have confidence in our
outlook and we believe we are on
the path to achieving our financial
ambitions of $7.5 to $8.5 billion of
underlying EBITDA and ROIC of
around 8 per cent by FY23.
In the year ahead our areas of
focus will include continuing to
improve our customer experience
including for regional customers,
completing our digitisation program
including remaining focused on
simplification, extending our
leadership in 5G and realising value
from our strategic investment in
networks, and continuing to grow
core connectivity and services as
well as existing and new growth
businesses. Delivering these
priorities is key to finishing T22
and will enable us to face a new
world of constant change.
We continue to progress our
proposed legal restructure. This
will set us up with a modern and
flexible structure to provide
increased focus and flexibility
to manage and realise additional
value from our assets. It also means
we will be well-placed to respond
to the growing global demand for
telecommunications infrastructure.
We expect the sale of a minority
stake in our InfraCo Towers
business to be completed in
the first quarter of FY22, with
approximately 50 per cent of
net cash proceeds after
transaction costs to be returned
to shareholders through an on-
market buy-back.
As we finish T22, we have been
considering the company’s strategy
into the future. We will provide more
detail on what comes after T22
and our strategy for the future
at an Investor Day event on
16 September. This will be firmly
focussed on growth and how we
will be leveraging the foundation
and capabilities we have built.
We will continue to work with
customers, industry partners,
regulators and political
stakeholders as we advocate
for reform to nbn wholesale
pricing and service standards.
We hope to see a long-term
solution that supports a
competitive and sustainable
broadband market.
The ongoing COVID-19
pandemic brings an element
of unpredictability and as we
have said previously, we know
our business and customers
will not be immune from this.
Telstra will continue to be guided
by our purpose and our values,
and focused on creating
long-term shareholder value.
1. 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.
2. 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.
3. Capex is measured on an accrued basis and excludes spectrum and guidance adjustments, externally funded capex, and capitalised leases.
4. 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.
16
17
Full year results and
operations review
Summary financial results
Revenue (excluding finance income)
Total income (excluding finance income)
Operating expenses
Share of net profit/(loss) from equity accounted entities
EBITDA
Depreciation and amortisation
EBIT
Net finance costs
Income tax expense
Profit for the period
Profit attributable to equity holders of Telstra Entity
Capex1
Free cashflow
Earnings per share (cents)
FY21
$m
21,558
23,132
15,470
(24)
7,638
4,646
2,992
551
539
1,902
1,857
3,020
4,887
15.6
FY20
$m
23,710
26,161
16,951
(305)
8,905
5,338
3,567
771
957
1,839
1,819
3,233
4,034
15.3
Full year results and operations review | Telstra Annual Report 2021
Reported results
Telstra delivered FY21 results in line with
guidance showing the business had
reached an important turning point in its
financial performance and outlook, with
financial momentum building and the
underlying business to return to full year
growth in FY22.
On a reported basis, total income
declined by 11.6 per cent and EBITDA
declined by 14.2 per cent while NPAT
increased by 3.4 per cent. Underlying
EBITDA declined by 9.7 per cent on a
guidance basis including an in-year nbn
headwind of $650 million. Underlying
EBITDA includes an estimated $380
million impact from COVID-19. Excluding
the in-year nbn headwind, underlying
EBITDA declined by approximately
$70 million.
We continue to execute on our T22
strategy with around 80 per cent of our
scorecard metrics completed or on track
for delivery, and we are seeing the
decision to be bold and transform the
business for the future clearly paying off.
Underlying fixed costs decreased by $490
million or 8.1 per cent bringing the total
underlying fixed cost reductions to
around $2.3 billion since FY16. We remain
on track to meet our cost out target of
$2.7 billion by FY22.
Our multi-brand strategy continued to
deliver mobile SIO growth as we added
101,000 retail postpaid handheld mobile
services including 34,000 from Belong,
95,000 retail prepaid handheld unique
users, and 240,000 Wholesale services.
We have expanded our 5G rollout to
selected areas in more than 200 cities
and towns across Australia and the
network now provides 5G coverage to
more than 75 per cent of the population.
We now have around 1.6 million 5G
devices connected to our network.
We have seen strong performances in our
growth businesses during the year,
including Telstra Health, Telstra Ventures
and Foxtel, as well as progress on Telstra
Energy. Foxtel reported record subscriber
growth in FY21 with paid streaming
subscribers increasing 155 per cent to
over 2 million. This exceptional
subscriber growth has Foxtel, and our
investment in Foxtel, well positioned for
the future.
The Telstra Board resolved to pay a fully
franked final dividend of 8 cents per
share, comprising a final ordinary
dividend of 5 cents and a final special
dividend of 3 cents. The total dividend for
FY21 is 16 cents per share, fully franked.
Telstra also provided financial guidance
including assumptions on a range of
metrics for FY22, showing the underlying
business returning to full year growth.
Other information
Consistent with information presented
for internal management reporting
purposes, the result of each segment is
measured based on its EBITDA
contribution which differs from our
statutory EBITDA. Refer to Note 2.1.1 in
the Financial Report for further detail.
Commentary reflects statutory and
management accounts reporting.
Change
Results on a guidance basis1
Total income
Underlying EBITDA
Net one-off nbn DA receipts less nbn net cost to connect
Capex
Free cashflow after operating lease payments
FY21
$22.9b
$6.7b
$0.8b
$3.0b
$3.8b
FY21 Guidance2
$22.6b to $23.2b
$6.6b to $6.9b
$0.7b to $1.0b
$2.8b to $3.2b
$3.3b to $3.7b
FY21
FY21
FY21
FY20
Guidance versus reported results1
Reported results
$m
Adjustments
$m
Guidance basis
$m
Guidance basis
$m
Total income
Underlying EBITDA
Free cashflow
23,132
7,638
4,887
(208)
(949)
(1,075)
22,924
6,689
3,812
26,141
7,409
3,415
1. This 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. Total income excludes finance income.
Underlying EBITDA excludes net one-off nbn DA receipts less nbn net cost to connect, one-off restructuring costs and guidance adjustments but includes
depreciation of mobile lease right-of-use assets. Capex is measured on an accrued basis and excludes spectrum and guidance adjustments, externally funded capex,
and capitalised leases. Free cashflow defined as ‘operating cash flows’ less ‘investing cash flows’ less ‘payments for operating lease liabilities’, and excludes
spectrum and guidance adjustments. Refer to the Guidance versus reported results schedule on page 164. The adjustments within the tables in this schedule have
been reviewed by our auditors.
%
(9.1)
(11.6)
(8.7)
92.1
(14.2)
(13.0)
(16.1)
(28.5)
(43.7)
3.4
2.1
(6.6)
21.1
2.0
1. Capex is measured on an accrued basis and excludes spectrum and guidance adjustments, externally funded capex, and capitalised leases.
2. FY21 guidance revised at 1H21 results announcement on 11 February 2021.
18
19
FULL YEAR RESULTS & OPERATIONS REVIEW On 12 August 2021, the Directors of
Telstra Corporation Limited resolved
to pay a final fully franked dividend of
8 cents per ordinary share, comprising
a final ordinary dividend of 5 cents per
share and a final special dividend of
3 cents per share. Shares will trade
excluding entitlement to the final
dividend from 25 August 2021 with
payment to be made on 23 September
2021. The total dividend for FY21
is 16 cents per share, fully franked,
including 10 cents ordinary and 6
cents special. This is in line with the
FY21 dividend guidance we provided
on 11 February 2021.
The ordinary dividend represents a 103
per cent payout ratio on FY21 underlying
earnings1 which is higher than the range
indicated in our capital management
framework to pay a fully franked ordinary
dividend of 70 to 90 per cent of
underlying earnings. The Board has
decided for FY21 to exceed its preferred
ordinary dividend payout ratio as a
proportion of underlying earnings
because (1) our ambition of delivering
underlying EBITDA of $7.5 billion to $8.5
billion from FY23 onwards is achievable;
(2) the free cash flow dividend payout
ratio remains supportive and we retain
a strong financial position; and (3) there
are no other factors that would make the
payment of the ordinary dividend at this
level imprudent.
The special dividend represents a 128 per
cent payout ratio of FY21 net one-off nbn
receipts2. We have returned 74 per cent
of cumulative net one-off nbn receipts
since the beginning of FY18, consistent
with our capital management framework
to return in the order of 75 per cent of net
one-off nbn receipts via fully franked
special dividends over time.
Our FY21 underlying earnings were
$1,191 million while net one-off nbn
receipts were $561 million compared
with underlying earnings of $1,224
million and net one-off nbn receipts of
$1,075 million in FY20.
1. “underlying earnings” is defined as net profit after
tax from continuing operations excluding net one-
off nbn receipts (as defined in footnote 2), one-off
restructuring costs and guidance adjustments (as
defined in footnote 3).
2. “net one-off nbn receipts” is defined as net nbn
one off Definitive Agreement receipts (consisting of
PSAA, Infrastructure Ownership and Retraining)
less nbn net cost to connect less tax.
3. Guidance adjustments included impairments in
and to investments or non-current tangible and
intangible assets, proceeds on the sale of
businesses, mergers and acquisitions and
purchase of spectrum, and excluded the impacts of
Pitt St exchange sale and leaseback.
Given the status of our proposed legal restructure, in order for us to manage our
ongoing continuous disclosure obligations the Board has determined that the
Dividend Reinvestment Plan (DRP) will not operate for the final dividend for FY21.
Our intention is to reinstate it when circumstances allow.
Segment performance
We report segment information on the same basis as our internal management reporting
structure as at reporting date. Segment comparatives reflect organisational changes
that have occurred since the prior reporting period to present a like-for-like view.
Segment total income
11%
11%
5%
0%
30%
FY21
54%
7%
0%
30%
FY20
52%
Telstra Consumer and Small Business
Telstra Enterprise
Networks and IT
All Other
Telstra InfraCo1
1. Excludes internal access charges
FY21
FY20
Change
Total external income
$m
$m
Telstra Consumer and Small Business
12,342
13,474
%
(8.4)
(9.8)
10.0
6,985
7,743
30
33
1,230
3,745
1,940
(36.6)
4,664
(19.7)
Telstra Enterprise
Networks and IT
All Other
Telstra InfraCo1
Internal access charges
(1,203)
(1,690)
28.8
Total
23,132
26,161
(11.6)
1. Excludes internal access charges
On a reported basis, total income (excluding finance income) declined by 11.6 per
cent to $23,132 million. On a guidance basis, total income (excluding finance income)
was $22,924 million. Legacy product and service declines, lower hardware and
equipment sales volumes, loss of international roaming revenue, and the nbnTM
network rollout negatively impacted income. There were positive trends in mobile
including further customer service additions, and an increase in postpaid Transacting
Minimum Monthly Commitment (TMMC) and a return to postpaid average revenue per
user (ARPU) growth in 2H21. Segment performance is on a reported basis unless
otherwise stated.
Telstra Consumer and Small Business
Telstra Consumer and Small Business provides telecommunication products, services
and solutions across mobiles, fixed and mobile broadband, media and digital content
to consumer and small business customers in Australia. It also operates call centres,
Telstra shops and the Telstra dealership network.
Income decreased by 8.4 per cent to $12,342 million impacted by a 6.8 per cent
decline across fixed products including a 46.0 per cent decline in on-net revenue due
to nbn migration and a 9.9 per cent decline in mobility revenue largely due to lower
hardware revenue.
Full year results and operations review | Telstra Annual Report 2021
Telstra Enterprise
Telstra Enterprise provides
telecommunication services, advanced
technology solutions, network capacity
and management, unified
communications, cloud, industry
solutions integrated and monitoring
services in Australia and globally. It also
manages our networks outside Australia
in conjunction with the Networks and IT
and Telstra InfraCo segments.
Income decreased by 9.8 per cent to
$6,985 million impacted by a 9.3 per cent
decline across fixed products including a
7.5 per cent decline in data and
connectivity income due to a decline in
services in operation (SIO) and ARPU, and
a 10.0 per cent decrease in NAS income
largely due to declines in calling
applications and equipment sales.
Networks and IT
Networks and IT primarily support the
revenue generating activities of the other
segments. It builds and manages our
digital platforms underpinning our
customer digital experience, and
software for all internal functions.
Income increased by 10.0 per cent to
$33 million.
Telstra InfraCo
Telstra InfraCo is responsible for key
passive network assets including data
centres, exchanges, poles, ducts, pits and
pipes, whole fibre network, and mobile
towers. This segment also includes
Telstra Wholesale.
Income excluding internal access
charges decreased by 14.5 per cent to
$2,542 million due to expected declines
from Telstra Wholesale legacy fixed
products and commercial works
supporting the nbn. This was partly offset
by increased recurring nbn DA receipts in
line with the progress of the nbn network
rollout and receipts for access to passive
infrastructure, and an increase in
wholesale mobility. Including internal
access charges, income decreased by
19.7 per cent to $3,745 million. Internal
access charges in FY20 are based on a
different asset perimeter and pricing to
FY21 and therefore numbers are not like-
for-like.
All Other
All Other includes certain items of
income and expense relating to other
operating segments and corporate
functions recorded by our corporate
areas. This category includes Product and
Technology Group, Global Business
Services (GBS) and Telstra Health.
Income decreased by 36.6 per cent
mainly due to declines in Per Subscriber
Address Amount (PSAA) receipts and
Infrastructure Services Agreement (ISA)
ownership receipts in line with the
progress of the nbn network rollout partly
offset by $78 million in proceeds from the
sale of our investment in Sensis.
Product performance
Product revenue breakdown
5% 2%
4%
6%
Product income
Mobile
FY21
40%
Fixed – C&SB
Fixed – Enterprise
Fixed – Wholesale
Global
Recurring nbn DA
One-off nbn DA & connection
Other
Total
21%
1%
8%
FY20
39%
6%
16%
3%
7%
7%
16%
FY20
Change
FY21
$m
9,310
4,736
3,724
1,356
1,496
908
1,050
552
$m
10,130
5,083
4,106
1,872
1,725
874
2,004
367
23,132
26,161
%
(8.1)
(6.8)
(9.3)
(27.6)
(13.3)
3.9
(47.6)
50.4
(11.6)
19%
Mobile
Fixed – C&SB
Fixed – Enterprise
Fixed – Wholesale
Global
Recurring nbn DA
One-off nbn DA & connection
Other
EBITDA
contribution margins1
FY21 %
2H21 %
1H21 %
FY20 %
Mobile
Fixed – C&SB
Fixed – Enterprise
Fixed – Wholesale
Global
Recurring nbn DA
Net one-off nbn DA less nbn
net cost to connect
39.2
5.8
23.8
45.8
22.5
94.7
76.4
41.4
5.1
24.4
42.3
23.2
94.7
71.9
37.0
6.4
23.2
48.4
21.7
94.7
79.0
34.3
11.2
28.0
47.9
21.9
93.8
76.6
1. The data in this table includes adjustments to historic numbers to reflect changes in product hierarchy.
20
21
FULL YEAR RESULTS & OPERATIONS REVIEW Product performance is on a reported
basis unless otherwise stated.
Mobile
Mobile income declined by 8.1 per cent
to $9,310 million largely due to lower
hardware volumes (-$748 million) and
international roaming declines (~-$200
million). Mobile services revenue, the key
driver of mobile profitability, increased
by 3.7 per cent or 5.2 per cent excluding
international roaming in 2H21. Retail
SIOs increased by 696,000 bringing the
total to 19.5 million. We now have 8.6
million postpaid handheld retail SIOs,
an increase of 101,000 including 34,000
from Belong and a strong contribution
from Enterprise.
Postpaid handheld services revenue
decreased by 1.7 per cent to $4,830
million as net adds were offset by a 3.7
per cent ARPU decline from $48.96 to
$47.16. Excluding the international
roaming decline, ARPU was broadly flat
as benefits from TMMC improvement in
mass market and pricing changes were
offset by out of bundle revenue decline,
accounting for new plans which allocate
more revenue to hardware, and dilution
from Belong customer mix.
Prepaid handheld services revenue
increased by 4.7 per cent to $809 million
as unique users increased by 95,000.
ARPU increased 7.0 per cent from $19.46
to $20.83.
Mobile broadband services revenue
decreased by 4.4 per cent to $612 million
largely due to a decline in prepaid, and
out of bundle Enterprise revenue in FY20.
Internet of Things (IoT) services revenue
grew by 1.2 per cent to $246 million from
increasing carriage and managed
services revenue.
Wholesale services revenue increased
20.8 per cent to $267 million. Wholesale
SIOs increased by 240,000 bringing the
total to 1.7 million as Mobile Virtual
Network Operators (MVNO) plans on the
Telstra mobile network grew in popularity.
Hardware, interconnect and other
revenue decreased by 24.5 per cent to
$2,529 million largely due to lower
handset sales.
Mobile EBITDA contribution margin
increased by 4.9 percentage points to
39.2 per cent largely due to improved
hardware margin and productivity. 2H21
margin was also supported by mobile
services revenue growth.
Fixed – Consumer and Small Business
(C&SB)
Fixed – C&SB income declined by 6.8 per
cent to $4,736 million impacted by nbn
migration along with declines in legacy
voice and Foxtel from Telstra. C&SB
bundles and standalone data SIOs
declined by 69,000 including 10,000
additions from Belong, bringing the total
to 3.6 million.
We continue to lead the nbn market with
a total of 3.5 million nbn connections, an
increase of 246,000. Our nbn market
share is now 45 per cent (excluding
satellite) with the migration to nbn now
around 90 per cent complete. The Telstra
Smart Modem is now being utilised by 81
per cent of our fixed data consumer base,
providing a better experience on the nbn
with strong Wi-Fi connectivity and mobile
back up.
On-net fixed revenue, which is revenue
from services on the Telstra network,
decreased by 46.0 per cent to $784
million while off-net fixed revenue, which
is revenue from services for which we are
a reseller, increased by 15.6 per cent to
$3,001 million as customers continue to
migrate on to the nbn network.
Consumer content and services revenue
declined by 9.1 per cent to $661 million
due to lower Foxtel from Telstra SIOs
despite growth in gaming.
Business apps and services revenue
declined by 5.2 per cent to $183 million
due to legacy product decline, partly
offset by growth in IP voice and video
calling, and professional services.
Interconnect, payphones and E000
revenue declined by 7.0 per cent to $107
million mainly due to ongoing decline in
payphone usage and inbound calling
services.
Fixed – C&SB EBITDA contribution
margin declined by 5.4 percentage points
to 5.8 per cent due to high margin
revenue reduction and growing network
payments to NBN Co, partly offset by
fixed cost reduction.
Fixed – Enterprise
Fixed – Enterprise income decreased by
9.3 per cent to $3,724 million reflecting
declines in data and connectivity income
and NAS income.
Data and connectivity income declined by
7.5 per cent to $1,103 million. While we
maintained our fibre SIO base, this was
offset by copper SIO decline and a
decrease in ARPU.
NAS income decreased by 10.0 per cent
to $2,621 million due to a decline in
legacy calling applications including
ISDN, and fewer lower margin equipment
sales.
Calling applications revenue declined by
14.5 per cent to $708 million due to
declines in ISDN, inbound and fixed line
calling products, and a customer shift to
cloud based contact solutions.
Managed services revenue increased by
5.8 per cent to $671 million as more
network customers attached cyber
security services in addition to growth in
managed cloud services.
Professional services revenue decreased
by 11.9 per cent to $376 million as large
strategic contracts were replaced by
digital transformation engagements.
Cloud applications revenue increased by
4.5 per cent to $257 million due to
demand for partner cloud products
including AWS and Microsoft, enabling
attachment to managed services.
Equipment sales revenue declined by
31.4 per cent to $343 million from a
general deferral of hardware spend due
to market conditions resulting from
COVID-19 and a shift to cloud based
technologies.
Fixed – Enterprise EBITDA contribution
margin declined by 4.2 percentage points
to 23.8 per cent. Data and connectivity
EBITDA contribution margin declined by
6.7 percentage points to 60.1 per cent
reflecting reduced revenue and higher
costs. NAS EBITDA contribution margin
declined by 3.6 percentage points to 8.5
per cent due to reductions in higher
margin legacy calling applications,
professional services, and equipment
sales partly offset by growth in managed
services and cloud applications.
Fixed – Wholesale
Fixed – Wholesale income declined by
27.6 per cent to $1,356 million impacted
by ongoing migration to the nbn and a
decline in commercial works.
Data and connectivity revenue decreased
by 6.5 per cent to $343 million reflecting
an ongoing SIO reduction in enterprise
grade copper products, price competition
in wideband fibre products, and
migration of copper services.
Legacy calling and fixed revenue declined
by 34.0 per cent to $412 million due to
the continued legacy fixed product SIO
decline as the nbn migration nears
completion.
Full year results and operations review | Telstra Annual Report 2021
Commercial and recoverable works
revenue declined by 31.8 per cent to
$601 million as the nbn network rollout
nears completion.
Fixed – Wholesale EBITDA contribution
margin decreased by 2.1 percentage
points to 45.8 per cent due to continued
legacy and nbn revenue decline.
Global
Global represents the international
business of Telstra Enterprise. Income
declined by 8.1 per cent in constant
currency (CC) terms largely due to
continuing decline in low margin legacy
voice and one-off transactions in FY20.
Fixed legacy voice revenue decreased by
8.9 per cent (CC) due to continued market
decline with strategic focus on
maximising margin.
Data and connectivity revenue declined
by 2.9 per cent (CC) from industry wide
price erosion across transmission
products and customer churn in
Enterprise as the market moves towards
SD-WAN.
NAS and other revenue decreased by
4.2 per cent (CC) due to a reduction in
low margin customer premises
equipment (CPE) sales and professional
services, and churn in private cloud.
Global EBITDA contribution margin
increased by 0.6 percentage points to
22.5 per cent as lower costs offset
revenue reduction.
Recurring nbn DA
Recurring nbn DA income includes
infrastructure services across ducts,
racks and fibre backhaul provided to
NBN Co. Income increased by 3.9 per
cent to $908 million reflecting the nbn
network rollout.
One-off nbn DA & connection
One-off nbn DA & connection income
includes receipts from NBN Co for
disconnecting customers from our legacy
network, and one-off income we receive
from customers to connect to the nbn
network. Income decreased by 47.6 per
cent to $1,050 million as migration to the
nbn nears completion.
Other
Other product income includes Telstra
Health and corporate adjustments.
Corporate adjustments include items not
related to products such as impact of
bond rate movements on leave
provisions. Income increased by 50.4 per
cent to $552 million mainly due to a gain
on sale and leaseback of the Pitt Street
exchange property and other M&A
transactions, and 6.4 per cent revenue
growth in Telstra Health.
22
23
FULL YEAR RESULTS & OPERATIONS REVIEW Expense performance
Total operating expenses declined by 8.7 per cent to $15,470 million on a reported basis and declined by 10.2 per cent to $15,664
million on a reported lease adjusted basis in part due to the 8.1 per cent or $490 million reduction in underlying fixed costs from
our productivity program.
Sales costs, which are direct costs associated with revenue and customer growth, decreased by 7.0 per cent to $8,184 million due
to an $862 million decline in other sales costs as a result of lower hardware costs, partly offset by a $244 million increase in nbn
access payments. Other fixed costs decreased by 24.5 per cent while one-off nbn DA and nbn cost to connect declined by 47.0 per
cent in line with the progress of the nbn network rollout. On an underlying basis, total operating expenses declined by 9.3 per cent
as underlying fixed cost reduction exceeded increased nbn access payments.
We are targeting a $2.7 billion annual reduction in underlying fixed costs by FY22 compared with underlying fixed costs of ~$7.9
billion in base year FY16. We have now achieved approximately $2.3 billion of annual cost out since FY16.
Operating expenses1
Sales costs
– nbn payments
– other
Fixed costs
– underlying2
– other3
Underlying
One-off nbn DA and nbn cost to connect
Restructuring
Other guidance adjustments4
Reported lease adjusted5
Lease adjustments6
Reported
+$244m
-$862m
$16,718m
FY21
$m
8,184
1,975
6,209
6,977
5,593
1,384
FY20
$m
8,802
1,731
7,071
7,916
6,083
1,833
$m
(618)
244
(862)
(939)
(490)
(449)
15,161
16,718
(1,557)
248
211
44
15,664
(194)
15,470
468
259
–
17,445
(494)
16,951
(220)
(48)
44
(1,781)
300
(1,481)
Change
%
(7.0)
14.1
(12.2)
(11.9)
(8.1)
(24.5)
(9.3)
(47.0)
(18.5)
n/m
(10.2)
n/m
(8.7)
-$490m
-8.1%
cost out
-$449m
+$211m
+$44m
$15,664m
+$248m
$15,161m
-9.3%
Underlying
basis
-10.2%
Reported
lease
adjusted
basis
FY20
underlying
Sales costs
– nbn
payments
Sales costs
– other
Fixed costs
– underlying2
Fixed costs
– other3
FY21
underlying
One-off nbn
DA and nbn
cost to
connect
Restructuring
Other
guidance
adjustments4
FY21
reported
lease
adjusted
1. Sales and fixed costs exclude costs associated with one-off nbn DA and nbn cost to connect.
2. Fixed costs – underlying was ~$7.9b in FY16 on a restated basis and targeted to decline by our net cost productivity target of $2.7b by FY22. Underlying fixed costs are
costs excluding other fixed costs (as defined in footnote 3).
3. Fixed costs – other includes items supporting revenue growth including relevant NAS costs, mobile handset lease, and product impairment.
4. Other guidance adjustments include M&A transactions.
5. ‘Reported lease adjusted’ includes all mobile handset leases as operating expenses, and all rent/other leases below EBITDA.
6. Refer to note 7 of the Guidance versus reported results schedule.
Full year results and operations review | Telstra Annual Report 2021
Our progress on achieving our productivity target is reported through the above operating expenses table. The detail below
provides commentary on the operating expenses as disclosed in our statutory accounts.
Operating expenses on a reported basis
Labour
Goods and services purchased
Net impairment losses on financial assets
Other expenses
Total
FY21
$m
4,012
8,318
160
2,980
FY20
$m
4,058
9,107
202
3,584
15,470
16,951
Change
%
(1.1)
(8.7)
(20.8)
(16.9)
(8.7)
Foreign currency impacts
For the purposes of reporting our
consolidated results, the translation of
foreign operations denominated in
foreign currency to Australian dollars
(AUD) reduced our sales revenue by $157
million. This foreign exchange impact was
partly offset by a decrease in expenses
by $132 million across labour, goods and
services purchased, and other expenses
resulting in an unfavourable EBITDA
contribution of $25 million.
Net finance costs
Net finance costs decreased by 28.5 per
cent or $220 million to $551 million. This
decrease is due to a reduction in interest
on borrowings of $160 million, a
reduction in interest on lease liabilities of
$26 million and other financing items as
set out in note 4.4.3. Interest on
borrowings decreased as a result of a
reduction in our average gross borrowing
cost from 4.6 per cent to 3.8 per cent and
lower debt on issue.
Labour
Total labour expenses decreased by 1.1
per cent or $46 million to $4,012 million.
Salary and associated costs increased by
$108 million as lower headcount was
offset by higher costs per employee.
Labour substitution costs declined by
$242 million from a reduction in labour
outsourcing which was partly due to our
COVID-19 response as a portion of our
labour substitution headcount shifted to
be permanent employees. Employee
redundancy costs increased by $96
million due to job reductions associated
with the T22 program. Total full time staff
equivalents (FTE) decreased by 6.7 per
cent or 1,944 to 27,015.
Goods and services purchased
Total goods and services purchased
decreased by 8.7 per cent or $789 million
to $8,318 million.
Cost of goods sold, which includes
mobile handsets and accessories,
tablets, cellular Wi-Fi, broadband
modems and other fixed hardware
decreased by 19.9 per cent or $693
million to $2,797 million due to lower
hardware and NAS equipment sales
volume.
Network payments decreased by 0.1 per
cent or $2 million to $3,153 million due to
a $243 million decline in costs associated
with lower global voice, data and
connectivity revenue, and lower
international roaming payments, while
nbn access payments increased by $244
million as customers migrate across to
nbn services.
Other goods and services purchased
declined by 3.8 per cent or $94 million to
$2,368 million mainly due to a reduction
in Foxtel service fees as a result of a
decline in Foxtel from Telstra subscribers.
Net impairment losses on financial assets
Total net impairment losses on financial
assets decreased by 20.8 per cent or $42
million to $160 million.
Other expenses
Total other expenses decreased by 16.9
per cent or $604 million to $2,980 million.
Service contracts and other agreements
expenses declined by 22.3 per cent or
$329 million to $1,144 million due to
productivity and cost reduction
programs. Impairment losses (excluding
net losses on financial assets) increased
by 25.6 per cent or $33 million to $162
million largely due to a $34 million
impairment loss for our Sensis
investment. Other expenses decreased
by 15.5 per cent or $308 million to $1,674
million including a $112 million decline in
general and administrative costs.
Depreciation and amortisation
Depreciation and amortisation decreased
by 13.0 per cent or $692 million to $4,646
million including a $291 million decrease
in depreciation of right of use assets, a
$151 million decrease in depreciation of
property, plant and equipment, and a
$250 million decline in amortisation of
intangible assets. Review of asset service
lives during FY21 resulted in a $7 million
decrease in depreciation expense and a
$71 million decrease in amortisation
expense.
24
25
FULL YEAR RESULTS & OPERATIONS REVIEW Financial position
Summary statement of cash flows
Net cash provided by operating activities
Net cash used in investing activities
– Capital expenditure (before investments)
– Other investing cash flows
Free cashflow
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the period
FY21
FY20
Change
$m
$m
7,231
7,010
(2,344)
(2,976)
(3,140)
(3,442)
796
4,887
466
4,034
(4,236)
(4,138)
651
499
(25)
1,125
(104)
604
(1)
499
%
3.2
21.2
8.8
70.8
21.1
(2.4)
n/m
(17.4)
n/m
n/m
Capital expenditure and cash flow
Free cashflow generated from operating
and investing activities was $4,887
million representing an increase of $853
million or 21.1 per cent. It was positively
impacted by a $1,394 million
improvement in working capital largely
due to reduced receivables from lower
handset sales and roaming revenue, and
stronger collections performance, and a
$407 million year on year improvement
including the sale and leaseback of the
Pitt Street exchange property and other
M&A transactions. This was partly offset
by a $967 million decline in reported
lease adjusted EBITDA largely due to a
$734 million decline in net one-off nbn
DA receipts and EBITDA declines across
the Fixed business.
Net cash provided by operating activities
increased by 3.2 per cent or $221 million
to $7,231 million mainly due to a $2,994
million decrease in payments to suppliers
and employees, partly offset by a $2,779
million decline in receipts from
customers.
Net cash used in investing activities decreased by 21.2 per cent or $632 million to
$2,344 million primarily due to a $273 million increase in proceeds from sale and
leaseback, a $160 million increase in proceeds from sale of businesses and shares in
controlled entities (net of cash disposed), and a $132 million increase from the sale of
equity accounted and other investments.
Net cash used in financing activities increased by 2.4 per cent or $98 million to $4,236
million. This was largely due to $698 million in proceeds from the sale of units in a
controlled trust in 1H20 and a $3,168 million decrease in proceeds from borrowings.
This was partly offset by $3,302 million decrease in repayment of borrowings, a $287
million decline in payments for the principal portion of lease liabilities, and a $199
million decline finance costs paid.
Our accrued capital expenditure for the year on a guidance basis was $3,020 million
or 14.4 per cent of sales revenue.
On a guidance basis free cashflow after operating lease payments was $3,812 million.
Performance against guidance has been adjusted for free cashflow associated with
operating lease payments (-$717 million), the sale and leaseback of the Pitt Street
exchange property (-$282 million), M&A (-$164 million) and spectrum ($88 million).
Debt issuance
$m
Debt repayments
Drawings (bilateral bank
facilities)
Proceeds under sale and
leaseback transaction1
Short term commercial
paper and revolving bank
facilities (net)
Other loans
Total
753
414
203
AUD bonds
Euro bond
Bilateral bank facilities
AUD floating rate note
Private placements
35
Other loans
1,405
Total
1. Treated as a financial liability under accounting
standards.
$m
(800)
(708)
(452)
(150)
(145)
(102)
(2,357)
26
Full year results and operations review | Telstra Annual Report 2021
Current liabilities increased by 3.3 per
cent to $10,424 million. Borrowings
increased by $868 million comprising
reclassification to current liabilities of
debt maturing within the next 12 months
and an increase in commercial paper
issuance, partly offset by debt maturities
during the year and other valuation
impacts. Trade and other payables
declined by $214 million due to a
decrease in accrued capital expenditure
while current tax payables decreased by
$100 million as a result of payments of
prior year tax provisions.
Non-current liabilities decreased by 12.2
per cent to $16,826 million. Borrowings
decreased by $2,561 million from
reclassification to current liabilities of
debt maturing within the next 12 months
and foreign currency and valuation
impacts offset by drawings on bilateral
bank facilities and a financial liability
recognised on sale and leaseback of the
underlying land and buildings housing
the Clayton data centre.
Debt position
Our gross debt position was $16,388
million comprising borrowings of $14,136
million, lease liabilities of $3,305 million
less $1,053 million in net derivative
assets. Gross debt decreased by 5.5
percent or $955 million primarily due to
an issuance of $1,405 million offset by
higher debt repayments of $2,357 million.
Net debt decreased by 9.4 per cent or
$1,581 million to $15,263 million
reflecting an increase in cash holdings of
$626 million and the decrease in gross
debt.
Financial
settings
Debt
servicing1
Gearing2
Interest
cover3
FY21
Actual
FY21
Comfort
zone
2.0x
1.5x to 2.0x
50.0% 50% to 70%
13.2x
>7x
1. Debt servicing ratio is calculated as net debt/
reported EBITDA.
2. Gearing ratio is calculated as net debt/total net
debt plus equity.
3. Interest cover is calculated as reported EBITDA/net
interest expense (excluding capitalised interest,
revaluation impacts on our borrowings and
derivatives and other non-cash accounting
impacts).
We remain within our comfort zones for
our credit metrics. Our debt servicing is
2.0 times (30 June 2020: 1.9 times),
gearing ratio is at 50.0 per cent (30 June
2020: 52.7 per cent) and interest cover is
13.2 times (30 June 2020: 11.7 times).
Statement of financial position
Our balance sheet remains in a strong
position with net assets of $15,275
million.
Current assets increased by 8.9 per cent
to $7,114 million. Cash and cash
equivalents increased by $626 million
including proceeds from business and
asset sales while derivative financial
assets increased by $477 million largely
from reclassification to current assets for
instruments maturing within the next 12
months and foreign currency and other
valuation impacts. This was partly offset
by a $544 million decline in trade and
other receivables and contract assets
reflecting lower revenue and better
collections.
Non-current assets decreased by 6.5 per
cent to $35,411 million. Derivative
financial assets decreased by $1,225
million due to a reclassification to
current assets of instruments maturing
within the next 12 months and foreign
currency and other valuation impacts.
Property, plant and equipment declined
by $636 million mainly due to
depreciation expense partly offset by
network investments, while intangible
assets decreased by $281 million mainly
due to amortisation expense partly offset
by spectrum licence and software asset
additions.
Summary statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Total equity
Return on average assets (%)
Return on average equity (%)
30 June 2021
30 June 2020
Change
$m
7,114
35,411
42,525
10,424
16,826
27,250
15,275
15,275
7.0
12.8
$m
6,534
37,869
44,403
10,094
19,162
29,256
15,147
15,147
8.0
12.5
%
8.9
(6.5)
(4.2)
3.3
(12.2)
(6.9)
0.8
0.8
(1.0)pp
0.3pp
27
FULL YEAR RESULTS & OPERATIONS REVIEW
Board
of Directors
John P Mullen
Age 66, BSc
Non-executive Director since July 2008, Chairman effective 27 April 2016 and last re-elected in 2020.
Chairman of the Nomination Committee and previously Chairman of the Remuneration Committee
(2009–2016).
John has extensive experience in international transportation and logistics, with more than two
decades in senior positions with some of the world’s largest transport and infrastructure companies.
He has lived or worked in 13 countries over this time. From 2011 to 2017 John was Chief Executive
Officer of Asciano, Australia’s largest ports and rail operator. Prior to this, John spent 15 years with DHL
Express, a US$20b company employing over 140,000 people in 220 countries, serving as the global
Chief Executive Officer from 2005 to 2009.
Prior to DHL, John spent ten years with the TNT Group, with four years from 1991 to 1994 as Chief
Executive Officer of TNT Express Worldwide based in the Netherlands.
Other listed company directorships (past three years): Chairman, Brambles Limited (Joined 2019, Chair
from 2020) and Director, Brookfield Infrastructure Partners L.P (from 2021 and previously 2017–2020).
Other directorships and not-for-profit appointments: Chairman, Toll Holdings (Private – since 2017).
Chair, Australian National Maritime Museum (Joined 2016 and Chair from 2019). Member, UNICEF Task
Force on Workplace Gender Discrimination and Harassment (2018–2019). UNSW Business School
Advisory Council Member (from 2005). Former – Chairman of the US National Foreign Trade Council
in Washington (2008–2010).
Andrew R Penn
Age 58, MBA (Kingston), AMP (Harvard), FCCA, HFAIPM
Chief Executive Officer and Managing Director since 1 May 2015.
Andy Penn became the CEO and Managing Director of Telstra, Australia’s largest telecommunications
company, on 1 May 2015. At Telstra Andy is leading an ambitious change program transforming Telstra
to be positioned to compete in the radically changing technology world of the future with 5G at its core.
Andy has had an extensive career spanning 40 years across 3 different industries – telecommunications,
financial services and shipping. He joined Telstra in 2012 as Chief Financial Officer. In 2014 he took on the
additional responsibilities as Group Executive International.
Prior to Telstra, Andy spent 23 years with the AXA Group, one of the world’s largest insurance and
investment groups. His time at AXA included the roles of Chief Executive Officer 2006-2011 AXA Asia
Pacific Holdings, Chief Financial Officer, Chief Executive Asia and Chief Executive Australia and New
Zealand. At AXA, Andy was instrumental in building one of the most successful Asian businesses by
an Australian company that was sold to its parent in 2011 for more than A$10bn.
Other directorships and appointments: Member of the Council of Trustees of the National Gallery of
Victoria; Board Director of the Groupe Speciale Mobile Association (GSMA) (from 2018), Chairman of
the Australian Government’s Cyber Security Industry Advisory Committee; Patron, on behalf of Telstra,
of the National and Torres Straights Islanders Arts Awards (NATSIAA), Life Governor of Very Special Kids
(from 2003) and an Ambassador for the Amy Gillet Foundation. He serves on the advisory boards of both
The Big Issue Homes for Homes and Juvenile Diabetes Research Foundation.
Board of Directors | Telstra Annual Report 2021
Eelco Blok
Age 64, MS, BBA
Non-executive Director appointed on 15 February 2019 and elected on 15 October 2019. Member of
the Nomination Committee.
Eelco has almost 35 years of telecommunications experience at Dutch-based landline and mobile
telecommunications company, KPN, where he was CEO for seven years until April 2018.
Eelco started his career in Finance at KPN before becoming responsible for several businesses
including Carrier Services, Corporate Networks and Network Operations. In 2006 he was appointed
a member of the KPN Board of Management, where he was consecutively responsible for the Fixed
Division, Business Market – Wholesale – Operations and Mobile International. He was appointed CEO
in April 2011.
From 2011 to 2017 Eelco was co-chairman of the Dutch National Cyber Security Council an advisory
body of the Dutch government. He was also a Director for the international association GSMA from
2017 to April 2018.
Other listed company directorships (past three years): Member of the Supervisory Board of Signify
NV (from 2017). Director, OTE Group (from 2019). Former – Member of the Supervisory Board of Post
NL (2017–2021).
Other directorships and appointments: Member of the Supervisory Boards of Koninklijke VolkerWessels
N.V (from 2019) and Fairphone (from 2020). Advisor, Reggeborgh Groep BV (from 2018).
Roy H Chestnutt
Age 62, BSc, BA, MBA
Non-executive Director appointed on 11 May 2018 and elected on 16 October 2018. Member of the Audit
& Risk Committee and the Nomination Committee.
Roy has more than 30 years of direct telecommunications experience. Most recently he was Executive
Vice President, Chief Strategy Officer for Verizon Communications and has held leadership positions
with other leading firms including Motorola, Grande Communications, Sprint-Nextel and AirTouch.
Roy’s last six years with Verizon, included almost five as head of strategy responsible for the
development and implementation of Verizon’s overall corporate strategy, including business
development, joint ventures, strategic investments, acquisitions and divestitures.
Roy has been a Director for international industry association GSMA and is a former chair of the Chief
Strategy Officers Group including 25 global strategists from the world’s leading wireless carriers.
Other listed company directorships (past three years): Director, Digital Turbine Inc (from 2018). Board of
Advisors, Accenture Luminary (from 2021). Former – Director, Saudi Telecom (2018–2021) and Boingo
Wireless, Inc (2019–2021).
Other directorships and appointments: Non-executive Partner, FTI Consulting Group/Delta Partners.
Senior advisor, VMware Inc and Tillman Global Holdings LLC.
Craig W Dunn
Age 57, BCom, FCA
Non-executive Director appointed on 12 April 2016 and last re-elected in October 2019. Chairman of the
Audit & Risk Committee and member of the Nomination Committee.
Craig is a highly regarded business leader with more than 20 years’ experience in financial services,
pan-Asian business activities and strategic advice for government and major companies. Craig was
Chief Executive Officer and Managing Director of AMP from 2008 to 2013 and held various roles at AMP
in a 13-year career including Managing Director of AMP Financial Services, Managing Director for AMP
Bank and head of Corporate Strategy and M&A.
Previously he was at Colonial Mutual Group from 1991 to 2000, including Managing Director for EON
CMB Life Insurance in Malaysia and senior roles in Group Strategy, M&A and Finance. He has also
served as a member of the Federal Government’s Financial System Inquiry in 2014 and the Consumer
and Financial Literacy Taskforce.
Other listed company directorships (past three years): Director, Westpac (from 2015).
Other directorships and appointments: Chair, ISO Blockchain Standards Committee (from 2017) and
The Australian Ballet (Joined 2014, Chair from 2015). Director, Lion Pty Limited and Lion Global Craft
Beverages Pty Limited (from 2021).
28
29
BOARD OF DIRECTORS Peter R Hearl
Age 70, B Com (UNSW), MIML ANZ, FAICD, Member – AMA
Non-executive Director appointed on 15 August 2014, last re-elected in October 2020. Chairman of the
People & Remuneration Committee and member of the Nomination Committee.
Peter is an experienced company director with substantial international experience as a senior
executive in the fast moving consumer goods sector. Peter served in senior executive roles with Yum!
Brands Inc from 1997 to 2008, including global Chief Operations and Development Officer for Yum!
Brands from 2006 until 2008 and President of Pizza Hut from 2002 to 2006. He previously worked for
PepsiCo Inc in Sydney and London reaching regional vice-president level, as well as in various roles
with Exxon in the United States and Australia. Peter was a Director of Treasury Wine Estates from
2012 to 2017.
Other listed company directorships (past three years): Chairman, Endeavour Group Ltd (from 2021.
Chairman-elect from 2019 prior to listing in June 2021). Director, Santos Ltd (from 2016).
Other directorships and appointments: Member, UNSW’s Australian School of Business Alumni Leaders
Group, Trustee of The Stepping Stone Foundation (from 2020) and member of the Stepping Stone
Foundation’s Investment Committee (from 2018). Previously honorary Chairman of the US-based UNSW
Study Abroad-Friends and US Alumni Inc.
Bridget Loudon
Age 33, BCom (University College Galway)
Non-executive Director appointed on 14 August 2020 and elected on 13 October 2020. Member of the
Nomination Committee.
Bridget is Founder and Chief Executive Officer of Expert360. Expert360 is Australia’s number one skilled
talent platform, using sophisticated vetting and matching technology to connect more than 1000
companies with more than 30,000 elite consultants, project managers, data analysts and developers.
Expert360 has been recognised as a game-changing platform by, among others, Harvard Business
Review and the Economist.
Prior to founding Expert360 in 2013, Bridget worked as a management consultant for Bain & Co in
Sydney. At Bain, Bridget was part of teams that advised ASX 50 leaders on strategy and transformation
across a range of industries such as Retail, Consumer, Mining and Education.
Bridget is a leader in how organisations transform themselves to capture the opportunities presented
by developments in technology. She has passion for solving customer problems and an impressive
desire to create positive outcomes for society using technology.
Other directorships and appointments: Director, Expert 360 Pty Ltd (from 2013) and E360 Holdings Pty
Ltd (from 2019).
Elana Rubin
Age 63, AM, BA (Hons), MA, FFin, FAICD
Non-executive Director appointed on 14 February 2020 and elected on 13 October 2020. Member of the
People & Remuneration Committee and the Nomination Committee.
Elana has more than 20 years Board experience across the financial service sector, including
superannuation and funds management as well as the property, infrastructure and government sectors.
Her executive career spanned industrial relations, social and economic policy and superannuation.
Elana is adept at working in consumer facing organisations with a strong customer focus and can
balance commercial interests with the complex requirements of regulated sectors.
Elana has strong risk management and regulatory experience, having worked in highly regulated sectors
including as Chair of AustralianSuper, one of Australia’s largest and innovative super funds, and Chair of
Victorian WorkCover Authority, a highly regarded regulator and personal injury insurer.
Other listed company directorships (past three years): Chair, Afterpay Limited (Joined 2017, Chair from
2020). Acting Chair, Slater and Gordon Limited (from 1 August 2021 for an expected period of a few
months, Director from 2018). Former – Director, Mirvac Limited (2010–2019).
Board of Directors | Telstra Annual Report 2021
Nora L Scheinkestel
Age 61, LLB (Hons), PhD, FAICD
Non-executive Director since August 2010 and last re-elected in October 2019. Member of the Audit &
Risk Committee (previously Chairman Audit & Risk Committee 2012–2019), the Nomination Committee
and the People & Remuneration Committee.
Dr Scheinkestel is an experienced company director with more than 25 years’ experience as a non-
executive Chairman and Director of companies in a wide range of industry sectors including the public,
government and private sectors. Dr Scheinkestel has a long track record in highly regulated sectors
such as infrastructure and financial services and in industries facing significant disruption from
technology and market changes.
Dr Scheinkestel is a former banking executive and has significant experience in international and
project financing. She has extensive financial and risk management expertise, which includes having
chaired the audit and risk committees of a number of listed companies.
She is a published author, has worked as an Associate Professor in the Melbourne Business School at
Melbourne University and a former member of the Takeovers Panel and was awarded a Centenary Medal
for services to Australian society in business leadership.
Other listed company directorships (past three years): Director, AusNet Services Ltd (from 2016),
Brambles Limited (from 2020), Westpac Banking Corporation (from 2021). Former – Director, Atlas
Arteria Limited (2014–2020), Atlas Arteria International Limited (2015–2020) and OceanaGold
Corporation (2018–2019).
Margaret L Seale
Age 60, BA, FAICD
Non-executive Director since May 2012 and last re-elected in October 2018. Member of the Audit & Risk
Committee and the Nomination Committee.
Margie is an experienced company director and has served and is serving on the boards of companies
across a range of industries. She previously worked in senior executive roles in Australia and overseas,
including in the consumer goods, health and global publishing sectors, and sales and marketing, and in
the successful transition of traditional business models to digital environments.
Immediately prior to her non-executive career, Margie was Managing Director of Random House
Australia and New Zealand and President, Asia Development for Random House globally. She is
currently a non-executive director of Scentre Group Limited and Westpac Banking Corporation. Margie
has previously served on the boards of Australian Pacific (Holdings) Pty Limited, Penguin Random
House Australia Pty Ltd (as a non-executive director and then Chair), the Australian Publishers’
Association, Bank of Queensland Limited, Ramsay Health Care Limited, the Council of Chief Executive
Women (chairing its Scholarship Committee), the Powerhouse Museum and the Sydney Writers’ Festival.
She has been on the Advisory Council of J P Morgan, Australia and New Zealand, and the Advisory Board
for the Australian Public Service Commission Centre for Learning and Leadership. In 2015, Margie
founded philanthropic literary travel company Ponder & See, which funds writers’ festivals and writers.
Other listed company directorships (past three years): Director, Westpac Banking Corporation (from
2019) and Scentre Group Limited (from 2016).
Niek Jan van Damme
Age 60, Drs.
Non-executive Director elected on 16 October 2018. Member of the People & Remuneration Committee
and the Nomination Committee.
Mr van Damme has almost 20 years direct telecommunications experience, with the first part of his
career focusing on brand and category management in a range of businesses including consumer goods
and retail. Most recently he was a member of the Deutsche Telekom Board of Management, where he
was responsible for fixed line and mobile communications in Germany. Niek Jan has held leadership
positions with other leading firms including Ben Nederland, later T-Mobile Netherlands, a challenger
mobile brand, where he was the Chairman of the Managing Board.
At Deutsche Telekom he led the merger of mobile and fixed line business, laying the foundation for
making Deutsche Telekom the leading operator in converged services. He also led a major network
modernisation program with the establishment of a new IP core, and high 4G network investments.
30
31
BOARD OF DIRECTORS Senior
management
team
Andrew Penn
Chief Executive Officer
Kim Krogh Andersen
Group Executive, Product & Technology
Brendon Riley
CEO, Telstra InfraCo
Telstra InfraCo is responsible for
efficiently leveraging Telstra’s significant
portfolio of assets, ensuring it maintains
and monetises these assets and meets
its obligations to wholesale customers.
Brendon is also responsible for the
Telstra Health business, which is
separate to Telstra InfraCo.
Dean Salter
Group Executive, Global Business
Services
Global Business Services (GBS) brings
together shared services such as
Assurance, Activation, Billing, Property,
Procurement and People Services to
improve customer service, efficiency
and service levels across the company.
Lyndall Stoyles
Group General Counsel and Group
Executive, Sustainability, External
Affairs & Legal
The Sustainability, External Affairs and
Legal team is responsible for providing
advice to Telstra’s Board and CEO as
well as providing legal counsel, policy
advice, stakeholder management and
community programs across government
relations, regulatory, risk compliance,
sustainability and regional affairs.
Andy is leading an ambitious change
program transforming Telstra to be
positioned to compete in the radically
changing technology world of the future
with 5G at its core. Andy has had an
extensive career spanning 40 years
across three different industries –
telecommunications, financial services
and shipping. He joined Telstra in 2012 as
Chief Financial Officer. In 2014 he took on
the additional responsibilities as Group
Executive International. Andy became
the CEO and Managing Director of Telstra,
Australia’s largest telecommunications
company, on 1 May 2015. Further detail
about Andy can be found in the Board of
Directors section.
Vicki Brady
Chief Financial Officer and Group
Executive, Strategy & Finance
The Strategy and Finance team guides
the company’s financial performance
and reporting, leads the development
of and progress against its corporate
strategy, and oversees its internal audit
capabilities, with the aim of delivering
shareholder value over the long-term.
Michael Ackland
Group Executive, Consumer & Small
Business
Consumer and Small Business works to
create and deliver the best experiences
possible for consumers and small
business customers through radically
simplifying our products and services,
while also working to transform the
experience customers have with us.
Product and Technology (P&T) drives
Telstra’s end-to-end product
accountability, profitability, and
experience. The team oversees Telstra’s
overall product and technology roadmap
and strategy, and manages the lifecycle
and economics of these products.
Through Telstra Labs, P&T is also the
thought-leader and incubator of
emerging technologies.
Alex Badenoch
Group Executive, Transformation,
Communications & People
The Transformation, Communications
and People team oversees the overall
T22 transformation program, leads the
delivery of our T22 Pillar 3 milestones
and our broader Human Resources
function. It is also responsible for
Telstra’s internal and external
communications function, ensuring
our employees are kept informed
and enhancing Telstra’s reputation.
David Burns
Group Executive, Enterprise
Enterprise is responsible for revenues
in excess of $7.5 billion from delivering
connectivity, platforms, applications
and tailored industry solutions to
Telstra’s enterprise and government
customers. It is also responsible for
Telstra’s international operations and
the largest subsea cable network in the
Asia Pacific region.
Nikos Katinakis
Group Executive, Networks & IT
Networks and IT is responsible for
ensuring Telstra delivers next generation
network technologies to create the
largest, smartest, safest and most
reliable networks in the world. This
includes rolling out new technology
developments, such as those related to
5G, as well as maintaining and enhancing
Telstra’s IT platforms.
32
33
Sustainability
Our goal is to embed social and environmental considerations into our business in ways that create
value for the company and our stakeholders.
Governance at Telstra
We are committed to excellence in corporate governance, transparency and accountability.
This is essential for the long term performance and sustainability of our company, and to protect
and enhance the interests of our shareholders and other stakeholders.
Our approach
This year we reviewed our approach to
sustainability and took steps to align our
strategy more closely to our purpose and
broader organisational objectives. Our
review resulted in the launch of a new
Responsible Business Strategy (Strategy)
and governance framework, which seeks
to embed responsible business principles
into every aspect of what we do, from the
way we interact with our customers,
suppliers and people, to the impact we
have on our planet and the role we can play
in increasing the number of Australians
who benefit from the digital economy.
When considering what it means to be a
responsible business, it’s clear that how
we do business is just as important as
what we do and why we do it. Community
trust in institutions reached a new low
point at the end of the last decade and yet
in a short space of time more and more
corporates, like Telstra, are standing up on
important issues, like climate change. In
doing so, we are demonstrating that we
understand the expectations on us and
the responsibility to support the
communities in which we operate.
Our Strategy reflects our most material
topics, our United Nations Sustainable
Development Goals (SDGs) priorities, the
areas in which we have the expertise to
make a meaningful impact, and where we
see opportunities to use innovative, tech-
based solutions to help address major
societal challenges and opportunities.
Through the Strategy we will build on our
reputation as a trusted, sustainable
business and draw on our tech expertise
to play a leadership role in promoting
digital inclusion and environmental action.
The Strategy was developed in consultation with key stakeholders and represents a holistic approach to sustainability that is
informed by, and integrated with, our core business activities. The Strategy includes three pillars:
Trusted operations
We will operate as a globally
trusted company that people want
to work for and with.
Digital inclusion
We will help our customers
and communities to thrive
in a digital world.
Environmental action
We will use technology to address
environmental challenges and help
others to do the same.
Our governance framework plays an
integral role in supporting our business
and helping us deliver on our strategy.
It provides the structure through which
our strategy and business objectives are
set, our performance is monitored, and
the risks we face are managed.
It includes a clear framework for decision
making and accountability across our
business and provides guidance on the
standards of behaviour we expect of
each other.
Telstra complies with the fourth edition
of the ASX Corporate Governance
Council’s Corporate Governance
Principles and Recommendations. We
regularly review our governance practices
in light of current and emerging corporate
governance developments of relevance to
our company, and to reflect market
practice, expectations and regulatory
changes as appropriate.
Our 2021 Corporate Governance
Statement, which provides
detailed information about
governance at Telstra, is
available on our website at
telstra.com/governance.
Our Bigger Picture FY21
Sustainability Report,
available online at telstra.com/
sustainability/report, provides
a transparent overview of our
progress and performance this
year in relation to each of our
strategic pillars. The report
also details the work we are
undertaking in support of the
SDGs and includes disclosures
aligned to the Taskforce on
Climate related Financial
Disclosures (TCFD).
Introducing three new resource efficiency goals
Having announced a significant acceleration of our response to climate change
in FY20, this year we launched three new resource efficiency goals that round
out our approach to environmental action. They are:
Reuse or recycle 500,000 mobile
phones, modems and other
devices each year to 2025
Ensure 100% of Telstra-branded
packaging is made of renewable
or recycled material and is fully
recyclable by 2022
Increase our network waste
recycling rate to 85% by 2025
Shareholders
Telstra Board
Audit & Risk
Committee
People &
Remuneration Committee
Nomination
Committee
Chief Executive Officer
Our People
Our governance framework includes:
• open, clear and timely communications
with our shareholders
• a skilled, experienced, diverse and
independent Board, with a Board
Committee structure suited to our needs
• clear delegation, decision making and
accountability frameworks
• robust systems of risk management and
assurance
• Telstra Values, Code of Conduct and policy
framework which explain what we stand
for as an organisation and how we will
conduct ourselves as we work together to
deliver our strategy.
34
35
SUSTAINABILITY & GOVERNANCE Directors’
Report
36
37
DIRECTORS’ REPORT Directors’ Report
Directors’ Report | Telstra Annual Report 2021
In accordance with a resolution of the Board, the Directors
present their report on the consolidated entity (Telstra Group)
consisting of Telstra Corporation Limited (Telstra) and the
entities it controlled at the end of, or during the year ended, 30
June 2021. Financial comparisons used in this report are of
results for the year ended 30 June 2021 compared with the
results for the year ended 30 June 2020.
The historical financial information included in this Directors’
Report has been extracted from the audited Financial Report
accompanying this Directors’ Report.
Dividends paid during the year were as follows:
Dividend
Date
resolved
Date
paid
Fully franked
dividend
per share
Total dividend
($ million)
Total final dividend for the year ended 30 June 2020
13 Aug 2020
24 Sept 2020
8.0 cents
Total interim dividend for the year ended 30 June 2021
11 Feb 2021
26 Mar 2021
8.0 cents
951
951
Principal activity
Our principal activity during the financial year was to provide
telecommunications and information services for domestic and
international customers. There has been no significant change
in the nature of this activity during the year.
Review and results of operations
Information on the operations and financial position for the
Telstra Group is set out in the Operating and Financial Review
(OFR), comprising the Chairman and CEO’s message, Strategy
and performance, Our material risks, Outlook and Full year
results and operations review sections accompanying this
Directors’ Report.
Dividend
The objectives of our Capital Management Framework are to
maximise returns for shareholders, maintain financial strength
and retain financial flexibility. The objectives of the Capital
Management Framework are supported by the following
principles:
• committed to balance sheet settings consistent with an A
band credit rating
• pay a fully-franked ordinary dividend of 70 to 90 per cent of
our underlying earnings, as defined below
• target capex/sales ratio of around 12 per cent, excluding
spectrum, from FY23
• maintain flexibility for portfolio management and to make
strategic investments.
In addition to the ordinary dividend, we intend to return in the
order of 75 per cent of net one-off nbn receipts to shareholders
over time via fully-franked special dividends.
Underlying earnings is defined as net profit after tax from
continuing operations excluding net one-off nbn receipts, one-
off restructuring costs and guidance adjustments. Guidance
adjustments include impairments in and to investments or non-
current tangible and intangible assets, proceeds on the sale of
businesses, mergers and acquisitions and purchase of
spectrum. “Net one-off nbn receipts” is defined as the net nbn
one-off Definitive Agreement receipts (consisting of Per
Subscriber Address Amount, Infrastructure Ownership and
Retraining) less nbn net cost to connect less tax. The dividend
is subject to no unexpected material events, and is subject to
Board discretion having regard to financial and market
conditions, business needs and maintenance of financial
strength and flexibility consistent with our Capital Management
Framework.
On 11 February 2021, the Directors resolved to pay an interim
fully franked dividend for the financial year 2021 of 8 cents per
ordinary share, comprising an interim ordinary dividend of 5
cents per share and an interim special dividend of 3 cents per
share.
On 12 August 2021, the Directors resolved to pay a final fully
franked dividend of 8 cents per ordinary share ($951 million),
comprising a final ordinary dividend of 5 cents per share and a
final special dividend of 3 cents per share. The record date for
the final dividend will be 26 August 2021, with payment to be
made on 23 September 2021. Shares will trade excluding
entitlement to the final dividend on 25 August 2021.
Further information regarding FY21 dividends is set out in the
Chairman and CEO message and the Full Year Results and
Operations Review accompanying this Directors’ Report.
The Board has determined that the Dividend Reinvestment
Plan (DRP) will not operate for the final dividend for financial
year 2021.
Significant changes in the state of affairs
Details of Directors and executives
Bridget Loudon was appointed as a non-executive Director
effective 14 August 2020. There were no other changes to the
Directors of Telstra Corporation Limited during the financial
year and up to the date of this report.
Information about our Directors and Senior Executives is
provided as follows:
• names of our current Directors and details of their
qualifications, experience, special responsibilities, periods of
service and directorships of other listed companies are set out
in the Board of Directors section accompanying this Directors’
Report
• details of Director and Senior Executive remuneration are set
out in the Remuneration Report, which forms part of the
Directors’ Report.
There were no significant changes in the state of affairs of our
company during the financial year 2021.
Business strategies, prospects and likely developments
The OFR sets out information on Telstra’s business strategies and
prospects for future financial years, and refers to likely
developments in Telstra’s operations and the expected results of
those operations in future financial years. Information in the OFR
is provided to enable shareholders to make an informed
assessment of the business strategies and prospects for future
financial years of the Telstra Group. Detail that could give rise to
likely material detriment to Telstra (for example, information that
is commercially sensitive, is confidential or could give a third
party a commercial advantage) has not been included. Other
than the information set out in the OFR, information about other
likely developments in Telstra’s operations and the expected
results of these operations in future financial years has not been
included.
Events occurring after the end of the financial year
The Directors are not aware of any matter or circumstance that
has arisen since the end of the financial year that, in their
opinion, has significantly affected, or may significantly affect in
future years, Telstra’s operations, the results of those
operations or the state of Telstra’s affairs, other than
• the final dividend for the financial year 2021 and that the DRP
will not operate in respect of that dividend
• acquisition of MedicalDirector
• on-market share buy-back.
Refer to note 7.5, Events after reporting date, of the 2021
Financial Report for details.
38
39
DIRECTORS’ REPORT Board and Committee meeting attendance
Details of the number of meetings held by the Board and its Committees during financial year 2021, and attendance by Board
members, are set out below:
Committees1
Board
Audit and Risk
Nomination
People and
Remuneration
a
20
20
20
20
20
20
16
20
20
20
20
b
20
20
20
20
20
20
15
20
20
20
20
a
–
–
–
6
6
–
–
–
6
6
–
b
(3)
(6)
–
5
6
(1)
–
(2)
6
6
(1)
a
6
–
6
6
6
6
5
6
6
6
6
b
6
(6)
6
5
6
6
5
6
6
6
6
a
–
–
–
–
–
6
–
6
6
–
6
b
(3)
(6)
–
–
–
6
–
6
6
–
6
John P Mullen3
Andrew R Penn
Eelco Blok
Roy H Chestnutt
Craig W Dunn3
Peter R Hearl3
Bridget Loudon2
Elana Rubin3
Nora L Scheinkestel3
Margaret L Seale
Niek Jan van Damme
Total number of meetings held
20
6
6
6
Column a: number of meetings held while a member.
Column b: number of meetings attended.
1. Committee meetings are open to all Directors to attend. Where a Director has attended a meeting of a Committee of which he or she was not a member, this is
indicated by ( ).
2. Bridget Loudon was appointed as a non-executive Director effective from 14 August 2020.
3. From time to time the Board establishes ad hoc committees to support the Board in carrying out its responsibilities. In FY20 a Committee was established to
oversee a review into Telstra’s sales, complaint handling and debt collection practices. The members were John Mullen, Craig Dunn and Peter Hearl and the
Committee met 7 times during FY21. During the year an ad hoc Board committee was established in relation to the formulation and implementation of a proposed
legal restructure of the Telstra Group as announced on 12 November 2020 and other matters arising from or in connection with the proposed restructure. This
committee commenced and ceased operation in FY21 and met 3 times. The members were John Mullen, Craig Dunn, Elana Rubin and Andrew Penn, as well as
Nora Scheinkestel who was a member for one of its three meetings.
Director shareholdings in Telstra
Company Secretary
Sue Laver BA, LLB (Hons) (Monash), GAICD, FGIA
Sue was appointed Company Secretary of Telstra Corporation
Limited effective 1 February 2018.
Sue is a senior legal and governance professional with over
20 years’ experience advising senior management and boards.
Sue reports to the board and her duties include continuous
disclosure compliance, corporate governance and
communication with Telstra’s 1.4 million shareholders.
Sue joined Telstra in 1997 and has served in senior legal
roles throughout the company including as Deputy Group
General Counsel, and General Counsel roles across the
company including: Dispute Resolution, HR, Finance,
Risk and Compliance, Media and Telstra Country Wide.
She holds a Bachelor of Law (Hons) and a Bachelor of
Arts from Monash University.
Details of Directors’ shareholdings in Telstra as at 12 August
2021 are shown in the table below:
Director
John P Mullen
Andrew R Penn2
Eelco Blok
Roy H Chestnutt
Craig W Dunn
Peter R Hearl
Bridget Loudon
Elana Rubin
Nora L Scheinkestel
Margaret L Seale
Niek Jan van Damme
Number of shares held1
101,159
2,152,021
75,000
70,000
70,073
100,000
–
67,961
148,037
253,500
77,000
1. The number of shares held refers to shares held either directly or indirectly by
Directors as at 12 August 2021 or, if earlier, as at the date of cessation as a
Director. Shares in which the Director does not have a relevant interest, including
shares held by the Directors’ related parties (including relatives), are excluded.
Refer to the Remuneration Report tables for total shares held by Directors and
their related parties directly, indirectly or beneficially as at 30 June 2021. The
numbers above include 175,000 shares held by a related party of Margaret
Seale. In this case, the Director has a relevant interest.
2. Andrew Penn also holds 1,201,242 Performance Rights.
Directors’ Report | Telstra Annual Report 2021
Directors’ and officers’ indemnity and insurance
(a) Constitution
Telstra’s constitution contains permissive provisions allowing it
to indemnify, to the maximum extent permitted by law:
• certain officers of Telstra and its related bodies corporate
(“Telstra Officers”), for any liability and legal costs which they
may incur in that capacity;
• certain employees of Telstra and its related bodies corporate
(“Telstra Employees”), for any liability which they may incur in
that capacity; and
• Telstra Officers and Telstra Employees, for any liability which
they may incur as a director or other officer of a company that
is not related to Telstra.
(b) Deeds of indemnity
Telstra has also executed deeds of indemnity in favour of
(amongst others):
• Directors and secretaries of Telstra (past and present);
• certain senior managers and employees of Telstra and its
wholly-owned subsidiaries and partly-owned companies
(including, for example, in relation to particular projects); and
• certain Telstra Group senior managers, employees and other
persons that act as nominee directors or secretaries, or in
other positions (at Telstra’s request) for entities or industry
associations, including wholly-owned subsidiaries and partly-
owned companies of Telstra,
(a) Prosecutions or convictions
Telstra has not been prosecuted for, or convicted of, any
significant breaches of environmental regulation during the
financial year.
(b) Energy and greenhouse emissions
In Australia, Telstra is subject to the reporting requirements of
the National Greenhouse and Energy Reporting Act 2007, which
requires Telstra to report its annual Australian greenhouse gas
emissions, energy consumption and energy production. Telstra
has implemented systems and processes for the collection and
reporting of data and has, in accordance with our obligations,
reported to the Clean Energy Regulator on an annual basis. The
next report is due on 1 November 2021 and will again be
supported with an independent assurance report.
In the United Kingdom, Telstra is subject to the Energy Savings
Opportunity Scheme (ESOS) Regulations 2014. Telstra qualifies
for ESOS and must carry out energy savings assessments every
four years. These assessments are audits of the energy used by
our buildings, network facilities and transport to identify cost-
effective energy saving measures. Telstra has met its
obligations under ESOS for all compliance periods to date,
being those first two compliance periods ended 5 December
2015 and 5 December 2019.
For more information on environmental performance, including
environmental regulation, refer to the Bigger Picture FY21
Sustainability Report, which is available online at telstra.com/
sustainability/report.
in each case as permitted under Telstra’s constitution and the
Corporations Act 2001 (Cth) (the Act).
Non-audit services
The deeds in favour of Directors of Telstra also give Directors
certain rights of access to Telstra’s books and require Telstra to
maintain insurance cover for the Directors.
(c) Directors’ and officers’ insurance
Telstra maintains directors’ and officers’ insurance policies
that, subject to some exceptions, provide worldwide insurance
cover to past, present and future directors, secretaries and
officers and certain employees of Telstra and its subsidiaries
and, in certain limited circumstances, other entities. Telstra has
paid the premiums for these policies. The directors’ and officers’
insurance policies prohibit disclosure of the premiums payable
under the policies and the nature of the liabilities insured.
Environmental regulation and performance
Telstra, as a minimum, seeks to be compliant with all applicable
environmental laws and regulatory obligations relevant to its
operations. Where instances of non-compliance may occur,
Telstra has procedures requiring that internal investigations are
conducted to determine the cause of the non-compliance and
to ensure that any risk of recurrence is minimised. Telstra’s
procedures further require that the relevant government
authorities are notified of any environmental incidents (where
applicable) in compliance with statutory requirements. Telstra
complies with notices issued by government authorities and
regulators.
During financial year 2021, Telstra’s auditor, Ernst & Young (EY),
has been engaged on assignments additional to its statutory
audit duties. Details of the amounts paid or payable to EY for
audit and non-audit services provided during the year are
detailed in note 7.1 to the financial statements in our 2021
Financial Report.
The Directors are satisfied, based on advice provided by the
Audit & Risk Committee that the provision of non-audit services
during financial year 2021 is consistent with the general
standard of independence for auditors imposed by the Act and
that the nature and scope of each type of non-audit service
provided did not compromise the auditor independence
requirements of the Act for the following reasons:
• all EY engagements, including non-audit services, were
approved in accordance with the external auditor services
policy adopted by Telstra and subject to confirmation by both
management and EY that the provision of these services does
not compromise auditor independence;
• the external auditor services policy clearly identifies
prohibited services, which include reviewing or auditing the
auditor’s own work or EY partners or staff acting in a
managerial or decision-making capacity for Telstra; and
• the provision of non-audit services by EY is monitored by the
Audit & Risk Committee via periodic reporting to the Audit &
Risk Committee.
A copy of the auditor’s independence declaration is set out in
the Auditor’s Independence Declaration to the Directors of
Telstra Corporation Limited and forms part of this report.
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41
DIRECTORS’ REPORT Directors' Report | Telstra Annual Report 2021
The FY21 primary performance measures and targets were
selected by the Board to ensure that the CEO and Group
Executives continue to deliver against our T22 strategy, and
their rewards are directly linked to their individual contribution,
company performance and long term shareholder value
creation. The key remuneration outcomes under the FY21
EVP include:
• The CEO’s Individual EVP Outcome was 63.8% of the
maximum opportunity
• The average Individual EVP Outcome for all other Senior
Executives (i.e. excluding the CEO) was 58.0% of the
maximum opportunity.
Positive outcomes were achieved across many of the financial
and non-financial primary performance measures for FY21
demonstrating strong delivery against our FY21 Corporate Plan
and T22 strategy. Notwithstanding the impact COVID-19
continued to have on our business, the Board determined that
the primary performance measure outcomes and the Base EVP
Outcome would be driven by the results achieved and so no
adjustments were made for the impact of COVID-19. In relation
to the sale of the Pitt St exchange, this transaction would have
ordinarily been included in underlying EBITDA and the sale was
indeed budgeted this way in management’s FY21 targets. Due
to the scale of the gain, however, it has been excluded from
Underlying EBITDA in our reported results in order to be fully
transparent with shareholders. However, the gain has been
allowed to flow through to the Base EVP outcomes (refer to
section 2.2 for further information) in recognition of both the
significant over achievement on that specific transaction (a
benefit of $102 million against a budget of $35 million), and
more broadly of management’s strong performance in over-
delivering against the overall T22 asset monetisation. The
average impact of the Pitt St exchange sale on outcomes across
all Telstra incentive plans is +1.9%, with a maximum impact to
the EVP pool for Senior Executives of +2.5%.
This year was the first time that performance rights granted
under the EVP were tested against the RTSR performance
condition since the EVP was first implemented in 2018. The
first tranche was subject to an RTSR condition measured over
the four year performance period from 1 July 2017 to 30 June
2021. Despite the strong share price performance over the last
twelve months, we fell short of the 4-year RTSR performance
condition and no performance rights vested for Tranche 1 of
the FY18 EVP. This outcome demonstrates the impact of the
‘double hurdle’ structure (where performance is measured
over both the initial performance period and the RTSR
performance period) and the sustained level of share price
performance required for executives to obtain value from
performance rights granted to them under the EVP. The
second tranche is subject to an RTSR performance condition
measured over a five year performance period from 1 July 2017
to 30 June 2022.
Further detail regarding the key FY21 remuneration outcomes
for the CEO and other Senior Executives and our non-executive
director fees is provided in the report that follows this letter.
Looking ahead
FY22 is a pivotal growth year in our financial trajectory as we
move past the FY21 inflection point, complete T22 and build
strong momentum into FY23-25.
We remain fully committed to finishing the job with T22 and
that includes continuing to improve customer experience,
including for our regional customers, and extending our
geographic leadership in 5G. We will continue to focus on
growing the core of our business as well as looking for growth,
including from areas like health and energy. And we want to
complete our work digitising and simplifying our business and
broadening our new ways of working. And in doing so, deliver
on our financial ambitions.
As part of our commitment to provide market leading
transparency and disclosure, we again provide detail on our
remuneration framework and targets for the coming year.
These appear in Section 4 of our Remuneration Report.
This provides our shareholders with meaningful information
to assess the appropriateness of our remuneration targets
and outcomes. In setting performance measures for FY22,
the Board sought to ensure the targets were robust and
sufficiently demanding, taking into account the key
deliverables and milestones outlined in our T22 strategy,
planned financial outcomes contained within our FY22
Corporate Plan and FY22 guidance (as announced on 12
August 2021).
We do not anticipate any increases to non-executive Director
base fees for FY22. Similarly, we do not anticipate any
increases in Senior Executive Fixed Remuneration for FY22,
other than on appointment or promotion to a new role or due
a significant increase in accountabilities.
On behalf of the People and Remuneration Committee, I would
like to thank you for your support as a Telstra shareholder and
invite you to read the full report in detail.
Peter R. Hearl
People and Remuneration Committee Chairman
Message from the
People and Remuneration
Committee Chairman
Dear fellow shareholders,
On behalf of your company’s People and Remuneration Committee, I am pleased to present Telstra’s
FY20 Remuneration Report.
How the company rewards its most senior people is an important issue for many shareholders.
The Board spends a significant amount of time trying to get the balance right between protecting
shareholders’ interests, while at the same time motivating, incentivising and retaining the best
management talent that we can attract.
FY21 performance
Our FY21 financial results show the turning point we have
reached and underscore our commitment to delivering long
term value for shareholders. On a reported basis, Total Income
(excluding finance income) for the year decreased 11.6% to
$23.1 billion and NPAT grew 3.4% to $1.9 billion. On a guidance
basis1, Underlying EBITDA declined 9.7% to $6.7 billion.
Underlying EBITDA included an in-year nbn headwind2 of
$650 million and an estimated $380 million financial impact
from COVID-193. However, in spite of continued impacts from
the nbn headwind, strong competition and the COVID-19
pandemic, we began to see growth in our underlying business.
Progress on our T22 transformation program (T22), including
our focus to simplify and digitise, remove customer pain
points, and remove legacy systems and processes, helped
reduce underlying fixed costs by $490 million or 8.1%. This
brought the total underlying fixed cost reductions to $2.3
billion since FY16 and we are on track to achieve our $2.7
billion net cost reduction target by the end of FY22. At the end
of the financial year, we had completed or were on track to
deliver around 80% of our T22 scorecard metrics. As we
approach the end of T22, we are well progressed to deliver our
T22 strategic objectives. Further information on our FY21
performance can be found in the FY21 Full Year Results and
Operations Review.
Throughout the year, there has been a significant focus on
improving our employee experience and transforming our
ways of working. This year we refreshed our values in
consultation with our people. Values play an important role
in an organisation because they help guide us through both
the easier times and decisions, as well as the harder ones.
We further matured our agile operating model and took a
leadership position on flexible working while also supporting
our people as we continue to deal with the challenging
impacts of COVID-19, in both our personal and working lives.
We finished the year with an employee engagement result
score of 78 which, although did not fully achieve the ambitious
target we set, places us only 2 points short of the top quartile
of global high performing companies.
FY21 executive remuneration outcomes
Telstra’s Executive Variable Remuneration Plan (EVP) is
designed to ensure a significant portion of remuneration
is variable and at-risk. Performance is assessed against
both primary performance measures (comprising financial,
strategic, customer and transformation measures) and
a secondary performance measure (being the RTSR
performance condition on any Performance Rights awarded).
1. 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. Underlying EBITDA excludes net one-off
nbn DA receipts less nbn net cost to connect, one-off restructuring costs and guidance adjustments but includes depreciation of mobile lease right-of-use assets.
2. In-year nbn headwind defined as the net negative recurring EBITDA impact of the nbn on our business for the reporting period.
3. COVID impact in FY21 includes estimates across international roaming declines, delayed cost-out, customer support and deferred NAS professional services.
42
43
DIRECTORS’ REPORT Remuneration Report
This audited report details the remuneration
framework and outcomes for Key Management
Personnel (KMP) of the Telstra Group for the year
ended 30 June 2021 (FY21).
Remuneration at Telstra and FY21 Remuneration Outcomes – Key Highlights
The following table includes the key highlights and remuneration outcomes for FY21.
Key area of focus
Highlights / Details
The overall structure and approach to remuneration at Telstra remained unchanged from FY20.
Remuneration
Structure, fixed
remuneration and
non-executive
director fees
There have been no Fixed Remuneration increases for Senior Executives during FY21, other than on appointment or
promotion to a new role or due to a significant increase in accountabilities. There were no changes to the Executive
Variable Remuneration Plan (EVP) structure or the variable remuneration opportunity levels during FY21.
With regard to non-executive Director remuneration, there have been no changes to the Chairman’s fee, non-executive
Director annual base fee or any standing committee fees during FY21. Certain directors received remuneration for
additional or special duties they performed in connection with the proposed corporate restructure of the Telstra Group.
Refer to Section 3 for information regarding remuneration paid to non-executive Directors in FY21.
For FY22 we do not anticipate any changes in Fixed Remuneration for Senior Executives or any changes to the Chairman’s
fee, non-executive Director base fee or standing committee fees.
The Individual EVP Outcomes for FY21 were as follows:
FY21 performance
and Executive
Variable
Remuneration
Plan (EVP)
outcomes
CEO
Other Senior Executives (average)
Individual EVP Outcomes (% of maximum)
63.8%
58.0%
Each Senior Executive’s Individual EVP Outcome for FY21 was determined having regard to the Base EVP Outcome, their
target EVP opportunity and their individual performance, and was ultimately at the discretion of the Board.
The Board determined the Base EVP Outcome following an assessment of Telstra’s performance against the primary
performance measures under the FY21 EVP. Positive outcomes were achieved across many of the financial and non-
financial measures demonstrating strong delivery against our FY21 Corporate Plan and T22 strategy. Further details on
the Base EVP outcomes are found in Section 2.2.
The form in which Senior Executives receive their Individual EVP Outcome for FY21 is:
Award
25% Cash
Timing and conditions
Payable in September 2021.
35% Restricted Shares
25% eligible to vest each year over 4 years through to 30 June 2025, subject to a
continuing employment condition.
40% Performance Rights
Only vest at the end of FY25 if a Relative Total Shareholder Return (RTSR) performance
condition and continuing employment condition are achieved.
Refer to Section 2.1 for further information.
The RTSR performance condition for the first tranche of Performance Rights awarded under the FY18 EVP was tested
following the end of the performance period on 30 June 2021. The results and vesting outcomes are detailed below and
no Performance Rights vested.
Performance Condition
RTSR – ASX100 (excluding resource companies)
as at 1 July 2017
Refer to Section 2.3 for further information.
Telstra’s
Percentile Rank
% of Performance
Rights vested
32nd percentile
0%
FY18 EVP
Performance
Rights (Tranche 1)
RTSR outcome
44
Remuneration Report | Telstra Annual Report 2021
Key Management Personnel (KMP) covered in this report
Telstra’s KMP are assessed each year and comprise the Directors of Telstra and the Senior Executives. The term “Senior
Executives” refers to the CEO and those executives with authority and responsibility for planning, directing and controlling
the activities of Telstra and the Group, directly or indirectly. Each KMP held their position for the whole of FY21, unless
stated otherwise.
Non-executive Directors
Senior Executives
Current
John P Mullen
Eelco Blok
Roy H Chestnutt
Craig W Dunn
Peter R Hearl
Bridget Loudon (from 14/08/2020)
Elana Rubin
Nora L Scheinkestel
Margaret L Seale
Niek Jan van Damme
Current
KMP Position
Andrew Penn
Chief Executive Officer & Managing Director (CEO)
Michael Ackland
Group Executive (GE) Telstra Consumer & Small Business (C&SB)
Kim Krogh Andersen
GE Product & Technology
Alex Badenoch
GE Transformation, Communications & People (TC&P)
Vicki Brady
David Burns
Chief Financial Officer and GE Strategy and Finance (CFO)
GE Global Business Services (GBS) (until 26/10/2020)
GE Telstra Enterprise (TE) (from 27/10/2020)
Nikos Katinakis
GE Networks & IT
Brendon Riley
Dean Salter
GE and CEO Telstra InfraCo
GE GBS (from 19/02/2021)
Former
Michael Ebeid AM
GE TE (until 26/10/2020)
Table of contents
1.0
2.0
2.1
2.2
2.3
2.4
2.5
3.0
3.1
3.2
4.0
4.1
4.2
5.0
Remuneration policy, strategy and governance
Senior Executive remuneration
FY21 Remuneration structure
FY21 Base EVP outcome
Individual performance and the exercise of Board discretion in
determining Individual EVP Outcomes
FY18 EVP Performance Rights RTSR Outcome
Detailed remuneration and interests in Telstra shares
Non-executive Director remuneration
FY21 Fee structure
Detailed remuneration and interests in Telstra shares
Looking forward to FY22
FY22 Remuneration Framework
FY22 EVP Performance Measures and Targets
Glossary
45
REMUNERATION REPORT 1.0 Remuneration policy, strategy and governance
Our governance framework for determining Senior Executive remuneration includes the aspects outlined below.
Our remuneration policy and framework is designed to support our strategy and reinforce our culture and values.
(a) The People and Remuneration Committee
Our purpose
Our purpose is to build a connected future so everyone can thrive.
Audit & Risk
Committee
Telstra Board
People &
Remuneration
Committee
Nomination
Committee
Our values
The People and Remuneration
Committee assists the Board in
discharging its responsibilities on
matters relating to remuneration,
people, culture, conduct and diversity
and consists only of Independent
non-executive Directors.
Remuneration Report | Telstra Annual Report 2021
We are changemakers
We are better together
We care
We make it simple
Our strategy
Strategic pillars
Enabled by
our up to $3b
investment
program
Delivering
Radically simplify
our product
offerings, eliminate
customer pain points
and create all digital
experiences
Establish a
standalone
infrastructure
business unit to drive
performance and set
up optionality post
the nbn rollout
Greatly simplify
our structure and
ways of working
to empower our
people and serve
our customers
Industry leading cost
reduction program
and portfolio
management
New digital platforms
Australia's largest, fastest, safest, smartest and most reliable next generation network
Market
leading
customer
experience
Simplified
products,
business
and
operating
model
Extended
network
superiority
and 5G
leadership
Achieve
Global High
Performance
Norm in
employee
engagement
Net cost
productivity
of $2.7bn
by F221
ROIC~ 8%
by FY231
Our remuneration policy is designed to
Provide internally
consistent and
market competitive
rewards to attract,
motivate and retain
highly skilled
employees
Support our strategy
and reinforce our
culture and values
Link financial reward
outcomes directly to
employee
contribution and
company
performance
Ensure all reward
decisions are made
free from bias and
support diversity
within Telstra
Align to long term
shareholder
value creation
1. Net cost productivity targeted outcome increased from $2.5bn in February 2021. ROIC targeted outcome reduced from >10% in August 2020.
Our People
Among other things, the Committee:
• reviews and makes recommendations to the Board on
non-executive Director, CEO and other Senior Executive
remuneration, as well as Telstra’s overall remuneration
framework
• monitors that Telstra’s overall remuneration framework,
and the remuneration arrangements and outcomes for the
CEO and Senior Executives, encourage employees to pursue
Telstra’s strategy and success without rewarding conduct
that is contrary to Telstra’s Values or risk appetite
• reviews selected people related risks and the risk
management plans management has put in place to deal
with those risks and monitors whether Telstra is operating
within its risk appetite in respect of those risks
• monitors the culture within Telstra and the effectiveness
of management’s initiatives to instil and reinforce Telstra’s
Values and compliance with Telstra’s Code of Conduct
• reviews Senior Executive succession plans and talent
development plans.
The Chairman of the Audit and Risk Committee attends certain
People and Remuneration Committee meetings and provides an
overview of the key issues considered by the Audit and Risk
Committee that are likely to be relevant to assessing the
performance and remuneration outcomes for the CEO and other
Senior Executives by the People and Remuneration Committee.
Information and papers considered by a Committee are also
provided to other Committees and the Board as relevant.
Further detail about the People and Remuneration Committee
and its responsibilities is provided in our Corporate Governance
Statement and in the People and Remuneration Committee
Charter, both of which are available at telstra.com/governance.
(b) Annual remuneration review
As part of its role, the People and Remuneration Committee
reviews that CEO and other Senior Executive remuneration
packages involve a balance between fixed and incentive pay,
reflecting appropriate short and long term performance
objectives.
The People and Remuneration Committee and Board review the
CEO’s fixed and variable remuneration and the CEO undertakes
a similar exercise in relation to other Senior Executives. The
results of the CEO’s annual review of other Senior Executives’
performance and remuneration are subject to People and
Remuneration Committee review and Board approval.
(c) Incentive design and performance assessment
The People and Remuneration Committee oversees the setting
of robust measures and targets to encourage performance and
behaviour that is aligned to Telstra’s Values, including the
primary performance measures for the EVP. The Board
determines the Base EVP Outcome by assessing performance
against each primary performance measure. The Base EVP
Outcome is an input into the assessment of each Senior
Executive’s Individual EVP Outcome. The Board also has
discretion to adjust an outcome to ensure there are no windfall
gains or losses. Refer to section 2.1(c) for further information.
(d) Board decision framework
The Board has a decision framework to provide guidance in
exercising its discretion on variable remuneration outcomes
and provide greater consistency in remuneration adjustments.
The framework was considered in determining the Individual
EVP Outcomes under the FY21 EVP.
(e) Engagement with consultants
During FY21, Telstra did not seek a remuneration
recommendation from a remuneration consultant in relation to
any of our KMP.
(f) Engagement with shareholders and stakeholders
The Chairman of the Board and the Chairman of the People and
Remuneration Committee engage throughout the year with
stakeholders to seek feedback and consider opportunities to
further enhance the effectiveness of our reward structure with
a commitment to the alignment of the interests of our
executives with the generation of long term shareholder value.
During FY21, numerous meetings were held with shareholders
and shareholder advisory organisations.
(g) Share ownership policies
Telstra has in place share ownership policies which apply to the
CEO, Group Executives and non-executive Directors. The intent
of these policies is to align the interests of the CEO, Group
Executives and non-executive Directors with the interests of
our shareholders.
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47
REMUNERATION REPORT Remuneration Report | Telstra Annual Report 2021
The requirements of our share ownership polices are summarised below:
2.0 Senior Executive remuneration
Summary of requirements under the share ownership policies
Position
CEO
Minimum holding requirement within 5 years of appointment to the position
200% of Fixed Remuneration
Group Executives
100% of Fixed Remuneration
Chairman of the Board
200% of the annual non-executive Director base fee
Non-executive Directors
100% of the annual non-executive Director base fee
The following outlines how various Telstra securities are valued in calculating a person’s shareholding for the purpose of the policies:
How Telstra securities are valued under the policies
Position
Securities
Basis of valuation under the policies
CEO and Group Executives
Ordinary shares purchased on-market
Acquisition price
Restricted Shares
The volume weighted average price of Telstra shares used
to determine the number of Restricted Shares granted
under the relevant employee equity plan
Performance Rights
Not included
Any shares granted upon vesting of
Performance Rights
Telstra’s closing share price on the date that the
Performance Right vests
Chairman and Non-executive Directors
Ordinary shares purchased on-market
Acquisition price
Senior Executives must obtain Board or, in certain
circumstances, CEO or Chairman approval before they sell
Telstra shares if they have not yet met their minimum holding
requirement. Progress towards the minimum holding
requirement is monitored on an ongoing basis.
As at 30 June 2021, the CEO held Telstra shares to the value of
403% of his Fixed Remuneration as recognised under the policy.
Those Senior Executives who have held a Group Executive
position for at least five years have met the shareholding
requirement as at 30 June 2021. For information on Senior
Executives’ interests in Telstra shares refer to section 2.5(e).
As at the date of this report:
• the Chairman held Telstra shares to the value of 160% of the
annual non-executive Director base fee. The Chairman has not
yet met his minimum holding requirement of 200%, but has
confirmed he will address this as soon as he is permitted to
do so in accordance with Telstra’s Securities Trading policy.
• All other non-executive Directors have met their minimum
holding requirement with the exception of one Director who
has been on the Board for less than 12 months.
Directors' shareholdings as at 12 August 2021 are set out in the
Directors' Report.
(h) Securities Trading Policy
All KMP must comply with Telstra’s Securities Trading Policy,
which includes a requirement that Telstra securities can only be
traded during specified trading windows and with prior
approval. KMP must also consider how any proposed dealing in
Telstra securities could be perceived by the market and must
not deal if the proposed dealing could be perceived as taking
advantage of their position in an inappropriate way. They are
also prohibited from entering into any hedging arrangement
that limits the economic risk of holding Telstra securities
(including those held under Telstra equity plans). This helps
align our KMP’s interests with shareholders’ interests. KMP are
required to confirm on an annual basis that they comply with
our Securities Trading Policy, which assists in monitoring and
enforcing our policy. Our Securities Trading Policy is available at
telstra.com/governance.
(i) Claw-back (Malus) Policy
A Claw-back Committee has been established to oversee the
application of the Claw-back (Malus) policy, which sets out the
process that is followed to put the Board in a position to
determine, before securities vest, whether a claw-back event
has occurred and whether to lapse or forfeit unvested
Performance Rights, Restricted Shares and Cash Rights. The
Claw-back Committee meets quarterly and reports to the
People and Remuneration Committee twice a year. The Claw-
back Committee is comprised of the GE TC&P, the CFO, the
Group Executive Sustainability, External Affairs and Legal
(SEAL) and the Chief Risk Officer. The People and Remuneration
Committee subsequently makes recommendations to the
Board as to whether to exercise its discretion to claw-back any
unvested equity.
Following the Clawback Committee’s review and
recommendations, no clawback of unvested securities held by
Senior Executives’ was recommended or approved during FY21.
2.1 FY21 Remuneration Structure
The following diagram illustrates the remuneration framework that applied to our Senior Executives during FY21. This framework
was unchanged from FY20.
Attract, motivate
and retain highly
skilled people
Support our strategy
and reinforce our culture
and values
Link financial reward
outcomes to employee
contribution and company
performance
Align to long term
shareholder value creation
Fixed Remuneration
Executive Variable Remuneration Plan (EVP)
Cash
Equity
Base salary
+
Superannuation
Each Senior Executive’s Individual EVP Outcome was determined having regard to the Base EVP
Outcome (based on Telstra’s performance against financial, strategic, customer and transformation
priorities), their target EVP opportunity and their individual performance, and was ultimately at the
discretion of the Board
Set taking into account:
• skills, capabilities,
experience and performance
• business performance,
scarcity of talent,
economic climate and
market conditions
• consistency with increases
elsewhere within Telstra
• external comparator groups
made up of companies of
similar size and complexity
to Telstra
Internally consistent and
market competitive
base reward
• 25% of the FY21 Individual
EVP Outcome is provided in
cash
• 35% of the FY21 Individual
EVP Outcome is deferred as
Restricted Shares
• Four tranches with 25%
eligible to vest each year
over the four years following
the end of the Initial
Performance Period
• May be forfeited if
employment ceases
other than for a Permitted
Reason or a clawback
(malus) event occurs
• 40% of the FY21 Individual
EVP Outcome is allocated
in Performance Rights,
which are subject to a
5-year Relative Total
Shareholder Return (RTSR)
performance condition
• May lapse if employment
ceases other than for
a Permitted Reason or
a clawback (malus)
event occurs
Recognises sustainable performance in the medium to longer term
Rewards annual
performance, providing
specific focus on strategic
priorities
Recognises the criticality of
strategic non-financial
measures as drivers of
longer-term value creation
Focuses on achieving
longer-term superior
performance for
stakeholders
(a) FY21 Remuneration mix for Senior Executives
The graph below shows the FY21 remuneration mix for Senior Executives expressed as a percentage of Fixed Remuneration (FR).
CEO
100%
Fixed Remuneration
50%*
EVP Cash
70%*
EVP Restricted Shares
80%*
EVP Performance Rights
Individual EVP Outcome at Target = 200% of Fixed Remuneration comprised of:
Total Equity = 150% of Fixed Remuneration
Other Senior
Executives
100%
Fixed Remuneration
45%*
EVP Cash
63%*
EVP Restricted Shares
72%*
EVP Performance Rights
Individual EVP Outcome at Target = 180% of Fixed Remuneration comprised of:
Total Equity = 135% of Fixed Remuneration
* The percentages shown are calculated from the 25% Cash, 35% Restricted Share and 40% Performance Right components of the FY21 EVP multiplied by the FY21 EVP
target opportunity for the CEO (200% of FR) and other Senior Executives (180% of FR). As Michael Ebeid ceased employment for a Permitted Reason before the
allocation of his FY20 and FY21 Restricted Shares and Performance Rights under the EVP, he was awarded Cash Rights in lieu of those Restricted Shares and
Performance Rights. Where a Senior Executive receives Cash Rights, there is no change to the Restriction Periods, and the RTSR Performance Period or the RTSR
performance condition.
48
49
REMUNERATION REPORT (b) Current Senior Executive Fixed Remuneration and contract details
The following table summarises the Fixed Remuneration and notice and termination payment provisions that apply under the
ongoing service contracts for current Senior Executives as at 12 August 2021.
Name
Andrew Penn
Title
CEO
Fixed
Remuneration
Notice
period
Termination
payment
$2,390,000
6 months
6 months
Michael Ackland
GE Consumer & Small Business
$1,150,000
6 months
6 months
Kim Krogh Andersen
GE Product & Technology
$1,000,000
6 months
6 months
Alex Badenoch
GE Transformation,
Communications & People
$930,000
6 months
6 months
Vicki Brady
CFO & GE Strategy and Finance
$1,200,000
6 months
6 months
David Burns
GE Telstra Enterprise
$1,150,000
6 months
6 months
Nikos Katinakis
GE Networks & IT
$1,100,000
6 months
6 months
Brendon Riley
GE & CEO Telstra InfraCo
$1,400,000
6 months
12 months*
Dean Salter
GE Global Business Services
$950,000
6 months
6 months
* Brendon Riley has a 12-month termination payment clause in his contract that was negotiated upon commencing employment at Telstra in February 2011. Telstra’s
current policy is to provide for a six-month termination payment in executive contracts.
Upon notice being given, Telstra can require a Senior Executive to work through the notice period or may terminate employment
immediately by providing payment in lieu of notice, or a combination of both. Any payment in lieu of notice is calculated based on
the Senior Executive’s Fixed Remuneration as at the date of termination.
There is no termination payment if termination is for serious misconduct or redundancy (unless the severance payment under
Telstra’s redundancy policy would be less than the termination payment, in which case the termination payment applies instead).
(c) FY21 Executive Variable Remuneration Plan (EVP) structure
The Senior Executives participated in the FY21 EVP. The construct of the FY21 EVP is illustrated in the diagram below:
d
e
s
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R
s
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R
1
2
Y
F
)
%
5
2
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V
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M
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A
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5
7
(
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FY21 EVP Initial
Performance
Period
1 July 2020 to
30 June 2021
Restricted Shares
(1st tranche)
End of restriction
30 June 2022
Restricted Shares
(2nd tranche)
End of restriction
30 June 2023
Restricted Shares
(3rd tranche)
End of restriction
30 June 2024
Restricted Shares
(4th tranche)
End of restriction
30 June 2025
Restricted
Shares – T1
Restricted
Shares – T2
Restricted
Shares – T3
Restricted
Shares –T4
Performance Rights
Performance
Rights
RTSR Test
30 June 2025
FY21 EVP Performance Rights RTSR Performance Period
1 July 2020 to 30 June 2025
FY21
FY22
FY23
FY24
FY25
FY26
Jul
Jun
Aug
Sep
Oct
Nov
Jun
Jul
Jun
Jul
Jun
Jul
Jun
Jul
At the 2021 AGM to be held on 12 October 2021, we will seek shareholder approval for the Restricted Shares and Performance
Rights to be allocated to the CEO under the FY21 EVP.
Remuneration Report | Telstra Annual Report 2021
The table below outlines the key features of the FY21 EVP.
EVP design
attributes
Detail
EVP
Reward
opportunity
Threshold
Target
Maximum
Reward opportunity as a % of Fixed Remuneration
CEO
100%
200%
300%
Group Executives
90%
180%
300%
Initial
performance
period
Calculation of
Individual EVP
Outcomes
1 year (1 July 2020 to 30 June 2021)
Overview
Each Senior Executive’s Individual EVP Outcome for FY21 is set out in section 2.5(c).
The CEO and each Group Executive’s Individual EVP Outcome was determined by the Board taking into consideration their ‘at target’
EVP reward opportunity, the Base EVP Outcome, their individual performance (in the case of the Group Executives including their
performance relative to each other) and other factors in accordance with its decision framework including any material risk events
identified, the severity of their impact, and the executive’s accountability for the matter.
At Target EVP Reward Opportunity
Calculating Individual EVP Outcome
FR
$
X
Target
EVP
Opportunity
%
=
Target
EVP
Opportunity
$
X
Primary Performance
Measures
Financial
Customer
Strategic
Transformation
Each primary
performance
measure
outcome and
total scorecard
outcome
subject to
Board
discretion
=
Base EVP
Outcome
%
Differentiated
for Individual
Performance
and subject
to Board
discretion
=
Individual
EVP
Outcome
Base EVP Outcome
The Base EVP Outcome was determined by the Board following an assessment of Telstra’s performance against the primary
performance measures (described in detail below) during the 2021 financial year (referred to as the Initial Performance Period).
The primary performance measures operated independently, and each measure was given a weighting and defined threshold,
target and maximum performance level. If performance fell between any of those levels, the outcome was determined
proportionately for the CEO and the other Senior Executives commensurate with the following ranges.
Metric Performance Range
Threshold
Target
Max
CEO Performance Outcome
50%
100%
150%
GE Performance Outcome
50%
100%
167%
The Board had discretion to adjust each primary performance measure outcome to ensure there were no windfall gains or losses.
Details of the adjustments approved by the Board for FY21 are outlined in section 2.2.
The Base EVP Outcome was calculated as the total sum of each primary performance measure outcome, although the Board had
discretion to adjust that outcome if it considered it to be inappropriate, taking into account matters including Telstra’s
performance, customer experience and shareholder expectations.
The Base EVP Outcome was an input for determining each Senior Executive’s Individual EVP Outcome. Refer to section 2.3 for
further information on discretion exercised in determining FY21 Individual EVP Outcomes.
50
51
REMUNERATION REPORT
EVP design
attributes
Primary
Performance
Measures
Detail
The primary performance measures outlined below were selected for FY21 because they provide the critical link between delivering
Telstra’s T22 strategy and Telstra’s Corporate Plan and increasing shareholder value. The Board believes that the strategic, customer
and transformation non-financial measures directly demonstrate the delivery of critical components of the T22 strategy and are
fundamental key drivers of long term value creation.
To assist shareholders understanding of these measures and their relevance to Telstra’s performance, further information on each
measure is provided below.
Refer to Section 2.2 for the threshold, target and maximum for each measure and their weightings.
Primary Performance Measures
Measure and metric
Rationale for why chosen
Total Income
Telstra External Income
(excluding finance income)
• Key indicator of financial performance
• Ensures continued focus on customer retention and growth
• Aligns to Pillar 1 of the T22 strategy
)
%
0
6
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F
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)
%
0
4
(
n
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f
s
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T
&
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e
m
o
t
s
u
C
,
c
i
g
e
t
a
r
t
S
Underlying EBITDA
Underlying EBITDA is Earnings
Before Interest, Tax, Depreciation &
Amortisation, 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
Free Cash Flow (FCF)
Free Cashflow excluding M&A
and spectrum plus operating lease
payments (reported in financing
cash flow under AASB 16)
Net Opex Reduction
Year-on-year reduction in
operating non-Direct Variable
Cost (DVC) expenses
Episode NPS
Improvement in our Episode NPS
Product Portfolio
Simplification
Active Enterprise Products
Telstra Enterprise Number
of Active Plans
• Key indicator of financial performance
• Ensures appropriate focus on profit and cost to deliver
• A strong indicator of underlying company profitability
• Aligns to Pillar 4 of our T22 strategy
• Key indicator of financial performance
• Appropriate for a capital intensive business and critical in managing the
company’s ability to pay a dividend and maintain balance sheet strength
• Aligns to Pillar 4 of our T22 strategy
• Active reduction of our costs is key to competing and delivering strong financial
performance in an increasingly competitive market
• Delivering significant absolute cost reduction aligns with intent to drive
productivity and reduce costs
• Aligns to Pillar 4 of our T22 strategy
• It is in our shareholders’ interests to have the executive team specifically
focused on continuously improving the customer service experience, driving
both customer attraction and retention
• Underpins company-wide improvement programs focused on improving our
operational excellence by identifying and eliminating the causes of unnecessary
customer effort and pain points
• Aligns to Pillar 1 of our T22 Strategy
• Simplifying our products and services increases the simplicity, transparency
and satisfaction that our customers experience and enables the delivery of
material cost reductions
• Each of these metrics aligns to Pillar 1 of our T22 strategy
Active Enterprise Products
• As part of our T22 strategy we committed to rationalising 50% of our Telstra
Enterprise products by the end of FY21. For our Enterprise customers the
simplification often requires a tailored solution in consultation with the
customer to ensure a good customer experience and retention of revenue
Services on in-market plans
Consumer and Small Business
Fixed and Postpaid services on
in-market plans
Services on in-market plans
• Moving customers to our 20 simplified connectivity plans supports the delivery
of improved customer experiences, offers our customers simplicity and ease of
dealing with Telstra, and supports readiness for future delivery of digitised
experiences for customers
Remuneration Report | Telstra Annual Report 2021
EVP design
attributes
Detail
Digital Engagement
• Enhancing our digital engagement with our customer improves customer
experience whilst supporting our cost reduction focus
• Each of these metrics align to Pillar 1 of our T22 strategy
)
%
0
4
(
n
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S
Digital Delivery
Consumer & Small Business Sale
transactions through digital channels
Telstra Connect
Active Telstra Enterprise customers
on Telstra Connect in the last 3 months
of FY21
People, Capability
& Engagement
Top-line sustainable employee
engagement score
Digital Delivery
• Increasing digital sales interactions and the engagement of our mass market
customers through digital sales channels remains a strong focus, targeting just
over a third of sales to occur through digital channels
• Key to achieving this is maximising the value and ease for our customers in
using our digital channels
• Intended to provide customer choice, reduce our servicing costs and improve
profit margins
Telstra Connect
• Delivering self-servicing solutions for our Enterprise customers is key to
improving customer experience and removing cost by reducing servicing calls.
The key to achieving this is increasing adoption and developing new
functionality for this customer base moving away from more traditional service
channels. This strategy is intended to enhance our customer connectivity and
experience, reduce our servicing cost and improve profit margins
• Focusing on our people and employee engagement throughout a period of
significant disruption is critically important
• We believe that it is in our shareholders' interests to have management strongly
focused on maintaining and growing our employee engagement as it will
support our ability to have both the key leadership and technical talent required
to deliver our ambitious strategy
• To ensure the integrity of our employment engagement score, this performance
measure only impacts the remuneration of Telstra’s senior leaders.
• Aligns to Pillar 3 of our T22 strategy
To assess the primary performance measures, the Board reviewed the Group’s results, including the financial statements which
are audited by Ernst & Young (EY), our external auditor. It also reviewed other work undertaken by EY and Telstra Group Internal
Audit on performance against the primary performance measures. Refer to section 2.2 for further information.
EVP outcome
– Cash vs
equity balance
A Senior Executive’s Individual EVP Outcome is provided as a combination of cash (25%), Restricted Shares (35%) and
Performance Rights (40%) which are subject to an RTSR performance condition. This results in a 25:75 ratio of cash to equity. On
vesting of a Performance Right, the holder receives a share or, at Telstra’s discretion, a cash amount equivalent to the value of a
share at vesting.
Equity
allocation
methodology
Individual EVP Outcome Components
25% Cash
Equity Allocation Calculation
(face value methodology)
35% Restricted Shares (pro-rata vesting over 4 years)
40% Performance Rights (subject to 5 year RSTR)
÷
5 Day
VWAP
=
No. of Restricted Shares allocated
No. of Performance Rights allocated
The number of Restricted Shares and Performance Rights to be allocated to a Senior Executive is based on the dollar value of
their Individual EVP Outcome, multiplied by 35% for Restricted Shares and 40% for Performance Rights, and then divided by the
five day volume weighted average price (VWAP) of Telstra shares commencing on the day after the FY21 results announcement
(i.e. a face value allocation methodology).
Issue/exercise
price
As the Restricted Shares and Performance Rights form part of a Senior Executive’s variable remuneration, no amount is payable
by the Senior Executive on grant of the Restricted Shares or on grant or vesting of the Performance Rights. Both the Restricted
Shares and any shares to be provided on the vesting of Performance Rights will be purchased on-market.
Restriction and
performance
periods for
equity
Restricted Shares
Restricted Shares will be eligible to vest in four equal tranches, with 25% eligible to vest each year for the four years following 30
June 2021 (being the end of the Initial Performance Period). i.e. on 30 June 2022, 30 June 2023, 30 June 2024, and 30 June 2025.
Performance Rights
The Performance Rights are subject to an RTSR performance condition, tested over a five-year performance period from 1 July
2020 to 30 June 2025. Refer to the secondary performance measures section outlined below for further information.
In certain limited circumstances, such as a takeover event where 50% or more of Telstra’s shares are acquired, the Board may
exercise discretion to accelerate vesting of the Performance Rights and accelerate the end of the Restriction Periods for the
Restricted Shares.
52
53
REMUNERATION REPORT
EVP design
attributes
Secondary
Performance
Measures
Detail
In addition to the primary performance measures (which are assessed over the one year period to 30 June 2021) the Performance
Rights component of each Senior Executive’s Individual EVP Outcome only vests if, and to the extent that, the RTSR performance
condition is satisfied at the end of the five year performance period on 30 June 2025. Any Performance Rights that vest following
the testing of the RTSR performance condition will be automatically exercised following the release of Telstra’s annual results for
FY25 and any Performance Rights that do not vest following the testing will lapse (and expire) at that time. This means Senior
Executives have a double hurdle in relation to the Performance Right component of their Individual EVP Outcome, with
performance measured over both the Initial Performance Period and the five-year RTSR Performance Period.
RTSR measures the performance of a Telstra share (including the value of any cash dividends and other shareholder benefits paid
during the RTSR Performance Period) relative to the performance of ordinary securities issued by the other entities in the
comparator group (being entities in the S&P / ASX100 index as at 1 July 2020 (excluding resources companies)) over the RTSR
Performance Period.
The Board believes that RTSR is an appropriate secondary performance measure because it links executive reward to Telstra’s
share price and dividend performance relative to entities in the comparator group over the long term. This reinforces the ultimate
focus on shareholder value creation and helps align actual pay outcomes with returns delivered to long-term shareholders.
Remuneration Report | Telstra Annual Report 2021
(d) Financial performance
The table below provides a summary of Telstra’s key financial results over the past five financial years.
Financial performance1
Earnings
Total Income
EBITDA
Net Profit2
Shareholder Value
Share Price ($)3
FY21
$m
FY20
$m
FY19
$m
23,132
26,161
27,807
7,638
1,857
3.76
16.0
8,905
1,819
3.13
16.0
7,984
2,154
3.85
19.0
FY18
$m
28,841
10,197
3,591
2.62
26.5
FY17
$m
28,205
10,679
3,891
4.30
31.0
Under the RTSR performance condition, the number of Performance Rights that vest will be determined as follows:
Total Dividend Paid Per Share (cents)4
RTSR Ranking
Below the 50th percentile
At the 50th percentile
Vesting
0%
50%
Between 50th and 75th percentiles
Straight-line vesting from 50% to 100%
At the 75th percentile or above
100%
Both the starting price and end price for the purpose of calculating Telstra’s RTSR is the average of Telstra’s daily closing share
price over the 30 day period to 30 June of the relevant year. The starting price that will be used to determine Telstra’s RTSR at the
end of the RTSR Performance Period for the FY21 EVP is $3.19.
Dividends
Restricted Shares
Participants receive dividends on Restricted Shares during the Restriction Periods consistent with other Telstra shareholders.
Performance Rights
No dividends are paid on Performance Rights prior to vesting. For any Performance Rights that ultimately vest following
satisfaction of the RTSR performance condition, a cash payment equivalent to the dividends paid by Telstra during the period
between allocation of the Performance Rights and vesting will be made at or around the time of vesting, subject to applicable
taxation (Dividend Equivalent Payment).
Before the Restricted Shares and Performance Rights are allocated
If a Senior Executive ceases employment for a Permitted Reason, the Senior Executive is eligible for a pro-rata Individual EVP
Outcome based on the proportion of time they were employed during FY21. The Senior Executive will receive the cash component
of their pro-rata Individual EVP Outcome. The Senior Executive will receive a grant of Cash Rights (or, at the Board’s discretion,
cash, if the Senior Executive ceases employment due to death, total and permanent disablement or certain medical conditions) in
lieu of Performance Rights and Restricted Shares. On vesting, a Cash Right entitles the executive to a cash payment equivalent to
the value of a Telstra share at the end of the applicable Restriction Period or the RTSR Performance Period (as applicable). A Cash
Right granted in lieu of a Restricted Share also entitles the Senior Executive to receive an amount equal to dividends paid on
Telstra shares between the date the Cash Right is allocated and the end of the applicable Restriction Period, at or around the
same time that Telstra pays the dividend. A Cash Right granted in lieu of a Performance Right entitles the Senior Executive, if the
Cash Right vests, to receive an amount equivalent to dividends paid on Telstra shares between allocation and vesting of the Cash
Right after the end of the RTSR Performance Period. Where the Senior Executive receives Cash Rights, there is no change to the
Restriction Periods, the RTSR Performance Period or the RTSR performance condition. If the Senior Executive ceases employment
for any other reason, their EVP entitlement is forfeited. This ensures equal treatment for all executives and that departing
executives continue to make decisions that are aligned to the long-term interests of our shareholders.
After the Restricted Shares and Performance Rights are allocated
If a Senior Executive ceases employment for a Permitted Reason after the Restricted Shares and Performance Rights have been
allocated, those Restricted Shares and Performance Rights will remain on foot. There is no change to the Restriction Periods, the
RTSR Performance Period, or the RTSR performance condition. If the Senior Executive ceases employment for any other reason,
their Restricted Shares and Performance Rights are forfeited.
The Board has discretion to claw-back Performance Rights and Restricted Shares if certain claw-back events occur before the
Performance Rights vest or the Restricted Shares are transferred to the Senior Executive following the end of the applicable
Restriction Period. Claw-back events include fraud, dishonesty, gross misconduct or material breach of obligations by the Senior
Executive or behaviour that brings Telstra into disrepute or may negatively impact Telstra’s long-term financial strength. It also
includes where the Senior Executive causes a significant deterioration in Telstra’s financial performance or negatively impacts
Telstra’s standing, reputation or relationship with its key regulators, where the financial results that led to the Performance Rights
or Restricted Shares being granted are subsequently shown to be materially misstated, where the Senior Executive fails to fulfil
responsibilities under Telstra’s risk management framework resulting in a material breach of Telstra’s risk management
framework, or where the Board determines that the Performance Rights or Restricted Shares are an inappropriate benefit.
Leavers
Claw-back
(malus)
54
1. Those results are not fully comparable due to changes in the accountings standards over the periods. For more details, refer to Note 1.5 to the financial statements in
the 2020 Annual Report in relation to the adoption of AASB16: ‘Lease’ and Note1.5 to the financial statements in 2019 Annual Report in relation to the adoption of
AASB15: ‘Revenue from Contracts with Customers’.
2. Net Profit attributable to equity holders of the Telstra entity includes results from continuing and discontinued operations.
3. Share prices are as at 30 June for the respective year. The closing share price for FY16 was $5.56.
4. We currently pay dividends to holders of Telstra’s ordinary shares twice a year, an interim and a final dividend. The amounts included in this table relate to dividends
paid during the financial year. Therefore, for each respective year, the amount includes the dividend paid for the previous year final dividend and the current year interim
dividend. Refer to Note 4.1 to the financial statements in the Financial Report for further information.
(e) Historical Individual EVP Outcomes relative to the Telstra share price
The graph below provides a useful comparison of performance and shows the average Individual EVP Outcomes for FY18 through
to FY21 as a percentage of the target opportunity, relative to the performance of Telstra’s share price over the past four years.
)
$
(
e
c
i
r
P
e
r
a
h
S
a
r
t
s
l
e
T
7.00
6.00
5.00
4.00
3.00
2.00
1.00
111.8%
43.6%
29.1%
39.1%
81.9%
32.8%
28.7%
20.4%
38.6%
33.8%
24.2%
120%
96.6%
100.%
1
t
e
g
r
a
T
f
o
%
P
V
E
80%
60%
40%
20%
0%
70.6%
27.5%
18.4%
24.7%
FY18 EVP
30/06/2018
FY19 EVP
30/06/2019
FY20 EVP
30/06/2020
FY21 EVP
30/06/2021
Telstra Share Price
EVP Cash
EVP Restricted Shares
EVP Performance Rights (RTSR)
1. The average Individual EVP outcomes as a percentage of target is shown for all Senior Executives (including the CEO) for the relevant period. There have been changes
to the EVP structure over this period including to the relative proportions of cash, Restricted Shares and Performance Rights.
55
REMUNERATION REPORT
2.2 FY21 Base EVP Outcome
The Board evaluated Telstra’s performance against
the primary performance measures. The
threshold, target and maximum levels for each
measure (as outlined in our 2020 Remuneration
Report) were set to be robust and sufficiently
demanding, taking into account the key
deliverables and milestones outlined in our T22
strategy, planned financial outcomes contained
within our Corporate Plan and FY21 guidance as
announced on 13 August 2020 (which took into
account the estimated negative impact on FY21
Underlying EBITDA from the in-year nbn headwind
and the COVID-19 pandemic). The levels for all
financial measures (with the exception of Net
Opex Reduction) were evaluated against market
guidance, with each target level approximating the
midpoint of that guidance and each maximum
level equal to or above the maximum guidance
range. It remains the Board’s view that the levels
were robust and demanding in the face of an
exceptionally challenging market.
The Board maintained absolute discretion to
ensure the Base EVP Outcome was appropriate,
taking into account matters which may include
Telstra’s performance, customer experience and
shareholder expectations. Notwithstanding the
impacts COVID-19 continued to have on our
business, our results were in line with guidance
and market expectations. The Base EVP Outcome
for FY21 was 95.7% of the target opportunity
(63.8% of maximum) for the CEO and 102.7% of
the target opportunity (61.6% of maximum) for the
other Senior Executives.
The Board determined that the primary
performance measure outcomes and the Base
EVP Outcome for FY21 would be driven by the
results achieved and so no relief was given to
management for the impact of COVID-19. In
relation to the sale of the Pitt St exchange, this
transaction would have ordinarily been included in
underlying EBITDA and the sale was indeed
budgeted this way in management’s FY21 targets.
Due to the scale of the gain, however, it has been
excluded from Underlying EBITDA in our reported
results in order to be fully transparent with
shareholders. However, the gain has been allowed
to flow through to the Base EVP outcomes in
recognition of both the significant over
achievement on that specific transaction (a
benefit of $102 million against a budget of $35
million), and more broadly of management’s
strong performance in over-delivering against the
overall T22 asset monetisation. The average
impact of the Pitt St exchange sale on outcomes
across all Telstra incentive plans is +1.9%, with a
maximum impact to the EVP pool for Senior
Executives of +2.5%.
Measures
Weighting
Targets and Performance Outcomes
Weighted Result
(% of Target)
CEO
GE
Additional information
Remuneration Report | Telstra Annual Report 2021
Total Income ($m)
is Telstra External Income excluding finance income
Underlying EBITDA ($m)
is Earnings Before Interest, Tax, Depreciation &
Amortisation, excludes net one-off nbn DA receipts
less nbn net C2C, one-off restructuring costs and
guidance adjustments but includes depreciation of
mobile lease right of use assets
15%
15%
Free Cash Flow ($m)
is Free Cashflow excluding spectrum and M&A plus
operating lease payments (reported in financing
cash flow under AASB 16)
15%
Net Opex Reduction ($m)
Year-on-year reduction in operating non-Direct
Variable Cost (DVC) expenses
15%
Episode NPS
Improvement in our Episode NPS
10%
$23,675m
$24,175m
$25,175m
Threshold
$23,108m
CEO
GE
50%
0%
50%
0%
Target
Max
100%
150%
0%
0%
100%
167%
Total Income (excluding finance income) of $23,132m was
reported by Telstra for FY21. This result was audited by our
external auditor EY. Adjusted for the factors outlined below,
Total Income was $23,108m, which for the purpose of the
EVP performance measure is below threshold.
To ensure the FY21 Base EVP Outcome appropriately
reflected the performance of Senior Executives, the Board
approved a negative adjustment of $24m to ensure no
windfall gain or loss from the NBN Transaction and excluded
proceeds on the sale of businesses, mergers and
acquisitions.
$6,571m
$6,771m
$7,071m
Threshold
50%
50%
Target
$6,765m
100%
99%
100%
99%
Max
150%
14.7 % 14.7%
167%
Underlying EBITDA of $6,689m was reported by Telstra for
FY21. The result was reviewed by our external auditor EY.
Adjusted for the factors outlined below, Underlying EBITDA
was $6,765m, which for the purpose of the EVP performance
measure is between threshold and target.
To ensure the FY21 Base EVP Outcome appropriately
reflected the performance of Senior Executives, the Board
approved a positive adjustment of $76m to ensure no
windfall gain or loss from the NBN Transaction and included
the impact of the Pitt St exchange sale and leaseback.
$2,956m
$3,156m
$3,556m
Threshold
Target
50%
50%
$350m
Threshold
50%
50%
+30
Threshold
50%
50%
100%
100%
$400m
Target
100%
100%
+32
Target
+32
100%
100%
100%
100%
22.5% 25.0%
21.8% 24.1%
Max
$3,903m
150%
150%
167%
167%
$500m
Max
$490m
150%
145%
167%
161%
+34
Max
150%
10.0% 10.0%
167%
FCF on a guidance basis of $3,812m was reported by Telstra
for FY21. The result was reviewed by our external auditor EY.
Adjusted for the factors outlined below, FCF was $3,903m
which for the purpose of the EVP performance measure was
at the maximum.
To ensure the FY21 Base EVP Outcome appropriately
reflected the performance of Senior Executives, the Board
approved a positive adjustment of $91m to ensure no
windfall gain or loss from the NBN Transaction and included
the impact of the Pitt St exchange sale and leaseback.
As outlined in the FY21 Full Year Results and Operations
Review, underlying fixed cost reduction (which is referred to
as Net Opex Reduction for the purpose of the EVP) was
$490m. This resulted in an outcome between target and
maximum. The Board did not adjust the outcome for any
additional factors. The Net Opex Reduction calculation was
reperformed by our external auditor EY.
This result was driven by excellent discipline in delivering
significant cost reduction across the organisation. We’re on
track to achieve our $2.7 billion net cost reduction target by
the end of FY22.
The overall Episode NPS result was at target and is a
weighted calculation of survey results from Telstra business
segments – 65% Consumer and Small Business (combined
calculation) and 35% Enterprise (Telstra Enterprise Australia
only). The result was audited by Telstra’s Group Internal Audit.
Despite many challenges during the year, including severe
weather events and COVID-19 related lockdowns, we
achieved our Episode NPS target of +32, improving 9 points
year-on-year. This was an outcome reflecting strong results
across both Consumer & Small Business and Telstra
Enterprise.
CEO
GE
CEO
GE
CEO
GE
CEO
GE
56
57
REMUNERATION REPORT Measures
Weighting
Targets and Performance Outcomes
Weighted Result
(% of Target)
CEO
GE
Additional information
Remuneration Report | Telstra Annual Report 2021
328
308
Product Portfolio
Simplification
Digital
Engagement
Telstra Enterprise Plans
(Number of active plans)
5%
Consumer and Small
Business Fixed and
Postpaid services on in
market plans
(Number of services)
Digital Delivery
(Consumer & small
Business sale
transactions through
digital channels)
Telstra Connect (Active
Telstra Enterprise
customers on Telstra
Connect in the last 3
months of FY21)
5%
5%
5%
Threshold
50%
50%
7.7m
Threshold
50%
50%
33.5%
Threshold
50%
50%
6,840
Threshold
50%
50%
CEO
GE
CEO
GE
CEO
GE
CEO
GE
Target
299
100%
112%
100%
115%
8.2m
Target
100%
100%
35.0%
Target
5.6%
5.8%
7.5%
8.3%
268
Max
150%
167%
8.6m
Max
8.8
150%
150%
167%
167%
45.0%
Max
39.3%
100%
150%
122%
6.1%
6.4%
100%
128%
167%
7,100
Target
100%
100%
9,000
Max
9,842
150%
150%
167%
167%
7.5%
8.3%
We achieved our T22 ambition of halving the number of
active Telstra Enterprise products by the end of FY21
(against an original FY18 baseline of 618 TE products). In
FY21, we reduced our active products to 299 which for the
purpose of the EVP was determined to be between target
and maximum. The result was audited by Telstra’s Group
Internal Audit.
The Enterprise products that we ceased over the period
include:
• Corporate Mobile Plus, Fleet Connect/Plus and Business
Mobile Plus/Advantage plans, which was enabled by the
launch of Adaptive Mobility
• certain product variants across Telstra Internet Direct (TID),
Business IP and Connect IP
• certain Managed Internet Gateway and IP Value Added
Service product variants, which was enabled by the launch
of our SecureEdge Cyber Security Solution
As part of our T22 transformation we launched our radically
simplified product proposition and have 20 core connectivity
plans in market for our C&SB customers (compared to 1,800
plans we had prior to the launch of our T22 transformation).
In FY20 we started migrating customers to these plans and
continued to migrate customers into FY21 to work towards
achieving our target of 10 million services on in-market
plans by FY22.
By the end of FY21 we had 8.8 million services on fixed and
postpaid mobile in-market plans, which for the purpose of
the EVP was determined to be at the maximum. This result
was audited by Telstra’s Group Internal Audit.
The Digital Delivery result was determined to be 39.3% and
for the purpose of the EVP resulted in an outcome between
target and maximum. The result was audited by Telstra’s
Group Internal Audit.
FY21 Digital Delivery was driven by excellent progress in
improving key customer digital experiences. This result was
largely underpinned by:
• strong growth in digital sales of mobile devices and media
services (such as Kayo and Binge).
• migrating customers from our legacy customer system
Siebel to our new customer system, Salesforce.
• moving customers from our legacy plans to our in-market
plans.
The new core capabilities established as part of T22 meant
we could fast-track the digitisation and automation of our
tools during COVID-19 and move more customer enquiries
online quickly, removing the need for many customers to call
us at all.
A key to improving customer experience and removing cost is
reducing servicing calls and delivering self-servicing
solutions for our Telstra Enterprise customers through our
platform Telstra Connect. Telstra Connect is a digital
platform for Telstra business and enterprise customers to
view and manage their products and services in one place.
During the last three months of FY21 there were 9,842 active
users on Telstra Connect resulting in the maximum outcome
for the purpose of the EVP. We continue to build and release
features and functionalities on Telstra Connect to improve
Telstra business and enterprise customer experience. This
result was audited by Telstra’s Group Internal Audit.
58
59
REMUNERATION REPORT Remuneration Report | Telstra Annual Report 2021
Measures
Weighting
Targets and Performance Outcomes
Weighted Result
(% of Target)
CEO
GE
Additional information
People Capability
& Engagement
10%
80
Threshold
78
CEO
GE
50%
0%
50%
0%
83
Target
84
Max
100%
150%
0%
0%
100%
167%
Total
% of Target
95.7%
102.7%
% of Max
63.8%
61.6%
The People Capability & Engagement result was determined
to be 78 and for the purpose of the EVP was below threshold,
resulting in no payout for this component.
Following on from our FY20 engagement result, where
engagement was predominately driven by the systematic
way we identified employee pain points and took action to
positively impact our people’s experience in response to the
COVID-19 pandemic, we set the ambitious target of
maintaining our FY20 engagement result of 83.
However, in FY21 the employee engagement score declined
to 78, largely due to our employees being concerned about
our processes and the need to keep things simple. Areas
where our engagement continued to remain high, included
employees feeling respected, having flexibility at work, and
taking pride in working at Telstra. Many of our employees say
their work gives them a feeling of accomplishment and they
would recommend Telstra as a great place to work.
The calculation of our employee engagement score was
reperformed by our external auditor EY.
60
61
REMUNERATION REPORT 2.3 Individual performance and the exercise of Board
discretion in determining Individual EVP Outcomes
The Base EVP Outcome (outlined above) was an input into each
Senior Executive’s Individual EVP Outcome. As outlined in
Section 2.1, each Senior Executive’s Individual EVP Outcome
was determined taking into consideration the Base EVP
Outcome, their “at target” EVP reward opportunity and their
performance (including, in the case of the Group Executives,
their performance relative to each other). The Board also had
discretion, in determining a Senior Executive’s Individual EVP
Outcome, to take into account factors in accordance with its
decision framework such as any material risk events identified,
the severity of their impact and the executive’s accountability
for the matter.
At the end of the 2021 financial year:
• the CEO’s individual performance was assessed by the Board
in accordance with the annual performance evaluation
process for the CEO, taking into account a range of
considerations including his individual scorecard
performance, leadership behaviour and conduct and effective
application of risk management practices; and
• each Group Executive’s individual performance was assessed
by the CEO in accordance with an annual performance
evaluation process, taking into account a range of
considerations including the Group Executive’s individual
scorecard performance, leadership behaviour and conduct,
effective application of risk management practices and
performance relative to the other Group Executives. The CEO’s
recommended assessment for each Group Executive was
provided to the People and Remuneration Committee for
endorsement, and then to the Board for approval.
On 13 May 2021, the Federal Court of Australia approved a
settlement, including a fine, we agreed with the ACCC for
unconscionable sales to Indigenous customers. Last year, the
Board reduced the individual remuneration outcomes under the
FY20 EVP for the Senior Executives accountable for the areas of
the business where these issues occurred (reducing payments
to these executives collectively by $758,000). Now that this
matter has concluded, the Board has not made any further
adjustments to individual remuneration outcomes.
Please refer to Table 2.5(c) for the FY21 Individual EVP
Outcomes.
2.4 FY18 EVP Performance Rights RTSR Outcome
Two tranches of Performance Rights were awarded under the
FY18 EVP. The first tranche was subject to an RTSR
performance condition measured over the four year
performance period from 1 July 2017 to 30 June 2021. The
second tranche is subject to a RTSR performance condition
over a five year performance period from 1 July 2017 to 30 June
2022. The Performance Rights in each tranche only vest if
Telstra’s RTSR ranks at the 50th percentile or greater against a
comparator group comprising the ASX100 (excluding resource
companies) as at 1 July 2017 over the relevant performance
period. Each Performance Right that vests following testing of
the performance condition entitles a Senior Executive to one
Telstra share (or, at Telstra’s discretion, a cash amount equal to
the value of one Telstra share).
The RTSR performance condition for the first tranche of
Performance Rights was tested following the conclusion of the
performance period on 30 June 2021 and the results and
vesting outcome are detailed below. The results were
calculated by an external provider.
FY18 EVP (Tranche 1) Vesting Outcome
Test
date
30 June
2021
Performance
Condition
Percentile
Rank
Vesting
RTSR measured against
the ASX100 (excluding
resource companies) as
at 1 July 2017
32nd
Percentile
0%
The Board has discretion to remove companies from the
comparator group in circumstances such as acquisitions,
insolvency and de-listings. The Board exercised its discretion
under the FY18 EVP terms to remove the following companies
from the comparator group prior to the calculation of the results.
FY18 EVP (Tranche 1) Peer Group Removals
Company removed
from the Peer Group
Tatts Group
Reason
for removal
Acquisition
Westfield Corporation
Acquisition
Investa Office Fund
Acquisition
Fairfax Media
Healthscope
Duluxgroup
Merger
Acquisition
Acquisition
TPG Telecom Limited
Merger
2.5 Detailed remuneration and interests in Telstra shares
The tables in this section disclose Senior Executive information
and only represent their time as Senior Executives.
(a) Actual pay which crystallised in FY21 for Senior Executives
As a general principle, the Australian Accounting Standards
require the value of share-based payments to be calculated at
the time of grant and to be expensed over the performance
period and applicable service period. This may not reflect what
Senior Executives actually received or became entitled to
during the year.
The tables in this section are voluntary disclosures and are not
prepared in accordance with Australian Accounting Standards.
They are designed to provide greater transparency for
shareholders on the pay and benefits the Senior Executives
actually received, or became entitled to receive, during FY21
while they were a Senior Executive.
Senior Executives receive a significant portion of their variable
remuneration in the form of equity. The value they actually
receive from that variable remuneration is tied directly to
Telstra’s share price performance and whether the variable
remuneration vests. We believe this demonstrates that our
reward framework effectively aligns with our shareholders’
interests and demonstrates the linkage between pay and
performance.
The statutory tables for Senior Executive remuneration can be
found in Sections 2.5(b) to (e).
Remuneration Report | Telstra Annual Report 2021
The following table details the actual remuneration the CEO received, or became entitled to receive, during FY21 in comparison to
FY20. The 45.1% increase in actual remuneration received by the CEO is reflective of:
−more cash awarded as a result of a higher Individual EVP outcome for FY21 relative to FY20 following strong company
performance in FY21 and the impact of reduced payments in FY20 following the Board’s exercise of discretion to reduce the
CEO’s individual remuneration outcome under the FY20 EVP (refer to section 2.3).
−more Restricted Shares (relating to variable remuneration earned in prior financial years) became unrestricted in FY21 relative
to FY20 and the value of these shares is reported using a share price of $3.76 at 30 June 2021 (compared to a share price of
$3.13 at 30 June 2020)
Name
Andrew Penn
Year
2021
20201
Fixed
Remuneration
($000)
Individual EVP
Outcome
payable as
cash
($000)2
Value of EVP
Restricted
Shares that
became
unrestricted
($000)3,4
Value of EVP
Performance
Rights and
other rights
that vested
($000)5
Total
($000)
% change
from prior
year
2,390
2,390
1,144
866
1,771
400
–
–
5,305
3,656
+45.1%
1. As reported in our 2020 Remuneration Report.
2. For FY21, amount relates to the cash component of the FY21 EVP, earned in FY21 and payable in September 2021. For FY20, the amount relates to the cash component
of the FY20 EVP, earned in FY20 and paid in September 2020 (and reflects the reduction resulting from the exercise of discretion by the Board in determining the CEO’s
FY20 Individual EVP Outcome as outlined in Section 2.3 of our 2020 Remuneration Report).
3. Equity in this table has been valued based on Telstra’s share price at 30 June for each respective year. For FY21 this price is $3.76 and for FY20 this price is $3.13.
4. Amount relates to the value of variable remuneration earned in prior financial years which was provided as Restricted Shares. For the amount reported for FY21, the
Restriction Period for these shares ended on 30 June 2021 and relates to the FY19 EVP and Tranche 1 of the FY20 EVP. For the amount reported for FY20, the Restriction
Period for these shares ended on 30 June 2020 and relates to Tranche 2 of the FY18 EVP.
5. The outcome of the FY18 (Tranche 1) EVP was that none of the Performance Rights vested.
The following table details the actual remuneration Senior Executives (other than the CEO) received or became entitled to receive
during FY21.
Fixed
Remuneration
($000)
Individual EVP
Outcome payable
as cash
($000)1
Value of EVP
Restricted Shares
that became
unrestricted
($000)2,3
Value of EVP
Performance
Rights and other
rights that vested
($000)2,4
1,144
1,000
930
1,200
1,102
1,100
1,400
344
516
518
443
525
505
500
723
151
782
75
738
407
889
585
906
–
766
–
–
–
–
–
–
–
Name
Michael Ackland
Kim Krogh Andersen
Alex Badenoch
Vicki Brady
David Burns
Nikos Katinakis
Brendon Riley
Dean Salter
Total
($000)
3,208
1,593
2,111
2,132
2,496
2,185
3,029
495
The table only includes Senior Executives (other than the CEO) who held that position as at 30 June 2021.
1. Amount relates to the cash component of the FY21 EVP, earned in FY21 and payable in September 2021.
2. Equity in this table has been valued based on the Telstra closing share price on 30 June 2021 of $3.76.
3. Amount relates to the value of Restricted Shares awarded under the FY19 and FY20 (Tranche 1) EVPs which were earned in a previous year, but subject to a Restriction
Period ending 30 June 2021. For Michael Ackland and David Burns only, the amounts also include the value of Restricted Shares granted under the FY18 STI deferral
plans that were issued prior to being appointed as Group Executive.
4. The outcome of the FY18 (Tranche 1) EVP was that none of the Performance Rights vested. For Michael Ackland, the amount relates to the second tranche of Retention
Rights that were awarded to him prior to being appointed as the Group Executive, C&SB.
62
63
REMUNERATION REPORT Remuneration Report | Telstra Annual Report 2021
(b) Senior Executive remuneration (main table)
The table below has been prepared in accordance with the requirements of the Corporations Act and the relevant Australian
Accounting Standards and relates only to the periods that the person was a Senior Executive. The figures provided under the
equity settled share-based payments columns are based on accounting values and do not reflect actual payments received by
Senior Executives in FY21 or FY20.
Short term
employee benefits
Post–
employment
benefits
Termination
benefits
Other long term benefits
Share–based payments
Accounting value (at risk) 8
Name and title
Andrew Penn
CEO
Michael Ackland
GE C&SB
Kim Krogh
Andersen
GE P&T
Alex Badenoch
GE TC&P
Vicki Brady
CFO
David Burns
GE TE
Nikos Katinakis
GE N&IT
Brendon Riley
GE & CEO InfraCo
Dean Salter
GE GBS
Michael Ebeid AM
Former GE TE
Total current
and former KMP
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Salary & fees
($000)1
2,368
2,369
1,122
1,091
978
473
908
909
1,178
1,179
1,080
979
1,078
1,079
1,378
1,379
336
–
365
1,129
10,791
10,587
EVP cash
($000)2
1,144
866
516
379
518
175
443
406
525
461
505
435
500
405
723
513
151
–
69
356
5,094
3,996
Non–monetary
benefits
($000)3
Other
($000)4
Superannuation
($000)5
Termination
benefits
($000)6
Accrued leave
benefits
($000)7
12
10
0
1
20
149
2
3
4
8
12
60
20
30
16
10
–
–
4
8
90
279
20
(46)
(21)
(22)
(5)
204
3
–
(5)
44
35
(14)
(1)
26
(38)
–
11
–
11
28
10
220
22
21
22
21
22
11
22
21
22
21
22
21
22
21
22
21
8
–
7
21
191
179
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,154
–
1,154
–
59
59
28
28
25
12
23
23
30
30
28
25
27
27
35
34
8
–
9
28
272
266
Dividend
Equivalent
Payment
Accrual ($000)
156
106
48
16
7
–
62
36
43
28
51
16
43
13
81
54
–
–
9
13
500
282
Restricted
shares
($000)9
Performance
rights
($000)10
Cash Rights
($000)11
Total
($000)12
1,338
942
559
351
330
47
529
375
498
311
597
373
526
303
734
487
32
–
(40)
282
662
711
428
477
119
17
278
234
251
176
253
184
234
142
387
366
10
–
147
135
5,103
3,471
2,769
2,442
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
662
–
662
–
5,781
5,038
2,702
2,342
2,014
1,088
2,270
2,007
2,546
2,258
2,583
2,079
2,449
2,046
3,338
2,864
556
–
2,397
2,000
26,636
21,722
In the table above, EVP Cash, Restricted Shares and Performance Rights are dependent on the satisfaction of performance conditions (an overview of those performance
conditions is included above in Section 2.1(c)). All other items are not related to performance.
Includes salary and salary sacrifice benefits (excluding salary sacrifice superannuation which is included under Superannuation), and where applicable is adjusted for
leave without pay.
For FY21, the amounts relate to performance in FY21 under the FY21 EVP, which will be paid in September 2021. For FY20, the amounts relate to cash amounts paid for
performance in FY20 under the FY20 EVP (and for Andrew Penn, Michael Ackland and Vicki Brady reflect the reduction resulting from the exercise of discretion by the
Board in determining their FY20 Individual EVP Outcome as outlined in section 2.3 of our 2020 Remuneration Report). Those cash amounts were paid in September
2020.
Includes the cost of personal use of Telstra products and services, the provision of car parking and where applicable, fees for ongoing taxation advice in accordance
with Telstra’s relocation policy for those executives who were repatriated or relocated to Australia in recent years. Where applicable, the value of non-monetary
benefits has been grossed up for FBT by the relevant FBT rates.
Includes the net movement of annual leave entitlement balance. For FY20, the amount provided for Kim Krogh Andersen also includes a cash allowance provided as a
part of his relocation to Australia in accordance with Telstra’s relocation policy as well as a cash sign on bonus of $100,000 which was provided as a part of his
appointment to the role of GE Product and Technology.
Represents company contributions to superannuation. Telstra does not provide any other post-employment benefits.
Termination benefits for Michael Ebeid of $1.154 million comprised of a $577k payment in lieu of notice (including the statutory minimum under the Fair Work Act 2009
(Cth)) and a $577k termination payment, both as per his contract of employment and inclusive of superannuation contribution where applicable. The termination
benefits were provided in compliance with Part 2D.2, Division 2 of the Corporations Act.
1.
2.
3.
4.
5.
6.
64
7.
8.
9.
Includes the net movement of long service leave entitlement balances.
The accounting values included in the table relate to the current year amortised value of all Restricted Shares, Performance Rights and Cash Rights that had not yet
fully vested at the commencement of the financial year. The value of each equity instrument is calculated by applying valuation methodologies or is based on the
market value of Telstra shares at the grant date as described in note 5.2 to the financial statements and is then amortised, based on the maximum achievable
allocation, over the relevant vesting period. This value includes an assumption that the instruments will vest at the end of the vesting period unless forfeited during the
financial year.
This includes the amortised value of the Restricted Share component of the FY21, FY20 and FY19 EVPs. For Michael Ackland and David Burns, the amounts also
include the amortised value for Restricted Shares that were awarded under STI deferral plans prior to being appointed as Group Executive. The negative value for
Michael Ebeid is due to the reversal of the expense that was previously recognised as a share-based payment expense which has been reclassified under the Cash
Rights.
10. This includes the amortised value of the Performance Right component of the FY21, FY20 and FY19 EVPs. For Michael Ackland only, the amount disclosed for FY21 also
includes the amortised value for Retention Rights that were granted prior to being appointed as the Group Executive, C&SB.
11. As required under AASB 2, the accounting expense for the FY20 and FY21 EVP Cash Rights awarded to Michael Ebeid has been fully recognised in this reporting period
even though the EVP Cash Rights will not be eligible to vest until the end of their respective restriction and performance periods. The Cash Rights are subject to the
same time conditions and performance measures as those applying to FY20 and FY21 Restricted Shares and Performance Rights allocated (or to be allocated) to other
Senior Executives.
12. The total for FY20 of $21.722 million in this table is different to the total for FY20 in the FY20 Remuneration Report of $23.028 million as it does not include $1.306
million for Christian Von Reventlow (former GE Product & Technology), reported in last year’s report.
65
REMUNERATION REPORT (c) FY21 EVP Payments (cash and equity)
(e) Senior Executive interests in Telstra Shares
During FY21, our Senior Executives and their related parties held Telstra shares directly, indirectly or beneficially as follows:
Remuneration Report | Telstra Annual Report 2021
Breakdown of FY21 Individual EVP Outcomes1
25% Cash
component
($000)
Maximum
potential
EVP
opportunity
($000)2
35%
Restricted
Shares
component
($000)3
40%
Performance
Rights
component
($000)
Individual
EVP
Outcome
($000)
% of
maximum
opportunity
earned
% of
maximum
opportunity
forfeited
7,170
3,431
3,000
2,790
3,600
3,450
3,300
4,200
1,031
1,134
1,144
1,602
1,830
516
518
443
525
505
500
723
151
69
723
724
619
735
707
700
826
828
708
840
808
800
1,011
1,156
212
96
242
110
4,576
2,065
2,070
1,770
2,100
2,020
2,000
2,890
605
275
63.8%
60.2%
69.0%
63.4%
58.3%
58.6%
60.6%
68.8%
58.7%
24.3%
36.2%
39.8%
31.0%
36.6%
41.7%
41.4%
39.4%
31.2%
41.3%
75.7%
Name
Andrew Penn
Michael Ackland
Kim Krogh Andersen
Alex Badenoch
Vicki Brady
David Burns
Nikos Katinakis
Brendon Riley
Dean Salter
Michael Ebeid AM
1. The FY21 Individual EVP Outcomes were approved by the Board on 10 August 2021.
2. Represents the maximum potential EVP opportunity specific to their time as Senior Executives for FY21, adjusted for any variation in Fixed Remuneration or any leave
without pay taken throughout FY21 that impacts the maximum potential EVP opportunity available. If the minimum threshold performance is not met, the minimum
possible EVP payment is nil.
3. The Restricted Shares and Performance Rights awarded are expected to be allocated shortly after Telstra’s 2021 Annual General Meeting and are subject to Restriction
Periods and performance periods (as set out in Section 2.1(c)) and the Senior Executive's continued employment.
(d) Number and value of rights over equity instruments allocated, vested and exercised during FY21
Equity Movements
Total
rights held
at 1 July
20201
Rights
allocated
during
FY212
Value of
rights
allocated
($000)3
Rights
vested /
exercised
during FY21
941,835
405,920
–
340,390
215,334
203,130
164,095
475,929
–
168,169
451,184
197,525
91,175
211,657
240,312
226,636
211,006
267,014
–
–
496
377
174
404
459
433
403
510
–
–
–
(203,688)
–
–
–
–
–
–
–
–
Value of
rights
vested/
exercised
($000)4
–
766
–
–
–
–
–
–
–
–
Other
changes
(lapsed
rights)5
Total
rights held
at 30 June
20216
(191,777)
1,201,242
–
–
(57,774)
(65,886)
–
–
(101,104)
–
–
399,757
91,175
494,273
389,760
429,766
375,101
641,839
–
168,169
Name
Andrew Penn
Michael Ackland
Kim Krogh Andersen
Alex Badenoch
Vicki Brady
David Burns
Nikos Katinakis
Brendon Riley
Dean Salter
Michael Ebeid AM
All service and performance conditions for rights granted in previous financial years that have vested in FY21 are summarised in the Remuneration Report for each
relevant year of grant. Each equity instrument granted, vested or exercised in FY21 (where applicable) in the table above was issued by Telstra and resulted or will result
(on vesting and exercise) in one ordinary Telstra share (or, at Telstra’s discretion, a cash amount equal to the value one ordinary Telstra share) being provided to the holder
per equity instrument. No amount is payable by the KMP on grant, vesting or exercise of their rights. Restricted Shares are excluded from this table, refer to Sections 2.5(c)
and (e) for further information.
1. The balance reflects the number of equity instruments held on the later of 1 July 2020 or the date on which the executive commenced as a KMP. Refer to page 45 for
further information.
2. Rights allocated during FY21 were the FY20 EVP Performance Rights allocated on 13 November 2020. The approval for the issue of Performance Rights allocated to
Andrew Penn was obtained from shareholders at our 2020 Annual General Meeting. The FY21 EVP Performance Rights will be allocated shortly after Telstra’s 2021
Annual General Meeting, refer to section 2.1 for more information.
3. The fair value reflects the valuation approach required by AASB 2 using an option pricing model for Performance Rights granted. The fair value of the Performance
Rights allocated in FY21 under the FY20 EVP are based on the grant dates of 13 October 2020 for the CEO and 15 August 2019 for all other Senior Executives,
respectively. The fair value of Performance Rights granted under the FY20 EVP are $1.10 for the CEO, and $1.91 for Senior Executives.
4. The value of the Performance Rights vested/exercised reflects the market value at the date the instruments vested. The retention rights that vested for Michael
Ackland during FY21 will be provided as shares following the date of this report.
5. Relates to rights that lapsed due to the specified performance measures or service conditions not being achieved. Rights lapsed in this column relate to the first
tranche of Performance Rights awarded under the FY18 EVP that was performance tested at the end of FY21 and resulted in 100% of the Performance Rights lapsing.
6. The balance reflects the number of rights at 30 June 2021 or, if earlier, the date on which the executive ceased to hold the KMP position. Refer to page 45 for further
information.
There are no Performance Rights or options held by any KMP’s related parties and no Performance Rights or options held indirectly or beneficially by our KMP. As at
30 June 2021, there were no options or Performance Rights vested, or vested and exercisable or vested and unexercisable.
Name
Andrew Penn
Michael Ackland
Kim Krogh Andersen
Alex Badenoch
Vicki Brady
David Burns
Nikos Katinakis
Brendon Riley
Dean Salter
Michael Ebeid AM
Total
Total shares
held at
1 July 20201,2
Restricted
Shares
allocated3
Net shares
acquired or
disposed of and
other changes
Total shares
held at
30 June 20211,4
Number of shares
held nominally at
30 June 20214,5
1,757,235
327,488
–
256,349
179,216
363,186
169,397
1,018,553
5,500
112,113
394,786
172,834
79,778
185,200
210,273
198,306
184,630
233,637
–
–
4,189,037
1,659,444
–
–
–
–
–
–
–
–
–
–
–
2,152,021
500,322
79,778
441,549
389,489
561,492
354,027
825,773
342,723
79,778
335,095
265,981
385,286
294,027
1,252,190
1,252,190
5,500
112,113
5,500
112,113
5,848,481
3,898,466
1. Total shareholdings include shares held by our Senior Executives and their related parties. Unless related to our employee share plans, shares acquired or disposed of
by our Senior Executives and their related parties during FY21 were on an arm's length basis at market price.
2. Reflects the number of shares held on the later of 1 July 2020 or the date on which the executive commenced as a KMP. Refer to page 45 for further information.
3. Restricted Shares in this column were allocated on 13 November 2020 and relate to the FY20 EVP. The approval for the issue of Restricted Shares allocated to Andrew
Penn was obtained from shareholders at our 2020 Annual General Meeting. The allocation of Restricted Shares under the FY21 EVP will be made after the reporting
date of 30 June 2021, therefore they have not been included in the table above.
4. The balance reflects the number of shares held at 30 June 2021 or, if earlier, the date on which the executive ceased to hold the KMP position. Refer to page 45 for
further information.
5. Nominally refers to shares held either indirectly or beneficially by Senior Executives and shares held by their related parties including certain Restricted Shares held
beneficially by Senior Executives. These shares are subject to a Restriction Period, such that the Senior Executive is restricted from dealing with the shares until the
Restriction Period ends. Refer to note 5.2 to the financial statements for further details.
3.0 Non-executive Director remuneration
3.1 FY21 Fee structure
(a) Overview
Our non-executive Directors are remunerated with set fees and
do not receive any performance-based pay. This enables non-
executive Directors to maintain independence and impartiality
when making decisions affecting the future direction of the
company.
Superannuation contributions are included within each non-
executive Director's total remuneration, in accordance with the
ASX Listing Rules and Telstra policy. Non-executive Directors
may choose to increase the proportion of their remuneration
taken as superannuation, subject to legislative requirements.
Telstra does not provide retirement benefits for non-executive
Directors other than the superannuation contributions noted
above.
Sections 1.2(g) and (h) of this report provide details of the share
ownership policy and securities trading restrictions that apply
to our non-executive Directors. Section 3.2 provides full details
of non-executive Director remuneration for FY21.
Non-executive Directors are remunerated in accordance with
Telstra's Constitution, which provides for an aggregate fee pool
that is set, and varied, only by approval of a resolution of
shareholders at the AGM. The current annual fee pool of $3.5
million was approved by shareholders at Telstra's 2012 AGM.
The total of Board and Committee fees, including
superannuation, paid to non-executive Directors in FY21
remained within the approved fee pool.
(b) FY21 Board and standing Committee fees
There were no increases in Board or standing Committee fees
during the year. The Board and standing Committee fee
structure (inclusive of superannuation) during FY21 was:
FY21
Board fees
Board
FY21
Committee fees
Audit & Risk
Committee
People and
Remuneration
Committee
Nomination
Committee*
Chairman
$775,000
Committee
Chairman
Non-executive
Director (annual
base fee)
$235,000
Committee
Member
$70,000
$35,000
$56,000
$28,000
–
–
*
All non-executive Directors are members of the Nomination Committee and do
not receive a fee for this Committee.
The Chairman Board fee and non-executive Director annual
base fee have not changed since 2014 and 2012 respectively,
and no increase in these fees is expected in FY22. The
Chairman of the Board does not receive Committee fees if he is
a Member of a Board Committee.
66
67
REMUNERATION REPORT (c) Remuneration for additional or special duties in relation to Telstra’s proposed corporate restructure
Under our Constitution, if a Director at the request of the Board performs additional or special duties for the Company, Telstra may
remunerate that Director as determined by the Board.
During FY21, some Directors received remuneration for additional or special duties they performed in connection with the
proposed restructure of the Telstra Group as follows:
• Craig Dunn, Elana Rubin and Nora Scheinkestel – for their services as members of an ad hoc Board committee established by
the Board in relation to the formulation and implementation of a proposed restructure of the Telstra Group as announced on 12
November 2020 and other matters arising from or in connection with the proposed restructure. (No additional amounts were paid
to John Mullen for his services as a member of this committee).
• Craig Dunn and Nora Scheinkestel – for their services as members of a committee established with the approval of the Board
regarding the due diligence process to be undertaken in relation to a potential scheme booklet in connection with Telstra’s
proposed corporate restructure.
Section 3.2 provides further details on the remuneration for additional or special duties received by Craig Dunn, Elana Rubin and
Nora Scheinkestel.
(d) Changes to the Board and Committee composition
During the year, Bridget Loudon was appointed to the Board effective 14 August 2020. There were no other changes to Board and
Committee composition during FY21.
3.2 Detailed remuneration and interests in Telstra shares
(a) Non-executive Director remuneration
Name and title
John P Mullen
Chairman
Eelco Blok4
Director
Roy H Chestnutt4
Director
Craig W Dunn
Director
Peter R Hearl
Director
Bridget Loudon3
Director
Elana Rubin
Director
Nora L Scheinkestel
Director
Margaret L Seale
Director
Niek Jan van Damme4
Director
Total
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Short term employee benefits
Post–employment
benefits
Salary and fees
($000)1
Non-monetary
benefits ($000)2
Superannuation
($000)
Total
($000)
753
754
231
231
265
265
296
284
291
280
189
–
268
83
284
277
248
249
258
258
3,083
2,681
7
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7
8
22
21
4
4
5
5
22
21
–
11
18
–
–
8
22
21
22
21
5
5
120
117
782
783
235
235
270
270
318
305
291
291
207
–
268
91
306
298
270
270
263
263
3,210
2,806
1. Includes fees for membership on Board standing committees and remuneration for additional or special duties (where applicable). In FY21, the following non-
executive Directors received remuneration for additional or special duties: Craig Dunn ($12,500), Elana Rubin ($4,500) and Nora Scheinkestel ($7,500).
2. Includes the provision of car parking as well as the value of Telstra products and services provided to the Chairman. The value of non-monetary benefits has been
grossed up for FBT by the relevant FBT rates.
3. Bridget Loudon qualified as KMP from 14 August 2020, when she was appointed as a non-executive Director of Telstra.
4. As Eelco Blok, Niek Jan van Damme and Roy Chestnutt are overseas residents, their superannuation contributions for FY21 are less than the contributions for
Australian resident non-executive Directors.
Remuneration Report | Telstra Annual Report 2021
(b) Non-executive Directors’ interests in Telstra shares
During FY21, our non-executive Directors and their related parties held Telstra shares directly, indirectly or beneficially as follows:
Name
John P Mullen
Eelco Blok
Roy H Chestnutt
Craig W Dunn
Peter R Hearl
Bridget Loudon
Elana Rubin
Nora L Scheinkestel
Margaret L Seale
Niek Jan van Damme
Total
Total shares held at
1 July 20201,2
Net shares acquired
or disposed of and
other changes1
Total shares held at
30 June 20211
Shares held
nominally at
30 June 20213
101,159
75,000
70,000
73,173
100,000
–
51,728
150,265
310,540
74,000
1,005,865
–
–
–
–
–
–
16,233
8,142
–
3,000
27,375
101,159
75,000
70,000
73,173
100,000
–
67,961
158,407
310,540
77,000
1,033,240
75,000
–
70,000
72,473
–
–
–
125,854
310,540
–
653,867
1. Total shareholdings include shares held by our non-executive Directors and their related parties. Shares acquired or disposed of by our non-executive Directors and
their related parties during FY21 were on an arm's length basis at market price.
2. For Bridget Loudon, the balance as at 1 July 2020 represents shares held as at the date on which she became KMP.
3. Nominally refers to shares held either indirectly or beneficially by non-executive Directors including those shares held by their related parties.
4.0 Looking forward to FY22
4.1 FY22 Senior Executive Remuneration Framework
For FY22 we do not anticipate any increases in Senior Executive Fixed Remuneration other than on appointment or promotion to a
new role or due to a significant increase in accountabilities, nor do we intend on making any significant changes to the EVP
remuneration structure.
As we consider the company’s strategy following the completion of T22, we will continue to ensure our Executive Remuneration
framework remains aligned to our remuneration policy and strategy.
The EVP structure for FY22 is as follows:
d
e
s
a
e
l
e
R
s
t
l
u
s
e
R
2
2
Y
F
)
i
%
5
2
(
d
a
P
h
s
a
C
P
V
E
M
G
A
a
r
t
s
l
e
T
2
2
0
2
)
%
5
7
(
d
e
t
a
c
o
l
l
A
y
t
i
u
q
E
P
V
E
FY22 EVP Initial
Performance
Period
1 July 2021 to
30 June 2022
Restricted Shares
(1st tranche)
End of restriction
30 June 2023
Restricted Shares
(2nd tranche)
End of restriction
30 June 2024
Restricted Shares
(3rd tranche)
End of restriction
30 June 2025
Restricted Shares
(4th tranche)
End of restriction
30 June 2026
Restricted
Shares – T1
Restricted
Shares – T2
Restricted
Shares – T3
Restricted
Shares –T4
Performance Rights
Performance
Rights
RTSR Test
30 June 2026
FY22 EVP Performance Rights RTSR Performance Period
1 July 2021 to 30 June 2026
FY22
FY23
FY24
FY25
FY26
FY27
Jul
Jun
Aug
Sep
Oct
Nov
Jun
Jul
Jun
Jul
Jun
Jul
Jun
Jul
Further information on the FY22 EVP structure will be provided in our 2022 Remuneration Report.
4.2 FY22 EVP Performance Measures and Targets
FY22 is a pivotal growth year in our financial trajectory as we move past the FY21 inflection point, complete T22 and build strong
momentum into FY23-25.
It is our intention to continue to provide meaningful information to enable shareholders to assess the appropriateness of our
remuneration targets and outcomes. This provides shareholders with a high level of transparency over the company’s
remuneration framework and outcomes. The Board considers this an imperative as our operating environment requires careful
shareholder consideration of the need to appropriately recognise and reward strong management performance for the value
created for the company and its shareholders.
The table below outlines the performance measures and targets that will apply to the FY22 EVP. These performance measures and
targets have been selected by the Board to ensure that the CEO and other Senior Executives continue to deliver against our T22
strategy, and that financial rewards are linked directly to Senior Executive contributions, company performance and long term
shareholder value creation.
68
69
REMUNERATION REPORT
Remuneration Report | Telstra Annual Report 2021
The FY22 EVP primary performance measures remain largely
unchanged other than the retirement of the Product Portfolio
Simplification metric for Telstra Enterprise products. This
metric has been retired as a result of achieving our T22
ambition of halving the number of active Telstra Enterprise
products by the end of FY21. The weighting that was previously
allocated to this metric has now been redistributed to Episode
NPS resulting in a revised weighting of 15% (previously 10%).
As our strategic, customer and transformation metrics are
heavily aligned to increasing customer satisfaction with our
products and services, we believe that transferring the
weighting from the retired metric to Episode NPS retains our
executive team's focus on continuously improving service
experiences and offerings.
In setting the primary performance measures and targets for
the FY22 EVP, the Board sought to ensure they were robust and
sufficiently demanding, taking into account the key deliverables
and milestones outlined in our T22 strategy, planned financial
outcomes contained within our FY22 Corporate Plan and FY22
guidance (as announced on 12 August 2021).
The targets that apply to the FY22 EVP do not constitute market
guidance. Subsequent adjustments to guidance throughout the
year (for example unplanned one-off events) and their impact on
EVP outcomes will be considered both during the financial year
as those events may occur and also at the end of the financial
year, in accordance with established principles to ensure that
outcomes appropriately reflect the performance of Senior
Executives. Any adjustments that the Board makes will be fully
disclosed to shareholders in next year’s Remuneration Report.
The Board also has the ability to amend the performance
measures themselves if it considers it appropriate having regard
to Telstra’s business circumstances and priorities.
All of the following measures have been selected on the basis that
they are directly linked to our T22 strategy as described below.
Performance
Measure
Metric
Weighting
FY21
Baseline^
FY22*
Threshold
Target
Max
Rationale for
why chosen
Performance
Measure
Metric
Weighting
FY21
Baseline^
FY22*
Threshold
Target
Max
Rationale for
why chosen
FY22 EVP Performance Measures and Targets
FY22 EVP Performance Measures and Targets
Telstra External Income
(excluding finance
income)
Total
Income
15.0%
$23,108m
Underlying EBITDA is
Earnings Before
Interest, Tax,
Depreciation &
Amortisation, excludes
net one-off nbn DA
receipts less nbn net
C2C, one-off
restructuring costs and
guidance adjustments
Underlying
EBITDA
15.0%
$6,765m
At or above
bottom end
of Market
Guidance*
Approx.
Midpoint
of Market
Guidance*
At or above
top end of
Market
Guidance*
Free Cashflow after
lease payments and
excluding M&A and
spectrum
Free Cash
Flow (FCF)
15.0%
$3,903m
• Key indicator of financial
performance
• Ensures continued focus on
customer retention and growth
• Aligns to Pillar 1 of the
T22 strategy
• Key indicator of financial
performance
• Ensures appropriate focus on
profit and cost to deliver
• A strong indicator of underlying
company profitability
• Aligns to Pillar 4 of our
T22 strategy
• Key indicator of financial
performance
• Appropriate for a capital
intensive business and critical
in managing the company’s
ability to pay a dividend and
maintain balance sheet
strength
• Aligns to Pillar 4 of our
T22 strategy
• Active reduction of our costs
will be key to competing and
delivering strong financial
performance in an increasingly
competitive market
Year-on-year reduction
in operating non-Direct
Variable Cost (DVC)
expenses
Net Opex
Reduction
15.0%
$490m
$380m
$430m
$530m
• Delivering significant absolute
cost reduction aligns with
intent to drive productivity
and reduce costs
• Aligns to Pillar 4 of our
T22 strategy
g
n
i
t
h
g
i
e
w
l
a
t
o
t
f
o
%
0
6
–
l
a
i
c
n
a
n
F
i
70
Improvement
in our
Episode NPS
Episode NPS
15%
+32
+34
+36
+38
g
n
i
t
h
g
i
e
w
l
a
t
o
t
f
o
%
0
4
–
n
o
i
t
a
m
r
o
f
s
n
a
r
T
&
r
e
m
o
t
s
u
C
,
c
i
g
e
t
a
r
t
S
Number of
Fixed and
Postpaid
Mobile
Services on
in-market
plans
C&SB
digital sales
interactions
TE Digital
Service
Interactions
Top-line
sustainable
employee
engagement
score
Product
Portfolio
Simplification
Digital
Engagement
People Capability
& Engagement
5%
8.8m
9.7m
10m
10.2m
5%
39.3%
43%
45%
55%
5%
n/a
38.5%
40%
45%
10%
78
80
84
85
^ For FY22 targets, the baseline refers to the FY21 EVP performance outcomes as outlined in section 2.2.
* Market Guidance means guidance for FY22 as set out in Telstra’s ASX announcement dated 12 August 2021.
• It is in our shareholders’ interests to have
the executive team specifically focused on
continuously improving the customer service
experience, driving both customer attraction
and retention
• Underpins companywide improvement
programs focused on improving our
operational excellence by identifying and
eliminating the causes of unnecessary
customer effort and pain points
• Aligns to Pillar 1 of our T22 Strategy
• Simplifying our products and services
increases the simplicity, transparency and
satisfaction that our customers experience
and enables the delivery of material cost
reductions
• Moving customers to our 20 simplified
connectivity plans supports the delivery of
improved customer experiences, offers our
customers simplicity and ease of dealing
with Telstra, and supports readiness for
future delivery of digitised experiences
for customers
• Aligns to Pillar 1 of our T22 strategy
• Enhancing our digital engagement with our
customer improves customer experience
whilst supporting our cost reduction focus
• Increasing digital sales interactions and the
engagement of our mass market customers
through digital sales channels remains a
strong focus, targeting just over a third of
sales to occur through digital channels
• Key to achieving this is maximising the
value and ease for our customers in using
our digital channels
• Intended to provide customer choice,
reduce our servicing costs and improve
profit margins
• Each of these metrics align to Pillar 1 of
our T22 strategy
• Focusses on our employee engagement.
• Supports our ability to have both the key
leadership and technical talent required
to deliver on our ambitious strategy
• Aligns to Pillar 3 of our T22 strategy
71
REMUNERATION REPORT
The outcome determined by the Board following an assessment of Telstra’s performance against the
primary performance measures under the EVP during the Initial Performance Period and making such
adjustments as it considers necessary to ensure the outcome is appropriate, that is then used as an
input for determining each Senior Executive’s Individual EVP Outcome
Permitted Reason
Permitted Reason under the EVP, means death, total and permanent disablement, certain medical
conditions, company initiated separation for a reason unrelated to performance or conduct, redundancy
or retirement. Permitted Reason under the EVP Performance Rights and Restricted Share terms also
includes mutual separation
Remuneration Report | Telstra Annual Report 2021
Related parties
of a person means:
• a close member of the person’s family; and/or
• an entity over which the person or close family member has, directly or indirectly, control, joint control
or significant influence
Restricted Share
A Telstra share that is subject to a Restriction Period
Restriction Period
A period during which a Telstra share is subject to a continuing employment condition and cannot
be traded. Restricted Shares are transferred to a Senior Executive on the first day after the end of
the Restriction Period that Senior Executives are able to deal in shares under Telstra's Securities
Trading Policy
RTSR
Relative Total Shareholder Return (RTSR) measures the performance of an ordinary Telstra share
(including the value of any cash dividend and other shareholder benefits paid during the period) relative
to the performance of ordinary securities issued by the other companies in a comparator group over the
same period
RTSR Performance
Period
The five-year performance period ending on 30 June 2025 over which the RTSR performance condition
for the FY21 EVP Performance Rights will be measured
Senior Executive
Refers to the CEO and those Group Executives who are KMP with authority and responsibility for
planning, directing and controlling the activities of Telstra and the Group, directly or indirectly
Underlying EBITDA
Underlying EBITDA is Earnings Before Interest, Tax, Depreciation & Amortisation. Excludes net one-off
nbn DA receipts less nbn net C2C, one-off restructuring costs and guidance adjustments (for FY21 only,
Underlying EBITDA also includes depreciation of mobile lease right-of-use assets)
5.0 Glossary
Base EVP Outcome
Cash Rights
Rights granted to a Senior Executive who ceases employment for a Permitted Reason before the
Restricted Shares and Performance Rights are granted in respect of the EVP in lieu of those Restricted
Shares and Performance Rights. The Cash Rights are subject to the same time conditions and
performance measures as those applying to those Restricted Shares and Performance Rights. On
vesting, a Cash Right will entitle the Senior Executive to a cash payment equivalent to the value of a
Telstra share at the end of the applicable Restriction Period or performance period. A Cash Right granted
in lieu of a Restricted Share also entitles the Senior Executive to receive an amount equal to dividends
paid on Telstra shares between the date the Cash Right is allocated and the end of the applicable
Restriction Period, at or around the same time that Telstra pays the dividend. A Cash Right granted in lieu
of a Performance Right entitles the Senior Executive, if the Cash Right vests, to receive an amount
equivalent to dividends paid between allocation and vesting of the Cash Right after the end of the
applicable performance period
EBITDA
EVP
Fixed Remuneration
or FR
Earnings Before Interest, Tax, Depreciation and Amortisation
Executive Variable Remuneration Plan
Base salary plus company and private salary sacrificed superannuation contributions
FY
Financial year
Individual EVP
Outcome
The individual award earned by a Senior Executive under the EVP taking into consideration their
performance, the Base EVP Outcome, their ‘at target’ EVP reward opportunity and other factors in
accordance with the Board’s decision framework such as any material risk events identified, the severity
of their impact and the Senior Executive’s accountability for the matter
Initial Performance
Period
1 year (1 July 2020 – 30 June 2021)
KMP
Key Management Personnel
NBN Transaction
Agreements with nbn co and the Government in relation to Telstra's participation in the rollout of the
nbn™ network. This includes the entire Definitive Agreement receipts and the net negative recurring NBN
headwinds on our business
NPS
Net Promoter Score is a non-financial performance that we use to measure customer experience at
Telstra. The Episode NPS performance measure is based on responses to internal surveys following
actual service experiences customers had with Telstra. The overall Episode NPS result for Telstra is a
weighted average calculation of the survey results from Telstra business segments – Consumer & Small
Business contribute collectively at 65% and Telstra Enterprise at 35%
Performance Right
A right to a share or, at Telstra’s discretion, a cash amount equivalent to the value of a share, at the end of
a performance period, subject to the satisfaction of certain performance measures and continuing
employment conditions
72
73
REMUNERATION REPORT Financial
Report
Directors’
Report
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Rounding
The Telstra Entity is a company of the kind referred to in
the Australian Securities and Investments Commission
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016 and issued
pursuant to section 341(1) of the Corporations Act 2001.
Except where otherwise indicated, the amounts in this
Directors’ Report and the accompanying financial report
have been rounded to the nearest million dollars ($m) and
amounts in the Remuneration Report have been rounded
to the nearest thousand dollars ($000).
This report is made on 12 August 2021 in accordance with
a resolution of the Directors.
Auditor’s Independence Declaration to the
Directors of Telstra Corporation Limited
As lead auditor for the audit of the financial report of
Telstra Corporation Limited for the financial year ended
30 June 2021, I declare to the best of my knowledge and
belief, there have been:
(a) No contraventions of the auditor independence
requirements of the Corporations Act 2001 in relation to
the audit; and
(b) No contraventions of any applicable code of professional
conduct in relation to the audit.
This declaration is in respect of Telstra Corporation Limited
and the entities it controlled during the financial year.
John P Mullen
Chairman
12 August 2021
Andrew R Penn
Chief Executive Officer and Managing Director
12 August 2021
Ernst & Young
Andrew Price
Partner
12 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under
Professional Standards Legislation
R
E
P
O
R
T
74
Telstra Corporation Limited and controlled entities | 75
I
F
N
A
N
C
A
L
I
Notes to the financial statements (continued)Telstra Financial Report 2021
2021.Financial Report.book Page 1 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 2 Wednesday, August 11, 2021 4:34 PM
Telstra Corporation Limited
and controlled entities
Australian Business Number (ABN): 33 051 775 556
Telstra Financial Report 2021
Financial report: introduction and contents
As at 30 June 2021
About this report
This is the financial report for Telstra Corporation Limited (referred
to as the Company or Telstra Entity) and its controlled entities
(together referred to as we, us, our, Telstra, the Telstra Group or the
Group) for the year ended 30 June 2021.
Telstra Corporation Limited is a ‘for profit’ company limited by
shares incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange (ASX). As at 18 June 2021,
Telstra was delisted from the Main Board of NZX Limited (NZX) and
shareholders who held Telstra shares on NZX were automatically
transferred to the ASX.
This financial report was authorised for issue in accordance with a
resolution of the Telstra Board of Directors on 12 August 2021. The
Directors have the power to amend and reissue the financial report.
Reading the financials
Section introduction
The introduction at the start of each section outlines the focus of
the section and explains the purpose and content of that section.
Note and topic summary
A summary at the start of certain notes explains the objectives and
content of that note, or at the start of certain specific topics
clarifies complex concepts, which users may not be familiar with.
Narrative table
Some narrative disclosures are presented in a tabular format to
provide readers with a clearer understanding of the information
being presented.
Information panel
The information panel describes our key accounting estimates and
judgements applied in the preparation of the financial report, which
are relevant to that section or note.
Contents
Financial Statements
Income Statement
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
F2
F3
F4
F6
F7
F8
87
77
F8
87
78
F8
87
79
F8
87
81
F9
82
88
F10
94
F17
100
F24
108
F25
109
F28
112
F28
112
83
83
83
83
84
Contents
Notes to the Financial Statements
Financial Statements
Section 1: Basis of preparation
1.1
Basis of preparation of the financial report
Income Statement
Terminology used in our income statement
1.2
Statement of Comprehensive Income
1.3
Principles of consolidation
Statement of Financial Position
1.4
Key accounting estimates and judgements
Statement of Cash Flows
Other accounting policies
1.5
Statement of Changes in Equity
85
92
99
100
103
103
Section 2: Our performance
Notes to the Financial Statements
2.1
Segments and disaggregated revenue
2.2
Income
Section 1: Basis of preparation
1.1 Basis of preparation of the financial report
2.3
Expenses
1.2 Terminology used in our income statement
2.4
Income taxes
1.3 Principles of consolidation
Earnings per share
2.5
1.4 Key accounting estimates and judgements
2.6
Notes to the statement of cash flows
1.5 Other accounting policies
Section 3: Our core assets, lease arrangements and
Section 2: Our performance
working capital
2.1 Segments and disaggregated revenue
3.1
2.2
2.3 Expenses
3.2
2.4
Income taxes
3.3
2.5 Earnings per share
3.4
2.6 Notes to the statement of cash flows
Property, plant and equipment and intangible
Income
assets
Lease arrangements
Trade and other receivables and contract assets
Contract liabilities and other revenue received in
advance
3.5
Net contract assets and contract liabilities
Section 3: Our core assets, lease arrangements and working capital
3.6
Deferred contract costs
3.1 Property, plant and equipment and intangible assets
105
3.7
Inventories
111
3.2 Lease arrangements
116
3.3 Trade and other receivables and contract assets
3.8
Trade and other payables
3.4 Contract liabilities and other revenue received in advance 118
Section 4: Our capital and risk management
119
3.5
4.1
120
3.6 Deferred contract costs
4.2
3.7
121
4.3
3.8 Trade and other payables
121
4.4
Section 4: Our capital and risk management
4.5
4.1 Capital management
Section 5: Our people
4.2 Dividend
5.1
Employee benefits
4.3 Equity
5.2
Employee share plans
4.4 Net debt
Post-employment benefits
5.3
4.5 Financial instruments and risk management
5.4
Key management personnel compensation
Section 5: Our people
Section 6: Our investments
5.1 Employee benefits
6.1
5.2 Employee share plans
6.2
5.3 Post-employment benefits
5.4 Key management personnel compensation
Capital management
Dividend
Inventories
Equity
Net debt
Financial instruments and risk management
Investments in controlled entities
Investments in joint ventures and associated
entities
F30
114
116
F36
119
F41
126
F43
129
129
F44
130
F45
F46
130
F46
131
132
Net contract assets and contract liabilities
F47
F47
F47
133
F49
133
F53
135
141
F65
F66
150
F69
151
F71
154
157
122
122
122
124
128
140
141
144
146
F72
F74
158
163
Investments in controlled entities
Investments in joint ventures and associated entities
Section 7: Other information
Section 6: Our investments
7.1
Auditor’s remuneration
6.1
Other provisions
7.2
6.2
Parent entity disclosures
7.3
Section 7: Other information
7.4
Commitments and contingencies
7.1 Auditor’s remuneration
7.5
Events after reporting date
7.2 Other provisions
7.3 Parent entity disclosures
Directors’ Declaration
7.4 Commitments and contingencies
Independent Auditor’s Report
7.5 Events after reporting date
147
149
F78
F78
168
F78
168
F80
169
F80
169
171
F82
171
F83
172
153
153
153
155
155
Income
Statement
For the year ended 30 June 2021
Telstra Group
Income
Revenue (excluding finance income)
Other income
Expenses
Labour
Goods and services purchased
Net impairment losses on financial assets
Other expenses
Share of net loss from joint ventures and associated entities
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA)
Depreciation and amortisation
Earnings before interest and income tax expense (EBIT)
Finance income
Finance costs
Net finance costs
Profit before income tax expense
Income tax expense
Profit for the year
Profit for the year attributable to:
Equity holders of Telstra Entity
Non-controlling interests
Earnings per share (cents per share)
Basic
Diluted
The notes following the financial statements form part of the financial report.
Telstra Financial Report 2021
Year ended 30 June
2021
2020
Note
$m
$m
2.2
2.2
2.3
6.2
2.3
2.2
2.3
2.4
2.5
2.5
21,558
1,574
23,132
4,012
8,318
160
2,980
23,710
2,451
26,161
4,058
9,107
202
3,584
15,470
16,951
(24)
(305)
15,494
17,256
7,638
4,646
2,992
103
654
551
2,441
539
1,902
1,857
45
1,902
8,905
5,338
3,567
274
1,045
771
2,796
957
1,839
1,819
20
1,839
cents
cents
15.6
15.6
15.3
15.3
R
E
P
O
R
T
I
F
N
A
N
C
A
L
I
Directors’ Declaration
Independent Auditor’s Report
157
173
158
76 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F1
F2 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 77
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021
2021.Financial Report.book Page 3 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 4 Wednesday, August 11, 2021 4:34 PM
Statement of
Comprehensive Income
For the year ended 30 June 2021
Telstra Group
Profit for the year attributable to:
Equity holders of Telstra Entity
Non-controlling interests
Telstra Financial Report 2021
Year ended 30 June
2021
2020
Note
$m
$m
1,857
45
1,902
1,819
20
1,839
Items that will not be reclassified to the income statement
Retained profits
Actuarial gain/(loss) on defined benefit plans attributable to equity holders of Telstra Entity
5.3
Income tax on actuarial (gain)/loss on defined benefit plans
Fair value of equity instruments reserve
Share of other comprehensive income of equity accounted investments
Income tax on share of other comprehensive income of equity accounted investments
Foreign currency translation reserve
Translation differences of foreign operations attributable to non-controlling interests
Items that may be subsequently reclassified to the income statement
Foreign currency translation reserve
Translation differences of foreign operations attributable to equity holders of Telstra Entity
4.5
4.5
Cash flow hedging reserve
Changes in cash flow hedging reserve
Share of other comprehensive income of equity accounted investments
Income tax on movements in the cash flow hedging reserve
Foreign currency basis spread reserve
Changes in the value of the foreign currency basis spread
Income tax on movements in the foreign currency basis spread reserve
Total other comprehensive income
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Equity holders of Telstra Entity
Non-controlling interests
The notes following the financial statements form part of the financial report.
60
(18)
292
(77)
(1)
256
(95)
68
3
(20)
(54)
16
(82)
174
2,076
2,032
44
(82)
25
16
(2)
-
(43)
21
54
(6)
(16)
(6)
2
49
6
1,845
1,825
20
Statement of
Financial Position
As at 30 June 2021
Telstra Group
Current assets
Cash and cash equivalents
Trade and other receivables and contract assets
Deferred contract costs
Inventories
Derivative financial assets
Current tax receivables
Prepayments
Total current assets
Non-current assets
Trade and other receivables and contract assets
Deferred contract costs
Inventories
Investments – accounted for using the equity method
Investments – other
Property, plant and equipment
Right-of-use assets
Intangible assets
Derivative financial assets
Deferred tax assets
Defined benefit asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Other provisions
Lease liabilities
Borrowings
Derivative financial liabilities
Current tax payables
Contract liabilities and other revenue received in advance
Total current liabilities
Non-current liabilities
Other payables
Employee benefits
Other provisions
Lease liabilities
Borrowings
Derivative financial liabilities
Deferred tax liabilities
Defined benefit liability
Contract liabilities and other revenue received in advance
Total non-current liabilities
Total liabilities
Net assets
Telstra Financial Report 2021
As at 30 June
2021
2020
Note
$m
$m
2.6
3.3
3.6
3.7
4.4
2.4
3.3
3.6
3.7
6.2
3.1
3.2
3.1
4.4
2.4
5.3
3.8
5.1
7.2
3.2
4.4
4.4
2.4
3.4
3.8
5.1
7.2
3.2
4.4
4.4
2.4
5.3
3.4
1,125
4,577
113
385
624
5
285
499
5,121
82
418
147
2
265
7,114
6,534
1,168
1,342
21
1,018
15
1,428
1,354
28
897
21
20,863
21,499
2,852
7,131
786
60
155
35,411
42,525
3,030
7,412
2,011
66
123
37,869
44,403
3,766
3,980
682
87
503
727
124
611
3,631
2,763
26
124
1,605
10,424
9
150
126
2,802
10,505
331
1,580
10
1,313
16,826
27,250
15,275
54
224
1,611
10,094
4
127
143
2,687
13,066
320
1,605
8
1,202
19,162
29,256
15,147
78 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F3
F4 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 79
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 5 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 6 Wednesday, August 11, 2021 4:34 PM
Statement of
Financial Position (continued)
Telstra Financial Report 2021
As at 30 June 2021
Telstra Group
Equity
Share capital
Reserves
Retained profits
Equity available to Telstra Entity shareholders
Non-controlling interests
Total equity
The notes following the financial statements form part of the financial report.
As at 30 June
2021
2020
Note
$m
$m
4.3
4.3
4,436
138
10,014
14,588
687
4,451
5
10,017
14,473
674
Statement of
Cash Flows
For the year ended 30 June 2021
Telstra Group
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax (GST))
Payments to suppliers and employees (inclusive of GST)
Government grants received for operating activities
Net cash generated by operations
Income taxes paid
15,275
15,147
Net cash provided by operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Capital expenditure (before investments)
Payments for shares in controlled entities (net of cash acquired)
Payments for equity accounted investments
Payments for other investments
Total capital expenditure (including investments)
Proceeds from sale of property, plant and equipment
Proceeds from sale and leaseback
Proceeds from sale of businesses and shares in controlled entities (net of cash disposed)
Proceeds from sale of equity accounted and other investments
Distributions received from equity accounted investments
Receipts for the principal portion of finance lease receivables
Government grants received for investing activities
Interest received
Net cash used in investing activities
Operating cash flows less investing cash flows
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment for the principal portion of lease liabilities
Purchase of shares for employee share plans
Finance costs paid
Dividends paid to non-controlling interests
Dividend paid to equity holders of Telstra Entity
Proceeds from the sale of units in a controlled trust
Other
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
The notes following the financial statements form part of the financial report.
Telstra Financial Report 2021
Year ended 30 June
2021
2020
Note
$m
$m
26,727
29,506
(18,901)
(21,895)
167
7,993
153
7,764
(762)
(754)
7,231
7,010
(2,079)
(1,061)
(2,341)
(1,101)
(3,140)
(3,442)
(26)
(30)
(152)
-
(33)
(122)
(3,348)
(3,597)
154
291
218
147
20
120
36
18
258
18
58
15
83
135
28
26
(2,344)
(2,976)
4,887
4,034
2,308
5,476
(3,260)
(6,562)
(706)
(39)
(613)
(35)
(993)
(22)
(812)
(23)
2.4
2.6
3.2
3.2
4.2
(1,902)
(1,903)
-
11
698
3
(4,236)
(4,138)
651
499
(25)
2.6
1,125
(104)
604
(1)
499
80 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F5
F6 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 81
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 7 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 8 Wednesday, August 11, 2021 4:34 PM
Statement of
Changes in Equity
For the year ended 30 June 2021
Telstra Group
Share
capital
Reserves Retained
Total
profits
Note
Balance at 1 July 2019
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends
Non-controlling interests from the sale of units in a
controlled trust
Transactions with non-controlling interests
Amounts repaid on share loans provided to
employees
Additional shares purchased
Share-based payments
Balance at 30 June 2020
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends
Transactions with non-controlling interests
Amounts repaid on share loans provided to
employees
Additional shares purchased
Share-based payments
Balance at 30 June 2021
4.3
$m
4,447
-
-
-
-
-
-
3
(22)
23
4,451
-
-
-
-
-
7
(39)
17
4,436
$m
(58)
-
63
63
-
-
-
-
-
-
5
-
133
133
-
-
-
-
-
138
$m
10,158
1,819
(57)
1,762
(1,903)
-
-
-
-
-
10,017
1,857
42
1,899
(1,902)
-
-
-
$m
14,547
1,819
6
1,825
(1,903)
-
-
3
(22)
23
14,473
1,857
175
2,032
(1,902)
-
7
(39)
-
10,014
17
14,588
The notes following the financial statements form part of the financial report.
Telstra Financial Report 2021
Notes to the financial statements
Notes to the financial statements
Non-
control-
ling
interests
$m
(19)
20
-
20
(26)
Total
equity
$m
14,528
1,839
6
1,845
(1,929)
698
698
1
-
-
-
674
45
(1)
44
(35)
4
-
-
-
687
1
3
(22)
23
15,147
1,902
174
2,076
(1,937)
4
7
(39)
17
15,275
Section 1. Basis of preparation
Section 1. Basis of preparation
This section explains basis of preparation of our
This section explains basis of preparation of our
financial report, describes changes in our accounting
financial report, describes changes in our accounting
policies and provides a summary of our key accounting
policies and provides a summary of our key accounting
estimates and judgements.
estimates and judgements.
SECTION 1.
1.1 Basis of preparation of the financial report
BASIS OF PREPARATION
This financial report is a general purpose financial report, prepared
by a ‘for profit’ entity, in accordance with the requirements of the
Australian Corporations Act 2001, Accounting Standards
applicable in Australia and other authoritative pronouncements of
the Australian Accounting Standards Board (AASB). It also
complies with International Financial Reporting Standards (IFRS)
and Interpretations published by the International Accounting
Standards Board (IASB).
The financial report is presented in Australian dollars and, unless
otherwise stated, all values have been rounded to the nearest
million dollars ($m) under the option available under the Australian
Securities and Investments Commission (ASIC) Corporations
(Rounding in Financial/Directors’ Report) Instrument 2016/191. The
functional currency of the Telstra Entity and its Australian
controlled entities is Australian dollars. The functional currency of
certain non-Australian controlled entities is not Australian dollars.
The results of these entities are translated into Australian dollars in
accordance with our accounting policy described in note 1.3.1.
The financial statements of controlled entities are prepared for the
same reporting period as the Telstra Entity, using consistent
accounting policies.
1.3.1 Translation of financial reports of foreign operations that
have a functional currency that is not Australian dollars
The financial reports of our foreign operations are translated into
Australian dollars (our presentation currency) using the following
method:
Foreign currency amount
Exchange rate
Assets and liabilities
including goodwill and fair
value adjustments arising
on consolidation
The reporting date rate
The financial report is prepared in accordance with historical cost,
except for some categories of financial instruments, which are
recorded at fair value.
Equity items
Where relevant, comparative information has been reclassified to
ensure comparability with the current year disclosures and
presentation.
Income statements
The initial investment date
rate
Average rate (or the
transaction date rate for
significant identifiable
transactions)
1.2 Terminology used in our income statement
EBITDA reflects earnings before interest, income tax, depreciation
and amortisation. EBIT is a similar measure to EBITDA, but takes
into account depreciation and amortisation.
The exchange differences arising from the translation of financial
statements of foreign operations are recognised in other
comprehensive income.
We believe EBITDA is useful as it is a widely recognised measure of
operating performance.
1.3 Principles of consolidation
Our financial report includes the consolidated assets and liabilities
of the Telstra Entity and its controlled entities as a whole as at the
end of the financial year and the consolidated results and cash
flows for the year.
An entity is considered to be a controlled entity where we are
exposed, or have rights, to variable returns from our involvement
with the entity and have the ability to affect those returns through
our power to direct the activities of the entity. We consolidate the
results of our controlled entities from the date on which we gain
control until the date we cease control.
The effects of intra-group transactions and balances are
eliminated from our consolidated financial statements.
Non-controlling interests in the results and equity of controlled
entities are shown separately in our income statement, statement
of comprehensive income, statement of financial position and
statement of changes in equity.
1.4 Key accounting estimates and judgements
Preparation of the financial report requires management to make
estimates and judgements.
1.4.1 COVID-19 pandemic
Financial impacts of the COVID-19 pandemic have been reflected in
our financial performance for the financial year 2021 and
considered in our financial position as at 30 June 2021. To the
extent that ongoing impacts have been identified or could
reasonably be expected, we have made specific disclosures in the
following notes:
• note 3.1 regarding management judgements of impairment
indicators for testing of our ubiquitous telecommunications
network
• note 3.3 regarding management judgements in the measurement
of expected credit losses of our financial assets
• note 4.5.5 regarding hedge accounting.
Telstra continues to have access to liquidity to support our short-
term liquidity requirements and protect against unforeseen events
should the economic environment deteriorate.
82 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F7
F8 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 83
Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 9 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 10 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 9 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Section 1. Basis of preparation (continued)
Notes to the financial statements (continued)
Section 1. Basis of preparation (continued)
1.4 Key accounting estimates and judgements (continued)
1.4.2 Summary of key management judgements
93
F18
2.2
2.2
2.2
2.2
F19
F21
96
F20
2.2
2.2
2.2
2.4
2.4
2.4
2.4
2.2
3.1
3.1
2.4
3.1
2.4
3.1
3.1
3.1
F21
96
F21
F26
101
F27
102
F21
F31
106
F26
F32
F27
107
F33
F31
94
2.2
2.2
F19
Note Page
F20
2.2
95
2.2
F18
2.2
The accounting policies and significant management judgements
1.4 Key accounting estimates and judgements (continued)
and estimates used, and any changes thereto, are set out in the
relevant notes. The key accounting estimates and judgements are
1.4.2 Summary of key management judgements
included in the following notes:
The accounting policies and significant management judgements
and estimates used, and any changes thereto, are set out in the
Note Page
Key accounting estimates and judgements
Key accounting estimates and judgements
Note Page
relevant notes. The key accounting estimates and judgements are
Assessment of a significant financing component
Assessment of a significant financing component
included in the following notes:
2.2
2.2
in mass market contracts
in mass market contracts
Determining standalone selling prices
Determining standalone selling prices
Key accounting estimates and judgements
Assessment of a significant financing component
Assessment of a significant financing component
Assessment of a significant financing component
in Indefeasible Right of Use (IRU)
in Indefeasible Right of Use (IRU)
in mass market contracts
Impact of nbn Infrastructure Services Agreement
Impact of nbn Infrastructure Services Agreement
Determining standalone selling prices
(ISA) on revenue from customer contracts and
(ISA) on revenue from customer contracts and
Assessment of a significant financing component
other income
other income
in Indefeasible Right of Use (IRU)
Assessment of a significant financing component
Assessment of a significant financing component
Impact of nbn Infrastructure Services Agreement
in nbn DAs
in nbn DAs
(ISA) on revenue from customer contracts and
Estimating provision for income tax
other income
Estimating provision for income tax
Unrecognised deferred tax assets
Assessment of a significant financing component
Unrecognised deferred tax assets
Capitalisation of development costs
in nbn DAs
Capitalisation of development costs
Useful lives and residual values of tangible and
Estimating provision for income tax
intangible assets
Useful lives and residual values of tangible and
Unrecognised deferred tax assets
Impairment assessment of our ubiquitous
intangible assets
Capitalisation of development costs
telecommunications network
Impairment assessment of our ubiquitous
Useful lives and residual values of tangible and
Determining CGUs and their recoverable amount
telecommunications network
intangible assets
for impairment assessment of goodwill
Impairment assessment of our ubiquitous
Determining CGUs and their recoverable amount
Determining lease term
telecommunications network
for impairment assessment of goodwill
Determining incremental borrowing rates for
F38
Determining CGUs and their recoverable amount
Determining lease term
111
property leases
F34
for impairment assessment of goodwill
F42
Estimating expected credit losses
Determining incremental borrowing rates for
F36
Determining lease term
113
property leases
F45
Amortisation period of deferred contract costs
Determining incremental borrowing rates for
F38
Long service leave provision
F65
Estimating expected credit losses
117
property leases
F70
Defined benefit plan
F42
Estimating expected credit losses
Amortisation period of deferred contract costs
120
F76
Significant influence over Telstra Super Pty Ltd
F45
Amortisation period of deferred contract costs
Long service leave provision
140
F76
Joint control of Telstra Ventures Fund II, L.P.
F65
Long service leave provision
Defined benefit plan
145
F77
Impairment of equity accounted investments
F70
Defined benefit plan
Significant influence over Telstra Super Pty Ltd
151
F76
Significant influence over Telstra Super Pty Ltd
151
Joint control of Telstra Ventures Fund II, L.P.
1.5 Other accounting policies
F76
Joint control of Telstra Ventures Fund II, L.P.
152
Impairment of equity accounted investments
F77
Impairment of equity accounted investments
Relevant accounting policies are included in the respective notes to
the financial statements. Changes in the accounting policies and
impacts from the accounting standards to be applied in future
1.5 Other accounting policies
reporting periods, as well as other accounting policies not
Relevant accounting policies are included in the respective notes to
disclosed elsewhere in the financial report are detailed below.
the financial statements. Changes in the accounting policies and
1.5.1 Changes in accounting policies
impacts from the accounting standards to be applied in future
reporting periods, as well as other accounting policies not
A number of new or amended accounting standards became
disclosed elsewhere in the financial report are detailed below.
mandatory in the current reporting period. None of the accounting
standards and amendments that became effective in the current
1.5.1 Changes in accounting policies
reporting period had a material impact on our accounting policies.
A number of new or amended accounting standards became
mandatory in the current reporting period. None of the accounting
standards and amendments that became effective in the current
reporting period had a material impact on our accounting policies.
3.2
3.2
3.1
3.3
3.2
3.2
3.6
3.2
5.1
3.3
5.3
3.3
3.6
6.2
3.6
5.1
6.2
5.1
5.3
6.2
5.3
6.2
6.2
6.2
6.2
6.2
6.2
108
F32
F34
3.1
3.1
3.1
F36
F33
109
3.2
3.1
3.1
Telstra Financial Report 2021
Telstra Financial Report 2021
1.5.2 New accounting standards to be applied in future reporting
periods
We have not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective and we do
1.5.2 New accounting standards to be applied in future reporting
not expect any of them to have a material impact on our financial
periods
results upon adoption.
We have not early adopted any standard, interpretation or
AASB 2020-8 ‘Amendments to Australian Accounting Standards -
amendment that has been issued but is not yet effective and we do
Interest Rate Benchmark Reform - Phase 2’ was issued in
not expect any of them to have a material impact on our financial
September 2020 and will be effective for Telstra from 1 July 2021.
results upon adoption.
These amendments provide a practical expedient when accounting
AASB 2020-8 ‘Amendments to Australian Accounting Standards -
for changes in the basis for determining the contractual cash flows
Interest Rate Benchmark Reform - Phase 2’ was issued in
of financial assets and liabilities, to allow the effective interest rate
September 2020 and will be effective for Telstra from 1 July 2021.
to be adjusted, and also provide certain relief from discontinuing
These amendments provide a practical expedient when accounting
hedge relationships as a result of the reform. We do not expect
for changes in the basis for determining the contractual cash flows
material impacts from this standard.
of financial assets and liabilities, to allow the effective interest rate
1.5.3 Transactions and balances in foreign currency
to be adjusted, and also provide certain relief from discontinuing
hedge relationships as a result of the reform. We do not expect
Foreign currency transactions are translated into the relevant
material impacts from this standard.
functional currency at the spot exchange rate at transaction date.
At the reporting date, amounts receivable or payable denominated
1.5.3 Transactions and balances in foreign currency
in foreign currencies are translated into the relevant functional
Foreign currency transactions are translated into the relevant
currency at market exchange rates as at the reporting date. Any
functional currency at the spot exchange rate at transaction date.
currency translation gains and losses that arise are included in our
At the reporting date, amounts receivable or payable denominated
income statement.
in foreign currencies are translated into the relevant functional
Non-monetary items denominated in foreign currency that are
currency at market exchange rates as at the reporting date. Any
measured at fair value (i.e. certain equity instruments not held for
currency translation gains and losses that arise are included in our
trading) are translated using the exchange rates at the date when
income statement.
the fair value was determined. Differences arising from the
Non-monetary items denominated in foreign currency that are
translation are reported as part of the fair value gain or loss in line
measured at fair value (i.e. certain equity instruments not held for
with the recognition of the changes in the fair value of the non-
trading) are translated using the exchange rates at the date when
monetary item.
the fair value was determined. Differences arising from the
translation are reported as part of the fair value gain or loss in line
with the recognition of the changes in the fair value of the non-
monetary item.
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Section 2. Our performance
Section 2. Our performance
This section explains our results, performance of our segments,
which are reported on the same basis as our internal
This section explains our results, performance of our segments,
management structure, and our earnings per share for the
which are reported on the same basis as our internal management
period. It also provides disaggregated revenue, details of
structure, and our earnings per share for the period. It also provides
selected income and expense items, information about taxation
disaggregated revenue, details of selected income and expense
and a reconciliation of our profit to net cash generated from
items, information about taxation and a reconciliation of our profit
operating activities.
to net cash generated from operating activities.
SECTION 2. OUR PERFORMANCE
2.1 Segments and disaggregated revenue
2.1.1 Operating segments
Segment information is based on the information that
management uses to make decisions about operating matters
and allows users to review operations of the Group through
the eyes of management.
Our operating segments represent the functions which offer
our main products and services in the market, however only
some of our operating segments meet the disclosure criteria
for reportable segments.
The presentation of revenue is disaggregated by category and
segment based on the timing of transfer of goods and
services, major products and our geographical markets.
Segment
Operation
We report segment information on the same basis as our internal
management reporting structure at the reporting date. Segment
comparatives reflect any organisational changes that have
occurred since the end of the prior financial year to present a like-
for-like view.
During the financial year 2021, there were no changes to our
operating segments. However, we have changed the way we
manage and report our products to drive simplicity and to better
align with how we go to market and our T22 strategy. We have
restated the comparative period to provide a like-for-like view.
In our segment results, the ‘All Other’ category includes functions
that do not qualify as operating segments as well as the operating
segments which are not material to be individually reported.
We have four reportable segments as follows:
Telstra Consumer and
Small Business (TC&SB)
• provides telecommunication products, services and solutions across mobiles, fixed and mobile
broadband, media and digital content to consumer and small business customers in Australia,
offering prepaid and post-paid services
• operates call centres, Telstra shops and Telstra dealership network
Telstra Enterprise (TE)
• provides telecommunication services, advanced technology solutions, network capacity and
management, unified communications, cloud, industry solutions, integrated and monitoring
services to government and large enterprise customers in Australia and globally
• manages Telstra’s networks outside Australia in conjunction with Networks and IT and Telstra
InfraCo segments
Networks and IT (N&IT)
• supports the other segments and their respective revenue generating activities by maintaining high
level of reliability and security of our network platforms and data
• builds and manages our digital platforms underpinning our customer digital experience
• builds and manages software for all internal functions
Telstra InfraCo
• provides telecommunication products and services delivered over Telstra networks to other carriers,
carriage service providers and internet service providers
• operates the fixed passive network infrastructure including data centres, exchanges, poles, ducts,
pits and pipes, fibre network, and mobile towers
• provides other Telstra functions and wholesale customers with access to network infrastructure
within Telstra InfraCo’s asset accountabilities
• provides nbn co with long-term access to certain components of our infrastructure and certain
network services under the Infrastructure Services Agreement and commercial contracts,
respectively
• designs and constructs fibre, exchanges and other infrastructure
84 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F9
F10 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 85
Telstra Corporation Limited and controlled entities | F9
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 11 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 12 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.1 Segment and disaggregated revenue (continued)
2.1.1 Operating segments (continued)
Consistent with information presented for internal management
reporting purposes, the result of each segment is measured based
on its EBITDA contribution.
EBITDA contribution excludes the effects of inter-segment
balances and transactions, with some exceptions mostly related to
the Telstra InfraCo segment result. Telstra InfraCo segment is
managed and presented on a standalone basis (with the exception
of items detailed in the table below) and inclusive of its
transactions with other functions. Other functions, however, do not
reflect those transactions with Telstra InfraCo in their segment
results. At the Group level, the inter-segment transactions are
eliminated.
EBITDA contribution differs from our reported EBITDA. In particular,
the segment result includes the depreciation expense related to
the right-of-use assets for mobile handsets arising from leases
(Telstra as a lessee) which we sublease to our TC&SB customers in
back-to-back arrangements. Given the nature of these leases, for
management purposes we treat the depreciation of the mobile
handsets right-of-use assets as an operating expense in order to
provide a transparent view of our operating performance.
The table below summarises inter-segment transactions, the
effects of which are not eliminated at the individual segment level;
and provides further details of how we internally report financial
results of our segments.
Nature of transaction
TC&SB
TE
N&IT
All Other
Telstra InfraCo
Internal access charges for
use of Telstra InfraCo’s
network infrastructure
presented as revenue
(determined based on a
variety of internally and
externally observable inputs
to reflect an arm’s length
basis for charging)
Revenue and cost of goods
associated with mobile
handsets sold to TE
customers via dealers
Inter-company transactions
for international connectivity
disclosed as revenue from
external customers and
external expenses
EBITDA contribution of the segments,
that Telstra InfraCo generates access
charges from, does not include those
charges
n/a
n/a
Revenue and
EBITDA
contribution
include the
access charges
from
transactions with
other segments
(eliminated at the
Telstra Group
level)
EBITDA
contribution
includes those
transactions as
TC&SB
manages our
supplier,
delivery and
dealership
arrangements
EBITDA
contribution
includes inter-
segment
expenses
recharged by TE
EBITDA
contribution does
not include those
transactions;
however, it does
include ongoing
revenues derived
from the mobile
services sold to
TE customers
EBITDA
contribution
includes inter-
segment revenue
(earned from
TC&SB and
Telstra InfraCo)
and expenses
(recharged by
Telstra InfraCo)
n/a
n/a
n/a
n/a
Elimination of
inter-company
transactions
EBITDA
contribution
includes inter-
segment revenue
(earned from TE)
and expenses
(recharged by TE)
2.1 Segments and disaggregated revenue (continued)
2.1.1 Operating segments (continued)
Nature of transaction
TC&SB
TE
N&IT
All Other
Telstra InfraCo
Income from nbn
disconnection fees and
associated expenses
EBITDA contribution does not include
those transactions
n/a
EBITDA
contribution
includes those
transactions
EBITDA
contribution does
not include those
transactions
Certain operational,
maintenance and associated
support function expenses
(such as human resources
and IT) related to Telstra
InfraCo’s assets (shared
operational and maintenance
costs are allocated based on
a usage methodology, whilst
the associated support
function expenses are
allocated using a driver-
based allocation
methodology)
Network service delivery
expenses for all segments
(including costs associated
with providing nbn co with
access to our infrastructure)
n/a
n/a
EBITDA contribution
includes those expenses
that originate in the N&IT
segment and All Other
category but relate to
Telstra InfraCo’s assets
EBITDA contribution does not include
the network service delivery expense
for TC&SB and TE customers
EBITDA contribution
includes network service
delivery expenses related to
TC&SB, TE and Telstra
InfraCo customers
EBITDA
contribution
includes those
expenses that
originate in the
N&IT segment
and All Other
category but
relate to Telstra
InfraCo’s assets
(eliminated at the
Telstra Group
level)
EBITDA
contribution does
not include the
network service
delivery expense
for Telstra
InfraCo
customers
Domestic promotion and
advertising expenses for all
segments
EBITDA
contribution
includes those
expenses for
the Telstra
Entity
EBITDA contribution does not include those expenses
Domestic redundancy and
restructuring expenses for all
segments
EBITDA contribution does not include those
expenses
EBITDA
contribution
includes those
expenses for
the Telstra
Entity
EBITDA
contribution does
not include those
expenses
86 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F11
F12 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 87
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 13 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 14 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.1 Segments and disaggregated revenue (continued)
2.1.2 Segment results and disaggregated revenue
Table A details our segment results and a reconciliation of EBITDA
contribution to the Telstra Group’s EBITDA, EBIT and profit before
income tax expense. It also presents disaggregated revenue based
on the nature and the timing of transfer of goods and services.
Table A
Telstra Group
TC&SB
TE
N&IT
All Other Subtotal
Telstra
InfraCo
Elimina-
tions
Total
$m
$m
$m
$m
$m
$m
$m
$m
Sale of services
Sale of goods
Other revenue from contracts with
customers
Revenue from contracts with
customers
Revenue from other sources
Revenue from external customers
Access revenue from transactions
between Telstra InfraCo and other
segments
Total revenue from external
customers and Telstra InfraCo
Other income
Total income
Share of net loss from equity
accounted entities
EBITDA contribution
Depreciation of mobile handsets
right-of-use assets
Telstra Group EBITDA
Depreciation and amortisation
Telstra Group EBIT
Net finance costs
Telstra Group profit before
income tax expense
9,774
2,020
17
11,811
288
12,099
6,194
646
44
6,884
62
6,946
Year ended 30 June 2021
-
-
-
-
1
1
9
28
4
41
4
45
15,977
2,694
65
18,736
355
19,091
2,260
2
-
2,262
205
2,467
-
-
-
-
-
-
18,237
2,696
65
20,998
560
21,558
n/a
n/a
n/a
n/a
n/a
1,203
(1,203)
-
12,099
243
12,342
6,946
39
6,985
-
(1)
1
32
33
-
45
19,091
1,185
1,230
1,499
20,590
(23)
(24)
3,670
75
3,745
-
(1,203)
21,558
-
(1,203)
1,574
23,132
-
(24)
4,818
2,921
(1,360)
(679)
5,700
2,664
(920)
7,444
194
7,638
(4,646)
2,992
(551)
2,441
2.1 Segments and disaggregated revenue (continued)
2.1.2 Segment results and disaggregated revenue (continued)
Table A (continued)
TC&SB
TE
N&IT
All Other Subtotal
Telstra Group
Sale of services
Sale of goods
Other revenue from contracts with
customers
Revenue from contracts with
customers
Revenue from other sources
Revenue from external customers
Access revenue from transactions
between Telstra InfraCo and other
segments
Total revenue from external
customers and Telstra InfraCo
Other income
Total income
Share of net profit/(loss) from
equity accounted entities
EBITDA contribution
Depreciation of mobile handsets
right-of-use assets
Telstra Group EBITDA
Depreciation and amortisation
Telstra Group EBIT
Net finance costs
Telstra Group profit before
income tax expense
Telstra
InfraCo
Elimina-
tions
Total
$m
$m
$m
$m
$m
$m
$m
$m
Year ended 30 June 2020
10,135
2,605
6
12,746
576
13,322
6,824
660
37
7,521
166
7,687
-
-
-
-
3
3
n/a
n/a
n/a
13,322
152
13,474
-
7,687
56
7,743
3
3
27
30
-
4,888
3,274
(1,619)
(106)
5
3
(98)
8
(90)
n/a
16,853
3,270
46
20,169
753
20,922
2,573
3
-
2,576
212
2,788
-
-
-
-
-
-
19,426
3,273
46
22,745
965
23,710
n/a
1,690
(1,690)
-
(90)
20,922
2,265
23,187
(305)
2,030
1,940
(308)
(153)
4,478
186
4,664
-
(1,690)
23,710
-
(1,690)
2,451
26,161
-
(305)
6,390
2,758
(737)
8,411
494
8,905
(5,338)
3,567
(771)
2,796
During the financial year 2020, in the ‘All Other’ category, we
recognised our share of net loss of $308 million, which included
impairment of our investment in NXE Australia Pty Limited.
We recognise revenue from contracts with customers when the
control of goods or services has been transferred to the customer.
Revenue from sale of services is recognised over time, whereas
revenue from sale of goods is recognised at a point in time. Other
revenue from contracts with customers includes licensing revenue
(recognised either at a point in time or over time) and agency
revenue (recognised over time). Refer to note 2.2.1 for further
details about our contracts with customers.
The effects of the following inter-segment transactions have not
been excluded from segment EBITDA contribution:
• revenue from external customers in the TE segment includes
$219 million (2020: $292 million) of inter-segment revenue
treated as external expenses in the TC&SB and Telstra InfraCo
segments, which is eliminated in the ‘All Other’ category
• EBITDA contribution in the TE segment reflects $7 million (2020:
$11 million) of inter-segment expenses treated as external
revenue in the Telstra InfraCo and eliminated in the ‘All Other’
category.
During the financial year 2021, in the 'All Other' category, we
recognised $1 million gain, net of $34 million impairment loss, from
the disposal of our investment in Project Sunshine I Pty Ltd
(Sensis). Refer to note 6.1.3 for further details.
88 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F13
F14 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 89
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 15 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 16 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.1 Segments and disaggregated revenue (continued)
2.1.2 Segment results and disaggregated revenue (continued)
Table B presents disaggregation of:
• total income, including revenue from external customers and
other income, by major products
• revenue from external customers by geographical markets.
2.1 Segments and disaggregated revenue (continued)
2.1.2 Segment results and disaggregated revenue (continued)
Table B (continued)
Telstra Group
Table B
Telstra Group
Total income by major product
Mobile
Revenue from contracts with customers
Revenue from other sources
Fixed - C&SB
Revenue from contracts with customers
Revenue from other sources
Other income
Fixed - Enterprise
Revenue from contracts with customers
Revenue from other sources
Fixed - Wholesale
Revenue from contracts with customers
Revenue from other sources
Other income
Global
Revenue from contracts with customers
Revenue from other sources
Other income
Recurring nbn DA
Revenue from contracts with customers
One-off nbn DA and connection
Revenue from contracts with customers
Other income
Other products and services
Revenue from contracts with customers
Revenue from other sources
Other income
Total revenue from contracts with customers
Total revenue from other sources
Total other income
Total revenue from external customers by geographical
market
Australian customers
Revenue from contracts with customers
Revenue from other sources
Offshore customers
Revenue from contracts with customers
Revenue from other sources
TC&SB
TE
N&IT
All Other
Telstra
InfraCo
Total
$m
$m
$m
$m
$m
$m
Year ended 30 June 2021
7,509
7,277
232
4,736
4,500
56
180
-
-
-
-
-
-
-
-
-
-
-
-
-
34
34
-
63
-
-
63
11,811
288
243
12,342
12,099
11,811
288
-
-
-
12,099
1,513
1,509
4
-
-
-
-
3,724
3,682
42
-
-
-
-
1,715
1,691
15
9
-
-
-
-
-
33
2
1
30
6,884
62
39
6,985
5,470
5,423
47
1,476
1,461
15
6,946
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33
-
1
32
-
1
32
33
1
-
1
-
-
-
1
13
13
-
-
-
-
-
-
-
-
-
-
-
-
(219)
(219)
-
-
9
9
1,016
-
1,016
411
238
4
169
41
4
1,185
1,230
265
261
4
(220)
(220)
-
45
275
275
-
-
-
-
-
-
-
-
1,356
1,076
205
75
-
-
-
-
899
899
-
-
-
12
12
-
-
2,262
205
75
2,542
2,467
2,262
205
-
-
-
2,467
9,310
9,074
236
4,736
4,500
56
180
3,724
3,682
42
1,356
1,076
205
75
1,496
1,472
15
9
908
908
1,050
34
1,016
552
252
6
294
20,998
560
1,574
23,132
20,302
19,757
545
1,256
1,241
15
21,558
Total income by major product
Mobile
Revenue from contracts with customers
Revenue from other sources
Fixed - C&SB
Revenue from contracts with customers
Revenue from other sources
Other income
Fixed - Enterprise
Revenue from contracts with customers
Revenue from other sources
Fixed - Wholesale
Revenue from contracts with customers
Revenue from other sources
Other income
Global
Revenue from contracts with customers
Revenue from other sources
Other income
Recurring nbn DA
Revenue from contracts with customers
One-off nbn DA and connection
Revenue from contracts with customers
Other income
Other products and services
Revenue from contracts with customers
Revenue from other sources
Other income
Total revenue from contracts with customers
Total revenue from other sources
Total other income
Total revenue from external customers by geographical market
Australian customers
Revenue from contracts with customers
Revenue from other sources
Offshore customers
Revenue from contracts with customers
Revenue from other sources
TC&SB
TE
N&IT
All Other
Telstra
InfraCo
Total
$m
$m
$m
$m
$m
$m
Year ended 30 June 2020
8,330
7,808
522
5,083
4,879
54
150
-
-
-
-
-
-
-
-
-
-
-
-
-
65
65
-
(4)
(6)
-
2
12,746
576
152
13,474
13,322
12,746
576
-
-
-
13,322
1,593
1,587
6
-
-
-
-
4,106
3,977
129
-
-
-
-
2,017
1,967
31
19
-
-
-
-
-
27
(10)
-
37
7,521
166
56
7,743
5,958
5,800
158
1,729
1,721
8
7,687
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30
-
3
27
-
3
27
30
3
-
3
-
-
-
3
(23)
(23)
-
-
-
-
-
-
-
-
-
-
-
-
(292)
(292)
-
-
9
9
1,939
-
1,939
307
208
8
91
(98)
8
2,030
1,940
205
197
8
(295)
(295)
-
(90)
230
230
-
-
-
-
-
-
-
-
1,872
1,476
212
184
-
-
-
-
865
865
-
-
-
7
5
-
2
2,576
212
186
2,974
2,788
2,576
212
-
-
-
2,788
10,130
9,602
528
5,083
4,879
54
150
4,106
3,977
129
1,872
1,476
212
184
1,725
1,675
31
19
874
874
2,004
65
1,939
367
197
11
159
22,745
965
2,451
26,161
22,276
21,319
957
1,434
1,426
8
23,710
Revenue from other products and services includes miscellaneous
income and revenue generated by Telstra Health. Refer to note 2.2
for further details on other income.
‘All Other’ category includes eliminations of the inter-segment
transactions described in the segment results below Table A in note
2.1.2. Other negative revenue amounts related to certain corporate
level adjustments.
90 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F15
F16 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 91
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 17 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 18 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.1 Segments and disaggregated revenue (continued)
2.1.2 Segment results and disaggregated revenue (continued)
Information about our non-current assets by geographical market
is presented in Table C.
Table C
Telstra Group
Carrying amount of non-current
assets
Located in Australia
Located offshore
As at 30 June
2021
2020
$m
$m
30,128
1,736
31,864
30,918
1,920
32,838
Our geographical operations are split between our Australian and
offshore operations. No individual geographical area of our offshore
operations forms a significant part of our operations.
The carrying amount of our segment non-current assets excludes
financial assets, inventories, defined benefit assets, deferred
contract costs and deferred tax assets.
2.2 Income
Table A
Telstra Group
Revenue from contracts with customers
Revenue from other sources
Total revenue (excluding finance income)
Other income
Net gain on disposal of property, plant and equipment and intangible assets
Net gain on disposal of businesses and investments
Net gain on sale and leaseback transactions
nbn disconnection fees
Government grants
Net foreign currency translation gains
Other miscellaneous income
Total income (excluding finance income)
Finance income
Finance income (excluding income from finance leases)
Finance income from finance leases (Telstra as a lessor)
Total income
Year ended 30 June
2021
2020
$m
20,998
560
21,558
66
107
102
1,022
216
13
48
1,574
23,132
93
10
103
23,235
$m
22,745
965
23,710
402
13
4
1,721
189
22
100
2,451
26,161
261
13
274
26,435
Disaggregation of revenue from contracts with customers based on
the nature and the timing of transfer of goods and services and by
major products and geographical market is presented in note 2.1.2
in Table A and Table B, respectively.
Net gain on disposal of businesses and investments includes $60
million gain from disposal of Telstra’s Velocity business and $45
million gain from disposal of assets and liabilities of e-commerce
platform. Refer to note 6.1.3 for further details.
Revenue from other sources includes income from our lease
arrangements (refer to note 3.2.2 for further details) and customer
contributions to extend, relocate or amend our network assets,
where the counterparty does not purchase any ongoing services
under the same (or linked) contract.
Net gain on sale and leaseback transactions resulted mostly from a
sale and leaseback of our exchange property. Refer to note 3.2.1 for
further details.
2.2 Income (continued)
nbn disconnection fees earned under the Subscriber Agreement
with nbn co are recognised as other income because they do not
relate to our ordinary activities. We recognise this income when we
have met our contractual obligations under this agreement.
Government grants include income under the Telstra Universal
Service Obligation Performance Agreement, the Federal
Government’s Mobile Black Spot Program and other individually
immaterial government grants. There are no unfulfilled conditions
or other contingencies attached to these grants.
2.2.1 Our contracts with customers
We generate revenue from external customer contracts, which vary
in their form (standard or bespoke), term (casual, short-term and
long-term) and customer segment (consumer, small-medium
business, government and large enterprise), with the main
contracts being:
• retail consumer contracts (mass market prepaid and post-paid
mobile, fixed and media plans)
• retail small to medium business contracts (mass market and off-
the-shelf technology solutions)
• retail enterprise and government contracts (carriage,
standardised and bespoke technology solutions and their
management)
• network capacity contracts, mainly Indefeasible Right of Use
(IRU)
• wholesale contracts for telecommunication services
• nbn Definitive Agreements (nbn DAs) and related arrangements
• network design, build and maintenance contracts (mainly with
nbn co).
The nature and type of contracts with customers are further
described below.
We sell a wide range of goods and services, which are provided
either directly by us or by third parties. Generally, we act as
principal rather than an agent in our contracts with customers.
(a) Telstra Consumer and Small Business (TC&SB) contracts
We offer prepaid and post-paid services to our mass market
customers. Our mass market contracts are homogeneous in nature
and sold directly by us or via our dealer channel. These contracts
often offer a bundle of goods and services, including products such
as hardware, voice, text and data services, media content and
others. Some also include options to purchase additional goods or
services free of charge or at a discount (i.e. material rights).
We currently offer no-lock-in (monthly) service plans to our fixed
and mobile mass market customers. In those arrangements, our
customers can purchase hardware, either outright or on a
repayment plan, together with a no-lock-in service plan. If a
customer stops renewing their no-lock-in service plan, any
outstanding hardware balance becomes payable immediately.
Until June 2019, we offered fixed term post-paid plans, where early
termination charges applied if the customer cancelled the
contract. The majority of those contracts had a term of 24 months,
however some small business contracts had a longer term. Those
legacy contracts are no longer offered but we continue to generate
revenue from these until customers transition to a current in-
market plan.
For mobile handset and service bundle plans which offer discounts
and are sold directly by us or through a dealer that is acting as our
agent, we allocate the discount between handset and services
based on their relative standalone selling prices. For our service
bundle plans sold via dealers, who in their own right also sell the
handset to the customer, the whole discount is allocated to
services only.
Generally, we allocate the consideration, and any relevant
discounts, to all products in the bundle based on a mixture of
observable and estimated standalone selling prices of these
products.
In general, we recognise revenue from sale of goods on their
delivery and from sale of services based on passage of time. The
consideration allocated at contract inception to material rights is
recognised as revenue either when the customer exercises the
option and benefits from the free or discounted products or when
the rights are forfeited.
We offer customers deferred payment terms for handsets or other
devices. The transition to no-lock-in contracts required
reassessment of the existence of a significant financing
component in the mobile bundles sold directly by us.
Assessment
of a
significant
financing
component
in mass
market
contracts
We have applied judgement to determine
that no significant financing component
exists in our no-lock-in mobile repayment
contracts sold directly by us. We
considered factors such as significance of
financing in the context of the contract as a
whole, commercial objectives of our offers,
the duration of deferred payment terms
and interest rates prevailing in the
marketplace.
We separately account for the significant
financing component in our legacy mass
market fixed term contracts offering
handsets and other devices on deferred
payment terms. We measure the financing
component at contract inception using a
discount rate reflecting credit
characteristics of the customer.
We offer a loyalty program, Telstra Plus, under which our consumer
and small business customers can earn points redeemable in the
future for certain goods and services. The program also provides
customers access to tier benefits in the form of free or discounted
services like entertainment or technical support. Points awarded
for purchases of Telstra goods and services are accounted for as
material rights with any amount allocated to the points recognised
as a contract liability in the statement of financial position until the
time when a customer redeems the points or they expire.
Discretionary bonus points that do not relate to accounting
contracts are classified as a marketing offer and expensed at the
time the points are awarded. Tier benefits reduce revenue of the
related accounting contracts.
Generally, mass market contracts are not modified due to their
homogeneous nature. However, our no-lock-in mass market fixed
and mobile service plans are monthly contracts and customers can
change plans each month or cancel their services altogether.
92 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F17
F18 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 93
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 19 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 20 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
Determining
standalone
selling
prices
We have applied judgement to determine
standalone selling prices in order to
allocate the consideration to goods and
services sold under the same customer
contract.
In the absence of observable prices, we use
various estimation methods, including an
adjusted market assessment and cost plus
margin approach to arrive at a standalone
selling price. We have determined that the
negotiated prices are largely aligned to the
standalone selling prices.
We recognise revenue from management services or fixed fee
services based on passage of time and from usage-based carriage
contracts when the services have been consumed.
Some of our framework agreements offer enterprise loyalty
programs and technology funds under which a customer can obtain
additional free products. At contract inception a portion of the
consideration is allocated to such products and recognised as a
contract liability in the statement of financial position. We
recognise revenue when the customer either exercises the option
and benefits from the free products or when the rights are forfeited.
Our large commercial arrangements often incorporate service level
agreements, e.g. agreed delivery time or service reinstatement
time. If we fail to comply with these commitments, we will
compensate the customer. The expected amount of such
compensation reduces the revenue for the period in which a service
level commitment has not been met, and it is recognised as soon as
it is probable that the commitment has not been or will not be met.
Some arrangements also include benchmarking or CPI clauses,
which are accounted for as variable consideration, usually from the
time the price changes take effect.
Our international TE arrangements include long-term network
capacity arrangements (some being take-or-pay arrangements) as
well as managed services such as security and backups, for which
revenue is usually recognised based on passage of time. IRU
arrangements usually include upfront payments for services which
will be delivered over multiple years.
2.2 Income (continued)
2.2.1 Our contracts with customers (continued)
(b) Telstra Enterprise (TE) contracts
TE transacts with medium to large enterprise and government
customers. Large and complex TE contracts are usually bespoke in
nature as they deliver tailored solutions and services. Outside of
the large customers, the contracts are mostly standard.
Our TE legal contracts often are in a form of multi-year framework
agreements under which customers can order goods and services,
include performance conditions and grant different types of
discounts or incentives. Such framework agreements are rarely
considered contracts for accounting purposes. Instead, revenue
recognition rules are applied to goods and services ordered under
each valid purchase order or a statement of work raised under the
terms of the framework agreement.
In some of our TE contracts we also act as a dealer-lessor for
computer mainframes, processing equipment and other related
equipment used by our customers as part of the solutions
management and outsourcing services. Leases embedded in those
contracts are separately accounted for, usually as dealer-lessor
finance leases with finance lease receivables recognised in the
statement of financial position.
Some of our TE contracts include two phases: a build phase
followed by the management of the technology solutions. Due to
the complex nature of those arrangements, we analyse the facts
and circumstances of each contract in order to determine goods
and services ordered and timing of revenue recognition. If the build
phase (or its components) qualifies as a separate service, we
recognise the build phase revenue over the term of the build or at
its completion depending on when the customer obtains control
over the technology solution.
Our bespoke TE contracts are varied or renegotiated from time to
time. When this happens, we assess the scope of the modification
or its impact on the contract price in order to determine whether
the amendment must be treated as a separate contract, as if the
existing contract were terminated and a new contract signed, or
whether the amendment must be considered as a change to the
existing contract.
Under some of our enterprise arrangements, we receive customer
contributions to extend or amend our network assets to ultimately
enable delivery of telecommunication services to that customer.
Where the counterparty makes a contribution for network
construction activities and purchases ongoing services under the
same (or linked) contract(s), the upfront contribution is added to
the total consideration in the customer contract and is allocated to
the goods and services to be delivered under that contract.
Our TE accounting contracts include multiple goods and services.
Generally, we allocate the consideration, and any relevant
discounts, to all the products in the accounting contract based on
the standalone selling prices. However, some discounts granted
under the framework agreements may be allocated to selected
goods or services only if specific performance conditions apply. Any
consideration allocated to a lease component is based on the
relative standalone selling price of the lease.
2.2 Income (continued)
2.2.1 Our contracts with customers (continued)
(b) Telstra Enterprise (TE) contracts (continued)
Assessment
of a
significant
financing
component
in
Indefeasible
Right of Use
(IRU)
We have applied judgement to assess if a
financing component is significant in the
context of the contract as a whole and
determine appropriate discount rates,
where relevant.
We account for a significant financing
component in our domestic and
international bespoke network capacity
agreements, i.e. IRUs, where customers
make an upfront payment in advance of
receiving services. These contracts have an
average legal contract term between 10
and 33 years.
Where Telstra receives financing from the
customer, revenue recognised over the
contract term exceeds the cash payment
received in advance of performance by the
amount of interest expense recognised in
net finance costs.
(c) Telstra Wholesale contracts
Telstra Wholesale (within Telstra InfraCo segment) transacts with
carriage services providers and internet service providers, who in
turn sell their services to their retail end user.
Revenue arises from fixed network service contracts, including
usage-based contracts and fixed bundles, with a term of up to two
years. Other contracts provide data and IP and mobile products
such as interconnect, bulk SMS and post-paid mobile services.
Telstra Wholesale legal contracts are generally signed as multi-
year framework agreements, which set out pricing for the agreed
services, the term and any renewal options, incentives, discounts
and one-off fees. However, until our wholesale customer's
customer, i.e. the end user, orders services, the obligation to
deliver goods or services does not exist. Therefore, the accounting
contract generally arises at the level of a service order of an end
user.
Some of our framework agreements specify a minimum spend
commitment (i.e. a take-or-pay arrangement), in which case the
accounting contract may exist also at the framework agreement
level.
Customer contributions to extend or amend our network assets to
ultimately enable delivery of telecommunication services are
recognised when those services are delivered.
Telstra Wholesale service revenue is generally recognised over time
during the period over which the services are rendered, mostly
based on passage of time as the service provider (i.e. our customer)
receives unlimited calls and data.
Some of Telstra Wholesale contracts include multiple goods and
services. We allocate the consideration, and any relevant
discounts, generally to all the products in the accounting contract
based on the negotiated prices, which are largely aligned to the
estimated standalone selling prices of goods and services
promised under the contracts. However, some discounts granted
under the framework agreements may be allocated only to selected
goods or services based on the specific performance conditions in
the framework agreement.
(d) Agreements with nbn co
We have two types of agreements with nbn co:
• nbn DAs and related arrangements
• commercial contracts for network design, build and maintenance
services.
Revenue from contracts with nbn co is mainly reported within the
Telstra InfraCo segment. Amounts recognised as other income are
recorded in the TC&SB segment and in our corporate areas.
Our nbn DAs and related arrangements include a number of
separate legal contracts with both nbn co and the Commonwealth
Government which have been negotiated together with a common
commercial objective. These contracts have been combined for
revenue assessment. The combined contract has a minimum term
of 30 years for accounting purposes.
The combined nbn DAs and related arrangements include a number
of separately priced elements, some of which are not accounted for
under the revenue recognition standard. For example, nbn
disconnection fees are presented as other income as they do not
relate to our ordinary activities and there is no price dependency on
other nbn DAs.
Services provided under the Infrastructure Services Agreement
(ISA) are accounted for under the revenue recognition standard. We
recognise revenue from providing long-term access to ducts and
pits and other infrastructure, including dark fibre and exchange
rack space, over time, initially based on the cumulative nbnTM
network rollout percentage and after rollout completion based on
passage of time.
The build of nbn related infrastructure is not considered a separate
service, therefore payments received for it under a separate legal
agreement have been combined and accounted for together with
the ISA long-term access services. These upfront payments have
been recorded as a contract liability in the statement of financial
position and are recognised as services transfer over the ISA
average contracted period of 35 years.
ISA also includes payments for the sale of our infrastructure
assets, with the net gain on sale of those assets recognised in other
income at a point in time when the control passes to nbn co based
on the incremental nbn network rollout percentage.
94 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F19
F20 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 95
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 21 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 22 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.2 Income (continued)
2.2.1 Our contracts with customers (continued)
(d) Agreements with nbn co (continued)
We deliver a number of different services under these
arrangements and the consideration includes a number of fixed
and variable components as described below.
Impact of nbn Infrastructure
Services Agreement (ISA) on
revenue from customer contracts
and other income
Under the ISA, we receive from nbn co the following payments:
• Infrastructure Access Payment (IAP) for long-term access to ducts and pits
• Infrastructure Ownership Payment (IOP) for the progressive transfer of
infrastructure assets
• payments for long-term access to other infrastructure, including dark fibre and
exchange rack space.
IAP are indexed to CPI and will grow in line with the nbn network rollout until its
completion (as defined under the DAs). Subsequently, IAP will continue being
indexed to CPI for the remaining average contracted period of 26 years.
IOP are received over the duration of the nbn network rollout, CPI adjusted and
linked to the progress of the nbn network rollout.
IAP and IOP are classified in the income statement as revenue and other income,
respectively, and are recognised on a percentage rollout basis of the nbn network
footprint.
For any given period, the IAP and IOP amounts ultimately received from nbn co
may vary from the amounts recognised in the income statement depending on the
progress of the nbn network rollout and the final number of our existing fixed line
premises as defined and determined under the ISA. A change in the nbn network
rollout progress and/or the final number of these premises could result in a
material change to the amount of IAP and IOP recognised in the income
statement and the associated cash flows. Some of these adjustments cannot be
finalised and the related amounts cannot be settled until the completion of the
rollout and are subject to interest.
The nbn network rollout progress and its completion date are controlled by nbn
co and the final number of the fixed line premises may continue to change even
after all the relevant assets have been transferred to nbn co. Therefore, the final
price adjustments and the resulting cash flows, including interest payable where
relevant, may not be known until nbn co declares that the nbn network rollout is
complete in accordance with the DAs.
We have applied judgement in relation to the variables described above in
determining the amounts of IAP and IOP recognised for the financial year 2021
and recorded a cumulative reversal of $14 million, including $7 million revenue
from access services and $7 million income from sale of our assets. Should
evidence exist in future reporting periods that changes previously reported IAP
and IOP amounts, revenue and other income will be adjusted in the future
reporting periods.
Given significant variability in the overall ISA consideration, the
legal contract includes specific clauses as to if, when and how an
interest receivable or an interest payable should be calculated.
Assessment
of a
significant
financing
component
in nbn DAs
We have applied judgement to assess if a
financing component is significant in the
context of the contract as a whole and
determine appropriate discount rates
where relevant.
We do not separately account for the
financing component in our nbn DAs and
related arrangements because it is not
significant to the accounting contract.
2.2 Income (continued)
2.2.3 Recognition and measurement
2.2.1 Our contracts with customers (continued)
Our revenue recognition accounting policies are described below.
(d) Agreements with nbn co (continued)
(a) Revenue from contracts with customers
The other arrangements with nbn co are commercial contracts for
network design, build and maintenance services. These
arrangements provide a framework agreement with scheduled
rates under which nbn co can order required services. Generally,
the accounting contracts under these arrangements have no fixed
term or minimum order quantities that extend beyond 12 months.
The majority of revenue is recognised over time on a percentage of
completion basis, calculated with reference to costs incurred up
until the reporting date relative to the total estimated costs.
2.2.2 Revenue for contracted goods and services yet to be
delivered
Sometimes goods and services purchased under the same
customer contract will be transferred to the customer over multiple
reporting periods.
Table B presents aggregate consideration allocated to the
remaining goods, services and material rights promised under the
contracts where a customer has made a firm commitment before
the balance date but goods and services will be transferred after 30
June 2021. Any future amounts arising from contracts where the
customer has not made a firm commitment, such as usage-based
contracts, are not included in the disclosed amounts. Presented
time bands best depict the future revenue recognition profile.
Table B
Telstra Group
Less than 1 year
Between 1 to 2 years
Between 2 to 5 years
Between 5 to 10 years
Between 10 to 20 years
More than 20 years
As at 30 June
2021
2020
$m
4,589
2,419
3,864
5,922
13,659
9,671
40,124
$m
5,194
2,567
3,947
5,915
13,699
11,471
42,793
Future revenue arising from nbn DAs is estimated based on a
number of assumptions which are reassessed at each reporting
period. However, given its size, long-term nature and a number of
variable components impacting the contract consideration (refer to
note 2.2.1 for details), the actual amounts recognised in the future
periods may still materially differ from our estimates.
Any amounts arising from our existing customer contracts which
will be recognised as ‘revenue from other sources’ or ‘other
income’, for example operating lease income or net gain on sale of
assets, are excluded from revenue for contracted goods and
services yet to be delivered.
Revenue from contracts with customers arises from goods and
services sold as part of our ordinary activities.
(i) Accounting contracts with customer
Revenue recognition principles are applied to accounting contracts
which are agreements between two or more parties that create
enforceable rights and obligations.
The accounting contract may not align with the legal contract and
in some cases multiple legal contracts may need to be combined to
form one accounting contract. In other instances, a legal contract
may only provide a framework agreement (i.e. an offer) and an
accounting contract only exists when the customer commits to
purchase goods or services.
Any components of the contract which are accounted for under
other accounting standards are separated out and accounted for
under those other standards.
(ii) Goods, services and/or material rights
Revenue is recognised when Telstra fulfils its contractual
obligation to deliver promised goods and services (or a bundle of
goods and services) to the customer.
A contractual promise giving the customer an option to purchase
additional goods and services at a discount (i.e. material right) is
accounted for separately if the incremental discount is at least 5
per cent compared to other customers.
A good or service is separately accounted for if a customer can
benefit from it on its own or together with other readily available
resources, and no transformative relationship exists with other
promised goods or services.
(iii) Variable consideration
If a contractual amount includes a variable component, we
estimate the amount to which we will be entitled in exchange for
promised goods and services. Examples of variable consideration
include discounts, rebates, refunds, credits and price concessions.
To estimate an amount of variable consideration, we use either the
most likely amount or the expected value method depending on
which better predicts the variable amount. The variable
consideration is estimated at contract inception and constrained
until it is highly probable that a significant reversal of cumulative
revenue recognised will not occur.
(iv) Significant financing component
If the period between when we would transfer the good or service to
the customer and when the customer would pay for them is
expected to be greater than one year, we assess whether revenue
should be adjusted for significant financing component, i.e.
reduced if we offer deferred payment terms or increased if we
receive an advance payment from customer. The significance of
financing is assessed relative to the total contract value and
interest rates used reflect credit characteristics of the
counterparty receiving financing.
96 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F21
F22 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 97
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 23 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 24 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.2 Income (continued)
(b) Revenue from other sources
2.3 Expenses
Revenue from other sources includes income arising from
arrangements other than those accounted for under the revenue
recognition standard.
Contract terminations generally trigger different rights and
obligations. These rights and obligations are not related to our
performance and were not considered at inception of the
accounting contract. Therefore, where relevant, any income over
and above the recovery of the consideration due for the delivered
goods or services is not classified as revenue from customer
contracts. Instead, we classify it as revenue from other sources.
We earn revenue from some of our lease arrangements described in
note 3.2, in particular from:
• finance leases where Telstra is a dealer-lessor of customer
premise equipment. We recognise revenue from sale of these
goods at a point in time at the commencement date of the lease.
• operating subleases of mobile handsets offered to our retail
customers (Telstra as a lessor), which we lease from a third party
in a back-to-back arrangement (Telstra as a lessee). We also earn
revenue from property operating leases. Operating lease income
is recognised on a straight-line basis over the lease term.
Where a (combined) accounting contract includes lease and non-
lease components and Telstra is a lessor, we allocate the
consideration to lease and non-lease components applying the
relative standalone selling prices requirements for revenue from
contracts with customers.
We receive contributions to extend, relocate or amend our network
assets. Where the counterparty makes a contribution for network
construction activities that is neither a government grant nor
relates to the purchase of ongoing services under the same (or
linked) contract(s), we recognise revenue over the period of the
network construction activities.
Revenue from other sources also includes late payment fees, which
are recognised when charged and their collectability is reasonably
assured.
(c) Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received and Telstra will comply
with all attached conditions. Government grants relating to costs
are deferred and recognised in the income statement as other
income over the period necessary to match them with the costs
that they are intended to compensate.
2.2.3 Recognition and measurement (continued)
(a) Revenue from contracts with customers (continued)
(v) Allocation of revenue to goods and services
We allocate the consideration to the goods and services based on
their relative standalone selling prices. Standalone selling price is
the price for which we would sell the goods or services on a
standalone basis, i.e. not in a bundle. We determine standalone
selling price at contract inception using an observable price for a
standalone sale of substantially the same good or service under
similar circumstances and to a similar class of customers. If no
observable price is available, we estimate the standalone selling
price using an appropriate method, e.g. adjusted market
assessment approach, expected cost plus a margin approach or a
residual approach.
In some instances, in order to correctly reflect the amount of
revenue we expect to be entitled to, we allocate variable
consideration, discounts or a significant financing component to
some but not all goods, services and/or material rights.
(vi) Timing of revenue recognition
Revenue is recognised when control of the good or service is
transferred to the customer, i.e. when the customer can benefit
from the good or service and decide how to use them.
We recognise revenue over time when the customer simultaneously
receives and consumes the benefits provided to them or we create
or enhance an asset controlled by the customer. Otherwise, we
recognise revenue at a point in time.
We use either input or output methods to measure progress when
selling goods or services. Output methods use direct
measurements of the value to the customer, for example,
milestones reached. Input methods use our efforts or inputs in
measuring the performance, for example, our labour hours used
relative to the total expected labour hours.
When revenue is recognised at a point in time, the allocated
consideration is recognised when control over a good is transferred
to the customer. In determining this, we consider the customer’s
obligation to pay, transfer of legal title to the good, physical
possession of the good, the customer’s acceptance, and risks and
rewards of ownership.
(vii) Contract modifications
From time to time, our contracts are renegotiated after contract
inception and their scope and/or price change. A contract
modification will result in a cumulative change to revenue already
recognised only when the remaining goods and services are not
separate from those already delivered.
(viii) Gross versus net presentation
When we control the promised goods and services before they are
transferred to the customer and we have primary obligation for
their delivery, we act as principal in the contract with a customer
and recognise revenue at gross amounts. When we act as an agent
of a third-party provider, we recognise revenue net of amounts
payable to that third party.
Year ended 30 June
2021
2020
$m
$m
253
18
212
52
3,153
2,797
162
214
1,144
248
982
230
2,980
2,606
726
1,314
4,646
518
83
108
709
(55)
654
157
23
210
51
3,155
3,490
129
256
1,473
268
1,089
369
3,584
2,757
1,017
1,564
5,338
678
109
315
1,102
(57)
1,045
decrease because of changes in financial indices and prices over
which we have no control. All unrealised amounts unwind to nil at
maturity of the underlying instrument.
We classify expenses (apart from finance costs) by nature as this
classification more accurately reflects the type of operations we
undertake.
Telstra Group
Included in our labour expenses are the following:
Employee redundancy
Share-based payments
Defined contribution plan expense
Defined benefit plan expense
Included in our goods and services purchased are the following:
Network payments
Cost of goods sold
Other expenses
Impairment losses (excluding net losses on financial assets)
Expenses relating to lease arrangements
Service contracts and other agreements
Promotion and advertising
General and administration
Other operating expenses
Depreciation and amortisation
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Finance costs
Interest on borrowings
Interest on lease liabilities (Telstra as a lessee)
Other
Less: interest on borrowings capitalised
The following paragraphs provide further information about our
expenses and finance costs:
• share-based payments expense relates to both cash-settled and
equity-settled share plans. Refer to note 5.2 for further details.
• impairment losses include $113 million (2020: $124 million)
impairment of deferred contract costs and $34 million (2020: nil)
impairment loss on the remeasurement of our investment in
Project Sunshine I Pty Ltd to its fair value less costs to sell at 31
December 2020. Refer to notes 3.6 and 6.1.3 for further details on
deferred contract costs and disposal of our investment in Project
Sunshine I Pty Ltd, respectively.
• interest on borrowings has been capitalised using a
capitalisation rate of 3.7 per cent (2020: 4.6 per cent)
• other finance costs include unrealised valuation impacts on our
borrowings and derivatives. These include net losses which arise
from changes in the fair value of derivative financial instruments
to the extent that hedge accounting is not effective or the hedge
accounting criteria are not met. These fair values increase or
98 | Telstra Corporation Limited and controlled entities
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F24 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 25 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 26 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.4 Income taxes
This note sets out our tax accounting policies and provides an analysis of our income tax expense and deferred tax balances,
including a reconciliation of tax expense to accounting profit.
Current income tax is based on the accounting profit adjusted for differences in accounting and tax treatments of income and
expenses (i.e. taxable income).
Deferred income tax, which is accounted for using the balance sheet method, arises because the accounting income is not always
the same as taxable income. This creates temporary differences, which usually reverse over time. Until they reverse, a deferred tax
asset or liability must be recognised in the statement of financial position.
This note also provides disclosures which form part of the requirements of the Australian Board of Taxation’s Voluntary Tax
Transparency Code.
2.4.1 Income tax expense
Table A provides a reconciliation of notional income tax expense to actual income tax expense.
Table A
Telstra Group
Major components of income tax expense
Current tax expense
Deferred tax resulting from the origination and reversal of temporary differences
Under/(over) provision of tax in prior years
Reconciliation of notional income tax expense to actual income tax expense
Profit before income tax expense
Notional income tax expense calculated at the Australian tax rate of 30% (2020: 30%)
Notional income tax expense differs from actual income tax expense due to the tax effect of:
Non-taxable and non-deductible items
Deferred tax assets derecognised
Amended assessments
Under/(over) provision of tax in prior years
Different tax rates in overseas jurisdictions
Income tax expense on profit
Income tax expense/(benefit) recognised during the year directly in other comprehensive income or equity
Year ended 30 June
2021
2020
$m
665
(138)
12
539
$m
980
(16)
(7)
957
2,441
732
2,796
839
(194)
-
-
12
(11)
539
99
118
18
1
(7)
(12)
957
(9)
Tables B and C include disclosures which form part of the
requirements of the Australian Board of Taxation’s Voluntary Tax
Transparency Code. Any disclosed amounts are determined in
accordance with the Australian Accounting Standards.
Table B provides a breakdown of effective income tax rates and Tax
Transparency Code effective income tax rates (TTC ETR) for both
the Australian Economic Group (the Telstra Entity and its Australian
resident controlled entities) and the Telstra Group.
Table B
Telstra Group
Effective income tax rate
Tax Transparency Code effective income tax rate
Year ended 30 June
2021
2020
Group
22.1%
21.6%
Australia
22.7%
22.2%
Group
34.2%
34.9%
Australia
35.2%
35.5%
The effective income tax rate for the Telstra Group of 22.1 per cent
(2020: 34.2 per cent) was calculated as income tax expense divided
by profit before income tax expense. Refer to the key non-taxable
and non-deductible items impacting our effective tax rate as
detailed on the next page.
The TTC ETR for the Telstra Group of 21.6 per cent (2020: 34.9 per
cent) differs to the effective income tax rate due to excluding the
impact of under or over provision of tax in prior years and amended
assessments. The 2020 TTC ETRs have been updated to include the
impact of the net under provision of tax and amended 2020
assessments reflected in the current year income tax expense.
The TTC ETR forms part of the requirements of the Voluntary Tax
Transparency Code to disclose the income tax expense borne by
Telstra in respect of the Australian and global operations for the
individual year.
2.4 Income taxes (continued)
2.4.1 Income tax expense (continued)
Non-taxable and non-deductible items include the tax effect of:
2.4.2 Deferred tax assets/(liabilities)
Table D details the amount of deferred tax assets and liabilities
recognised in the statement of financial position, which include
impact of foreign exchange movements.
• non-assessable $200 million gain and $101 million net deferred
tax asset recognised on property disposals
• derecognition of $27 million deferred tax liability on the disposal
of Sunshine NewCo Pty Limited (refer to note 6.1.3 for details).
Table D
Telstra Group
Deferred tax items recognised in the
income statement
Trade and other receivables and
contract assets
Allowance for doubtful debts
Deferred contract costs
Investments
Property, plant and equipment
Right-of-use assets
Intangible assets
Trade and other payables
Provision for employee entitlements
Other provisions
Lease liabilities
Defined benefit liability
Borrowings and derivative financial
instruments
Contract liabilities and other revenue
received in advance
Capital tax losses
Income tax losses
Other
Deferred tax items recognised in other
comprehensive income or equity
Investments
Defined benefit asset
Borrowings and derivative financial
instruments
Net deferred tax liability
Comprising:
Deferred tax assets
Deferred tax liabilities
Table C provides a reconciliation of income tax expense to income
tax paid during the year.
Table C
Telstra Group
As at 30 June
2021
2020
Income tax expense
(Under)/over provision in prior years
Temporary differences recognised in
deferred tax expense
Trade and other receivables and
contract assets
Deferred contract costs
Investments
Property, plant and equipment
Right-of-use assets
Intangible assets
Trade and other payables
Provision for employee entitlements
Lease liabilities
Borrowings and derivative financial
instruments
Contract liabilities and other revenue
received in advance
Other
Current tax expense
Income tax payments/(refunds) for
prior years
Income tax payable next year
Other
Income tax paid
$m
539
(12)
(12)
5
27
(40)
52
(39)
19
(10)
(11)
103
60
(16)
138
665
213
(119)
3
762
$m
957
7
22
20
4
11
(239)
(33)
41
32
195
(8)
(37)
8
16
980
(4)
(222)
-
754
Estimating
provision for
income tax
We are subject to income tax
legislation in Australia and in
jurisdictions where we have foreign
operations. We apply judgement in
determining our worldwide provisions
for income taxes and assessing
recognition of deferred tax balances
in the statement of financial position.
Changes in tax legislation in the
countries we operate in may affect
the amount of provision for income
taxes and deferred tax balances
recognised.
Year ended 30 June
2021
2020
$m
$m
(221)
(203)
54
(370)
(15)
(1,626)
(832)
(567)
169
246
128
909
114
46
514
33
9
(13)
(1,422)
(109)
(161)
172
(98)
(1,520)
60
(1,580)
(1,520)
63
(376)
(47)
(1,566)
(867)
(533)
123
257
141
925
106
(48)
445
20
31
(11)
(1,540)
(32)
(143)
176
1
(1,539)
66
(1,605)
(1,539)
100 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F25
F26 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 101
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 27 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 28 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 2. Our performance (continued)
Section 2. Our performance (continued)
2.4 Income taxes (continued)
2.4.2 Deferred tax assets/(liabilities) (continued)
Unrecognised
deferred tax
assets
We apply judgement to recognise a
deferred tax asset and review its
carrying amount at each reporting
date. The carrying amount is only
recognised to the extent that it is
probable that sufficient taxable profit
will be available in the future to utilise
this benefit. Any amount
unrecognised could be subsequently
recognised if it has become probable
that future taxable profit will allow us
to benefit from this deferred tax
asset.
Table E details deferred tax assets not recognised in the statement
of financial position.
Under the tax funding agreement, the head entity and each of the
members have agreed to pay/receive a current tax payable to/
receivable from the head entity based on the current tax liability or
current tax asset recorded in the financial statements of the
members. The Telstra Entity will also compensate the members for
any deferred tax assets relating to unused tax losses and tax
credits.
Amounts receivable by the Telstra Entity of $27 million (2020:
$55 million) and payable by the Telstra Entity of $17 million
(2020: $24 million) under the tax funding agreement are due in the
next financial year upon final settlement of the current tax payable
for the tax consolidated group.
2.4.4 Recognition and measurement
Our income tax expense is the sum of current and deferred income
tax expenses. Current income tax expense is calculated on
accounting profit after adjusting for non-taxable and non-
deductible items based on rules set by the tax authorities. Deferred
income tax expense is calculated at the tax rates that are expected
to apply for the period in which the deferred tax asset is realised or
the deferred tax liability is settled. Both our current and deferred
income tax expenses are calculated using tax rates that have been
enacted or substantively enacted at the reporting date.
Year ended 30 June
2021
2020
$m
$m
Our current and deferred taxes are recognised as an expense in the
income statement, except when they relate to items that are
directly recognised in other comprehensive income or equity. In this
case, our current and deferred tax expenses are also recognised
directly in other comprehensive income or equity.
Table E
Telstra Group
Deferred tax assets not recognised
Capital tax losses
Income tax losses
Deductible temporary differences
1,285
257
118
1,660
1,907
292
138
2,337
On 30 June 2021, we announced that a consortium will become a
strategic partner in Telstra’s towers business. As a result, we have
recognised $444 million deferred tax asset for capital tax losses
which has been offset against the estimated capital gain on the
towers business sale transaction. Refer to note 7.3.1 for further
detail about Telstra’s towers business sale transaction. Other
significant transactions which reduced our unrecognised capital
tax losses included taxable disposals of exchange and data centre
properties disclosed in notes 3.2.1 (f) and 4.4, respectively.
2.4.3 Tax consolidated group
Under the Australian taxation law, the Telstra Entity and its
Australian resident wholly-owned entities (members) form a tax
consolidated group and are treated as a single entity for income tax
purposes. The Telstra Entity is the head entity of the group and, in
addition to its own transactions, it recognises the current tax
liabilities and the deferred tax assets arising from unused tax
losses and tax credits for all members in the group.
Entities within the tax consolidated group have entered into a tax
sharing agreement and a tax funding agreement with the head
entity.
The tax sharing agreement specifies methods of allocating any tax
liability in the event the head entity defaults on its group payment
obligations and the treatment where a member exits the tax
consolidated group.
Our current and deferred taxes must also recognise the impact of
any uncertain tax positions. If it is probable that a relevant tax
authority would accept our tax treatment, our tax balances are
recognised under that tax treatment. Otherwise, for each uncertain
tax position for which it is not probable that the relevant tax
authority will accept the tax treatment, we use the most likely
amount or the expected value to estimate our tax balances.
We apply the balance sheet method for calculating our deferred tax
balances. Deferred tax is the expected tax payable or recoverable
on all taxable and deductible temporary differences determined
with reference to the tax bases of assets and liabilities and their
carrying amount for financial reporting purposes as at the reporting
date.
We generally recognise deferred tax liabilities for all taxable
temporary differences, except to the extent that the deferred tax
liability arises from:
• the initial recognition of goodwill
• the initial recognition of an asset or liability in a transaction that
is not a business combination and affects neither our accounting
profit nor our taxable income at the time of the transaction.
For our investments in controlled entities, joint ventures and
associated entities, recognition of deferred tax liabilities is
required unless we are able to control the timing of our temporary
difference reversal and it is probable that the temporary difference
will not reverse.
Deferred tax assets are recognised to the extent that it is probable
that taxable profit will be available against which the deductible
temporary differences, and the carried forward unused tax losses
and tax credits, can be utilised.
Deferred tax assets and deferred tax liabilities are offset in the
statement of financial position where they relate to income taxes
levied by the same taxation authority and to the extent that we
intend to settle our current tax assets and liabilities on a net basis.
2.5 Earnings per share
2.6 Notes to the statement of cash flows
2.6.1 Reconciliation of profit to net cash provided by operating
activities
This note outlines the calculation of Earnings per Share (EPS),
which is the amount of post-tax profit attributable to each
share. EPS excludes profit attributable to non-controlling
interest and takes into account the average number of shares
weighted by the number of days on issue.
We calculate basic and diluted EPS. Diluted EPS reflects the
effects of the equity instruments allocated to our employee
share schemes under the Telstra Growthshare Trust.
Telstra Group
Earnings used in the calculation of
basic and diluted EPS
Profit for the year attributable to
equity holders of Telstra Entity
Year ended 30 June
2021
2020
$m
$m
1,857
1,819
Weighted average number of ordinary
shares
Number of shares
(millions)
Weighted average number of ordinary
shares used in the calculation of basic
EPS
Dilutive effect of certain employee
share instruments
Weighted average number of ordinary
shares used in the calculation of
diluted EPS
Basic EPS
Diluted EPS
11,875
11,880
17
15
11,892
11,895
cents
cents
15.6
15.6
15.3
15.3
When we calculate the basic EPS, we adjust the weighted average
number of ordinary shares to exclude the shares held in trust by
Telstra Growthshare Trust (Growthshare).
Information about equity instruments issued under Growthshare
can be found in note 5.2.
Table A
Telstra Group
Profit for the year
Add/(subtract) items classified as
investing/financing activities
Finance income
Finance costs
Net gain on disposal of property, plant
and equipment and intangible assets
Net gain on disposal of businesses,
controlled entities and equity
accounted investments
Revenue of a dealer-lessor
Net gain/(loss) on lease related
transactions
Government grants received relating
to investing activities
Other
Add/(subtract) non-cash items
Depreciation and amortisation
Share-based payments
Defined benefit plan expense
Share of net loss from joint ventures
and associated entities
Impairment losses (excluding
inventories, trade and other
receivables)
Other
Cash movements in operating assets
and liabilities
Decrease/(increase) in trade and other
receivables and contract assets
Decrease in inventories
Increase in prepayments and other
assets
Increase in deferred contract costs
Decrease in trade and other payables
Increase/(decrease) in contract
liabilities and other revenue received
in advance
(Decrease)/increase in net taxes
payable
Decrease in provisions
Net cash provided by operating
activities
Year ended 30 June
2021
2020
$m
1,902
$m
1,839
(103)
654
(66)
(107)
(42)
4
(19)
(1)
4,646
18
52
24
40
3
589
31
(88)
(18)
(98)
111
(222)
(79)
(274)
1,045
(402)
(13)
(122)
(2)
(16)
-
5,338
23
51
305
5
(24)
(169)
37
(15)
(109)
(544)
(62)
203
(84)
7,231
7,010
102 | Telstra Corporation Limited and controlled entities
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F28 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 29 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 30 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Section 2. Our performance (continued)
2.6 Notes to the statement of cash flows (continued)
2.6.2 Cash and cash equivalents
Table B
Telstra Group
Cash at bank and on hand
Bank deposits and negotiable
certificates of deposit
Cash and cash equivalents in the
statement of cash flows
Year ended 30 June
2021
2020
$m
266
859
1,125
$m
238
261
499
2.6.3 Recognition, measurement and presentation
(a) Cash and cash equivalents
Cash and cash equivalents include cash at bank and on hand, bank
deposits and negotiable certificates of deposit that are held to
meet short-term cash commitments rather than for investment
purposes.
Bank deposits and negotiable certificates of deposit are classified
as financial assets held at amortised cost.
(b) Short-term borrowings in financing cash flows
Where our short-term borrowings are held for the purposes of
meeting short-term cash commitments, we report the cash
receipts and subsequent repayments in financing activities on a net
basis in the statement of cash flows.
(c) Goods and Services Tax (GST) (including other value-added
taxes)
We record our revenue, expenses and assets net of any applicable
GST, except where the amount of GST incurred is not recoverable
from the Australian Taxation Office (ATO). In these circumstances
the GST is recognised as part of the cost of acquisition of the asset
or as part of the expense item.
Receivable and payable balances include GST where we have either
included GST in our price charged to customers or a supplier has
included GST in their price charged to us. The net amount of GST
due to the ATO but not paid is included in our current trade and
other payables.
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Section 3. Our core assets, lease
arrangements and working capital
Section 3. Our core assets, lease
arrangements and working capital
This section describes our core long-term tangible (owned and
leased) and intangible assets underpinning the Group’s
This section describes our core long-term tangible (owned and
performance and provides a summary of our asset impairment
leased) and intangible assets underpinning the Group’s performance
assessment. This section also describes our short-term assets
and provides a summary of our asset impairment assessment. This
and liabilities, i.e. our working capital supporting the operating
section also describes our short-term assets and liabilities, i.e. our
liquidity of our business.
working capital supporting the operating liquidity of our business.
SECTION 3.
3.1 Property, plant and equipment and intangible assets
OUR CORE ASSETS, LEASE ARRANGEMENTS AND WORKING CAPITAL
This note provides details of our tangible and intangible
assets, including goodwill, and their impairment assessment.
Our impairment assessment compares the carrying values of
our cash generating units (CGUs) with their recoverable
amounts determined using a ‘value in use’ calculation. The
value in use calculations use key assumptions such as cash
flow forecasts, discount rates and terminal growth rates.
3.1.1 Property, plant and equipment
Table A shows movements in the net book value of our tangible
assets during the financial year.
Table A
Telstra Group
Land and
buildings
Communication
assets
Other plant and
equipment
Total property,
plant and
equipment
Net book value at 1 July 2019
Additions
Depreciation expenses
Other movements
Net book value at 30 June 2020, comprising:
Cost
Accumulated depreciation and impairment
Net book value at 1 July 2020
Additions
Depreciation expenses
Other movements
Net book value at 30 June 2021, comprising:
Cost
Accumulated depreciation and impairment
The following paragraphs provide further information about our
fixed asset classes:
• additions to property, plant and equipment include $41 million
(2020: $41 million) of capitalised borrowing costs directly
attributable to qualifying assets
• land and buildings include leasehold improvements related to
right-of-use assets recognised under our leasing arrangements
(Telstra as a lessee)
• our property, plant and equipment assets include buildings
which are mainly used by us to generate revenue, however we
also generate an insignificant rental income from those assets.
Given the dual purpose and the insignificance of the rental
income those assets continue to be presented as owned assets
not subject to operating leases.
$m
620
65
(62)
1
624
1,340
(716)
624
52
(55)
(33)
588
1,344
(756)
$m
20,846
2,467
(2,607)
(79)
20,627
61,879
(41,252)
20,627
2,064
(2,476)
(158)
20,057
62,302
(42,245)
$m
301
22
(88)
13
248
1,075
(827)
248
48
(75)
(3)
218
1,096
(878)
$m
21,767
2,554
(2,757)
(65)
21,499
64,294
(42,795)
21,499
2,164
(2,606)
(194)
20,863
64,742
(43,879)
• communication assets include certain network land and building
assets that are essential to the operation of our communication
assets
• as at 30 June 2021, $1,133 million (2020: $1,158 million) of
property, plant and equipment was under construction and not
installed or ready for use
• other movements include $85 million (2020: $3 million)
disposals, $74 million decrease (2020: $25 million increase) due
to net foreign exchange differences, $30 million (2020: $104
million) net transfers from construction in progress to intangible
assets; and other individually insignificant transactions.
104 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F29
F30 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 105
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 31 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 32 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
3.1.4 Impairment assessment
All non-current tangible and intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amounts may not be recoverable. Goodwill and
intangible assets with an indefinite useful life are not subject to
amortisation and are assessed for impairment at least annually. If
the carrying amount of the asset exceeds its recoverable amount,
the asset is impaired and an impairment loss is charged to the
income statement so as to reduce the carrying amount.
The recoverable amount of an asset is the higher of its fair value
less cost of disposal and its value in use. Fair value less cost of
disposal is measured with reference to quoted market prices in an
active market. Value in use represents the present value of the
future amount expected to be recovered through the cash inflows
and outflows arising from the asset’s continued use and
subsequent disposal.
We identify CGUs, the smallest groups of assets that generate
largely independent cash inflows from other assets or groups of
assets. CGUs to which goodwill is allocated cannot be larger than
an operating segment.
Expected benefit
(years)
As at 30 June
2021
2020
30
25
8
9
13
17
30
25
8
8
14
16
3.1 Property, plant and equipment and intangible assets
(continued)
3.1.2 Goodwill and other intangible assets
Table B shows movements in the net book value of our intangible
assets during the financial year.
3.1 Property, plant and equipment and intangible assets
(continued)
3.1.3 Depreciation and amortisation
Table C presents the weighted average useful lives of our property,
plant and equipment and identifiable intangible assets.
Table B
Telstra Group
Goodwill
Software
assets
Licences
Other intan-
gible assets
Total intan-
gible assets
Table C
Telstra Group
Net book value at 1 July 2019
Additions
Amortisation expense
Other movements
Net book value at 30 June 2020, comprising:
Cost
Accumulated amortisation and impairment
Net book value at 1 July 2020
Additions
Amortisation expense
Other movements
Net book value at 30 June 2021, comprising:
Cost
Accumulated amortisation and impairment
$m
1,076
-
-
9
1,085
1,172
(87)
1,085
14
-
(47)
1,052
1,139
(87)
$m
3,983
734
(1,234)
27
3,510
11,046
(7,536)
3,510
924
(964)
(15)
3,455
11,281
(7,826)
$m
2,023
403
(239)
2
2,189
3,265
(1,076)
2,189
120
(265)
(1)
2,043
3,328
(1,285)
$m
624
22
(91)
73
628
1,508
(880)
628
7
(85)
31
581
1,525
(944)
$m
7,706
1,159
(1,564)
111
7,412
16,991
(9,579)
7,412
1,065
(1,314)
(32)
7,131
17,273
(10,142)
The following paragraphs detail further information about our
intangible asset classes:
• additions to software assets include $14 million (2020: $16
million) of capitalised borrowing costs directly attributable to
qualifying assets
• software assets mostly comprise internally generated assets. As
at 30 June 2021, $451 million (2020: $211 million) of software
assets were not installed and ready for use.
• licences comprise of the spectrum licences and apparatus
licences obtained to operate a range of radiocommunications
devices
• other movements include $61 million decrease (2020: $9 million
increase) due to net foreign exchange differences, $30 million
(2020: $104 million) net transfers from property, plant and
equipment construction in progress to intangible assets, $13
million (2020: nil) additions due to acquisitions of controlled
entities, and other individually insignificant transactions.
Capitalisation
of development
costs
We apply judgement to determine
whether to capitalise development
costs.
Development costs are only
capitalised if the project is assessed
to be technically and commercially
feasible, we are able to use or sell the
asset, and we have sufficient
resources and intent to complete the
development.
Property, plant and equipment
Buildings
Communication assets
Other plant and equipment
Intangible assets
Software assets
Licences
Other intangibles
Useful lives and
residual values
of tangible and
intangible
assets
We apply judgement to estimate
useful lives and residual values of our
assets and review them each year. If
useful lives or residual values need to
be modified, the depreciation and
amortisation expense changes from
the date of reassessment until the
end of the revised useful life for both
the current and future years.
This assessment includes a
comparison with international trends
for telecommunication companies
and, in relation to communication
assets, includes a determination of
when the asset may be superseded
technologically or made obsolete. For
intangible assets, specifically
business software, useful lives are
adjusted to align with expected
retirement dates of the relevant
applications under the current
corporate strategies.
The net effect of the assessment of
useful lives was a $7 million (2020:
$37 million) decrease in depreciation
and $71 million (2020: $87 million)
decrease in amortisation expense.
106 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F31
F32 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 107
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 33 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 34 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
3.1 Property, plant and equipment and intangible assets
(continued)
3.1.4 Impairment assessment (continued)
(a) Telstra Entity ubiquitous telecommunication network
An impairment assessment is performed at the level of our Telstra
Entity ubiquitous telecommunications network CGU.
Impairment assessment of our
ubiquitous telecommunications
network
We have determined that assets which form part of the Telstra Entity ubiquitous
telecommunications network, comprising the customer access network and the
core network, are working together to generate independent cash inflows. No one
item of telecommunications equipment is of any value without the other assets
to which it is connected to deliver our products and services.
Indicators of impairment may include changes in our operating and economic
assumptions or possible impacts from emerging risks such as COVID-19 and
climate change. We apply judgement in determining whether certain trends with
an adverse impact on our cash flows are considered impairment indicators.
The COVID-19 pandemic continues to create uncertainty in the economic
environments we operate in, however, given the long-lived nature of the majority
of our assets and the nature of the services we provide, we did not consider it as
an impairment indicator of our ubiquitous telecommunications network.
We continue to assess the potential impacts of climate change and the transition
to a lower carbon economy. Some financial impacts of meeting our medium-term
environmental goals, including maintaining our carbon-neutral status and
moving to 100 per cent renewable energy generation equivalent to our
consumption by 2025, are incorporated in our management forecasts.
On the other hand, we are yet to identify potential long-term financial impacts of
climate change and to incorporate them in our forecasts. Telstra operates
significant physical assets including telephone exchanges, mobile towers, data
centres and fibre network. These are located in city centres as well as urban and
regional areas of Australia with many exposed to extreme weather conditions.
Increased frequency and severity of extreme weather events such as bushfires,
coastal inundation and flooding, cyclones, high temperatures, and flash flooding
may damage and disrupt our operations and service delivery.
Based on our experience with extreme weather events, and considering the
diverse location and nature of our assets as well as our continued focus on
network resiliency and business continuity programs, at this stage we do not
consider the potential impacts of climate change and the transition to a lower
carbon economy to be an impairment indicator.
As we continue to assess climate impacts to our business we will incorporate any
identified financial impacts into our impairment assessment. Should we identify
material adverse effects of climate change or transition to a lower carbon
economy on our cash flows, we may deem it an impairment indicator in the future.
Management forecasts require significant judgements and assumptions and are
subject to risk and uncertainty that may be beyond our control. Hence, there is a
possibility that changes in circumstances will materially alter projections, which
may impact our assessment of impairment indicators and the recoverable
amount of assets at each reporting date.
We have used the following key assumptions in determining the
recoverable amount of our CGUs to which goodwill has been
allocated:
Table E
Telstra Group
Telstra Enterprise
International Group
Telstra Enterprise
Australia Group
Discount rate
Terminal value
growth rate
2021
2020
2021
2020
%
9.0
%
9.5
13.1
13.1
%
2.0
2.3
%
2.0
2.3
The discount rate represents the pre-tax discount rate applied to
the cash flow projections. The discount rate reflects the market
determined, risk-adjusted discount rate that is adjusted for
specific risks relating to the CGU and the countries in which it
operates.
The terminal value growth rate represents the growth rate applied
to extrapolate our cash flows beyond the forecast period. These
growth rates are based on our expectation of the CGUs’ long-term
performance in their markets.
We also perform a sensitivity analysis to examine the effect of a
change in a key assumption on the remaining CGUs. The pre-tax
discount rate would need to increase by 300 basis points (2020: 47
basis points) or the terminal value growth rate would need to
decrease by 584 basis points (2020: 82 basis points) before the
recoverable amount of any of the CGUs would equal its carrying
value. No other changes in key assumptions will result in a material
impairment charge for any of the CGUs.
3.1 Property, plant and equipment and intangible assets
(continued)
3.1.4 Impairment assessment (continued)
(b) Goodwill
The carrying amount of goodwill has been allocated to the CGUs as
detailed in Table D.
Table D
Telstra Group
Telstra Enterprise International Group ¹
Telstra Enterprise Australia Group ²
Other ³
As at 30 June
2021
2020
$m
543
437
72
1,052
$m
587
437
61
1,085
1 These CGUs operate in overseas locations. Therefore, the goodwill allocated to these
CGUs will fluctuate in line with movements in applicable foreign exchange rates.
2 The Telstra Enterprise Australia Group includes goodwill from past acquisitions
integrated into this business.
3 Other includes individually immaterial CGUs.
Determining
CGUs and their
recoverable
amount for
impairment
assessment of
goodwill
We apply judgement to identify our
CGUs and determine their recoverable
amounts using a value in use
calculation. These judgements
include cash flow forecasts, as well
as the selection of growth rates,
terminal growth rates and discount
rates based on experience and our
expectations for the future.
Our cash flow projections are based
on five-year management-approved
forecasts unless a different period is
justified. The forecasts use
management estimates to determine
income, expenses, capital
expenditure and cash flows for each
asset and CGU.
We have concluded that the
discounted cash flows generated
continue to support the carrying
values, thus no impairment has been
identified.
108 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F33
F34 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 109
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 35 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 36 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
3.1 Property, plant and equipment and intangible assets
(continued)
3.1.5 Recognition and measurement
Asset class
Recognition and measurement
Property, plant and
equipment
Property, plant and equipment, including assets under construction, is recorded at cost less
accumulated depreciation and impairment. Cost includes the purchase price and costs directly
attributable to bringing the asset to the location and condition necessary for its intended use.
Goodwill
We capitalise borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset. All other borrowing costs are recognised as an expense in our income
statement when incurred.
Items of property, plant and equipment, including buildings and leasehold property but excluding
freehold land, are depreciated on a straight-line basis in the income statement over their estimated
useful lives. We start depreciating assets when they are installed and ready for use.
Goodwill acquired in a business combination is measured at cost. Cost represents the excess of what
we pay for the business combination over the fair value of the identifiable net assets acquired at the
date of acquisition.
Goodwill is not amortised but is tested for impairment on an annual basis or when an indication of
impairment arises.
Goodwill arising on the acquisition of joint ventures or associated entities constitutes part of the cost
of the investment.
3.2 Lease arrangements
This note provides details about our leasing arrangements,
where Telstra is either a lessee or a lessor, including
arrangements where Telstra is an intermediate lessor (i.e.
subleases).
3.2.1 Telstra as a lessee
Our most significant lease contracts relate to network and non-
network properties, including:
• land and buildings supporting our network assets and data
centres
• office buildings, retail space and warehouses.
Other lease arrangements include:
• communication assets dedicated to solution management that
we provide to our enterprise customers
• mobile handsets which are subleased to our consumer and small
business customers
• spaces on mobile towers
• renewable energy plants
• motor vehicles
• laptops, personal computers and printers.
None of our leases include residual value guarantees. Other
features of our leases are described below.
(a) Leases with extension, termination and purchase options
We do not have any significant purchase options in our property
leases.
Extension options are included in a number of commercial and
network property leases and are taken up to maximise the
operational flexibility in terms of managing the assets used in our
core business operations.
Leases for communication assets dedicated to solution
management include purchase options. These assets are usually
provided to our enterprise customers under the dealer-lessor
finance lease arrangements (refer to note 3.2.2 for further details
about Telstra as a lessor) and purchase options allow us to transfer
the legal title to the relevant equipment to the end customer at the
end of the lease.
The majority of extension and termination options within our lease
contracts are exercisable only by us and not by the respective
lessor, with the exception of ‘holdover periods’ in our property
leases, where generally either party can terminate the lease.
The extension, termination and purchase options are considered
when determining lease term.
Internally generated
intangible assets
Internally generated intangible assets include mainly IT development costs incurred in design, build
and testing of new or improved IT products and systems.
Determining lease term We apply judgement to determine a lease term for leases with extension,
termination or purchase options. We also consider lease modifications where we
continue to use the same underlying asset for an extended term.
Research costs are expensed when incurred.
Capitalised development costs include:
• external direct costs of materials and services consumed
• payroll and payroll-related costs for employees (including contractors) directly associated with the
project
• borrowing costs that are directly attributable to the qualifying assets.
Internally generated intangible assets have a finite life and are amortised on a straight-line basis over
their useful lives.
Acquired intangible
assets
We acquire other intangible assets either as part of a business combination or through a separate
acquisition. Intangible assets acquired in a business combination are recorded at their fair value at the
date of acquisition and recognised separately from goodwill. Intangible assets acquired through a
specific acquisition are recorded at cost.
Intangible assets that are considered to have a finite life are amortised on a straight-line basis over the
useful life. Intangible assets that are considered to have an indefinite life are not amortised but tested
for impairment on an annual basis or when an indication of impairment exists.
Our property lease terms are negotiated on an individual basis and contain a wide
range of different terms and conditions, with typical fixed term periods between
three and 15 years.
Where Telstra is a lessee of communication assets dedicated to solution
management or motor vehicles, i.e. the leased assets are more generic in nature
and/or of lower values, generally master lease agreements are in place with a
range of fixed lease terms between three and five years.
In determining the lease term, we consider all facts and circumstances that
create an economic incentive to exercise an extension, termination or purchase
option, including holdover periods where relevant.
In particular, we consider contractual terms under which the lease term can be
extended or terminated, the price value at which a purchase option (if relevant)
can be exercised, potential relocation costs, asset specific factors and any
relevant leasehold improvements or our wider strategy and policy decisions.
Extension options are only included in the lease term if the lease is reasonably
certain to be extended. Periods beyond termination options are only included in
the lease term if it is reasonably certain that the lease will not be terminated.
The longer the fixed lease term, the less certain a lessee is to exercise an option
to extend the lease.
The extension options for leases of office buildings have generally not been
included in the lease term due to a competitive marketplace and our commercial
ability to either substantially renegotiate or replace these assets instead of
exercising the extension options.
None of our termination options have been considered reasonably certain to be
exercised; therefore, the lease terms have not been shortened and all future cash
flows have been included in the measurement of the lease liability.
The lease term assessment is reviewed if a significant event or change in
circumstances occurs which affects this assessment and that is within our
control as a lessee.
110 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F35
F36 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 111
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 37 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 38 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
(c) Leases with variable lease payments that do not depend on an
index or a rate
Some of our leases, such as leases of renewable energy plants,
include variable lease payments that do not depend on an index or
a rate. Such payments are not included in the measurement of the
lease liability and are expensed as incurred in ‘other expenses’ in
the income statement.
(d) Right-of-use assets
Table A shows movements in net book value of our right-of-use
assets during the financial year.
3.2 Lease arrangements (continued)
3.2.1 Telstra as a lessee (continued)
(e) Lease liabilities
Lease liabilities do not include leases of low value assets (such as
personal computers, laptops and printers) or leases with variable
payments which do not depend on an index or a rate, for which
associated outstanding rental payments as at balance date
continue to be included in trade and other payables.
3.2 Lease arrangements (continued)
3.2.1 Telstra as a lessee (continued)
(b) Leases with lease payment increases
Under most of our lease arrangements, we pay fixed lease
payments, which are included in the measurement of lease
liabilities on initial recognition or at the time of reassessment.
Fixed lease payments in our property leases usually include fixed
increases. However, some of our property leases contain other
escalation clauses, including increases subject to the consumer
price index, the greater of fixed increase or the consumer price
index or increases subject to market rates. Market rent review
terms are used to respond to competitive market trends and to
minimise our fixed costs. No material adjustments to lease
liabilities resulting from such escalation clauses were recognised
during the financial year 2021.
Table A
Telstra Group
Net book value at 1 July 2019
Additions
Depreciation expense
Terminations
Other movements
Net book value at 30 June 2020, comprising:
Cost
Accumulated amortisation and impairment
Net book value at 1 July 2020
Additions
Depreciation expense
Terminations
Other movements
Net book value at 30 June 2021, comprising:
Cost
Accumulated amortisation and impairment
Right-of-use assets for underlying assets
Land and
buildings
Other
Total
$m
2,899
309
(454)
(9)
37
2,782
3,230
(448)
2,782
409
(448)
(33)
(17)
2,693
3,583
(890)
$m
852
122
(563)
(155)
(8)
248
612
(364)
248
243
(278)
(25)
(29)
159
400
(241)
$m
3,751
431
(1,017)
(164)
29
3,030
3,842
(812)
3,030
652
(726)
(58)
(46)
2,852
3,983
(1,131)
In both financial years, terminated leases of other assets mainly
included derecognised right-of-use assets for our mobile handset
leases (Telstra as a lessee), which we ceased following
terminations of the back-to-back customer operating leases.
Other movements include derecognition of $20 million (2020: $17
million) right-of-use assets subleased under finance leases, and
other individually insignificant transactions.
Table B provides information about the weighted average useful
lives of our right-of-use assets.
Table B
Telstra Group
Right-of-use assets
Land and buildings
Other
Weighted average
useful life (years)
As at 30 June
2021
2020
9
4
10
2
Potential future cash outflows of $2,194 million (2020: $2,750
million) are not reflected in the measurement of lease liabilities as
they relate to leases which are yet to commence and/or extension
options that we assessed as not reasonably certain. Almost 90 per
cent of those cash flows will occur after five years. These outflows
represent contractual undiscounted future cash flows estimated
based on fixed lease payments only, payable over the legally non-
cancellable lease term (for leases yet to commence) and/or over all
extension options exercisable only by us (i.e. excluding holdover
periods) for leases already recognised in the statement of financial
position and for those yet to commence.
Such cash flows are not contractually payable until options have
been legally exercised (if at all) and/or until the effective dates of
already executed new contracts.
(f) Amounts recognised in the income statement and cash outflows
for leases
Table D presents amounts recognised in the income statement and
the cash outflows related to our lease arrangements.
Table D
Telstra Group
Amounts recognised in the income
statement
Income from operating subleases (in
revenue from other sources)
Depreciation of right-of-use assets (in
depreciation and amortisation
expense)
Interest expense on lease liabilities (in
net finance costs)
Net gain on sale and leaseback
transactions (in other income)
Net loss on termination and
modification of leases (in other
expenses)
Expense for leases of low value assets
and variable payments (in other
expenses)
Cash outflows for leases
In cash flows from operating activities
In cash flows from financing activities
(principal portion)
In cash flows from financing activities
(interest portion)
As at 30 June
2021
2020
$m
$m
181
468
(726)
(1,017)
(83)
(109)
102
4
(189)
(226)
(25)
(30)
(25)
(706)
(83)
(30)
(993)
(109)
In December 2020, we recognised a $102 million net gain from a
sale and leaseback transaction for an exchange property and
received $282 million in sale proceeds. We also recognised a $136
million lease liability and a $39 million right-of-use asset for the
transaction.
During the financial year, we also entered into a number of sale and
leaseback transactions for mobile devices subleased to our
enterprise customers under a finance lease. We received $9 million
in sale proceeds, and recognised a minimal net gain on those
transactions.
Net loss on termination of leases mainly includes early termination
charges for our mobile handset leases and it has been partly
recovered from the income recognised on termination of the
operating subleases of those handsets.
Determining
incremental
borrowing rates
for property
leases
We apply judgement to determine
incremental borrowing rates for our
property leases because the interest
rates implicit in leases are not readily
determinable for those
arrangements.
The incremental borrowing rates are
determined with reference to rates
sourced from market-based credit
adjusted yield curves which are
independently derived and
reasonably reflect the credit risk of
the lessee. The discount rates also
reflect:
• the lease term (based on the
weighted average repayment term)
• any guarantees which may be in
place
• the impact of any security if
significant to pricing.
As at 30 June 2021, the weighted
average incremental borrowing rate
was 2.3 per cent (2020: 2.5 per cent).
Table C presents maturity analysis of our lease liabilities.
Table C
Telstra Group
Undiscounted future cash flows
Less than 1 year
1 to 2 years
2 to 5 years
More than 5 years
Total undiscounted lease liabilities
Future finance charges
Present value of lease liabilities
Comprising:
Current
Non-current
As at 30 June
2021
2020
$m
$m
566
577
1,118
1,444
3,705
(400)
3,305
503
2,802
3,305
633
471
1,105
1,560
3,769
(471)
3,298
611
2,687
3,298
Measurement of lease liabilities reflects judgements made about
discounted future cash flows arising from reasonably certain
extension options and lease modifications, which must be
reassessed should the circumstances change.
112 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F37
F38 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 113
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 39 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 40 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
3.2 Lease arrangements (continued)
(iii) Finance lease receivable maturity analysis
3.2 Lease arrangements (continued)
3.2.2 Telstra as a lessor (including a dealer-lessor and an
intermediate lessor)
Our lease arrangements where Telstra is a lessor, including a
dealer-lessor and intermediate lessor, include the following main
categories:
• leases and subleases of property assets, including office and
network buildings
• finance leases where Telstra is a dealer-lessor of communication
assets dedicated to solution management
• subleases of mobile handsets to our consumer and small
business customers.
None of our leases include residual value guarantees. Our key
finance and operating leases are described below.
(a) Finance leases
(i) Finance leases where Telstra is a dealer-lessor
We enter into finance lease arrangements with our customers
predominantly for communication assets dedicated to solution
management. At lease commencement date, we recognise revenue
and a selling profit from these transactions as we have no risks
associated with the remaining rights in the underlying assets. The
weighted average remaining term of the finance leases in our
customer contracts is four years (2020: five years).
(ii) Subleases
Generally, we rent office and network buildings for our own use and
not with the intention to earn rental income. However, where our
needs or the intended use of the rented properties change and we
have assessed that exiting a lease is uneconomical, we sublease
property assets on market terms for the remaining non-cancellable
lease term of the head lease.
These subleases are classified as finance leases and at lease
commencement date we record a net gain or loss on the
derecognised right-of-use asset and recognise a finance lease
receivable. We have no risks associated with any retained rights in
the underlying assets as the properties are vacated and returned to
the landlords at the end of the non-cancellable lease term.
Table E sets out the maturity analysis of undiscounted lease
payments receivable and the unearned finance income for our
finance lease receivables. No unguaranteed residual values accrue
under our finance leases.
Table E
Telstra Group
Undiscounted lease payments
receivable under finance leases
Less than 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
More than 5 years
Total undiscounted lease payments
receivables
Less: unearned finance income
Net investment in the lease
Allowance for doubtful debts
Comprising
Current
Non-current
As at 30 June
2021
2020
$m
$m
89
64
38
22
22
30
265
(24)
241
(1)
240
80
160
240
99
79
47
28
21
48
322
(33)
289
(1)
288
90
198
288
During the financial year, we added $61 million (2020: $171 million)
new finance lease receivables and recognised interest income of
$10 million (2020: $13 million).
Refer to note 3.3.1 for details regarding impairment assessment of
our finance lease receivables.
(b) Operating subleases of mobile handsets
In prior financial years, we offered bundles of leased handsets and
mobile services to our consumer and small business customers.
Leases of those handsets were in back-to-back arrangements with
a third party, where Telstra was a lessee. From 25 June 2019, we
ceased to offer these mobile bundles, however, we continue to
account for them until the earlier of the end of the lease term or
customer termination.
As at 30 June 2021, there were no significant future lease payments
receivable under those arrangements.
3.2.2 Telstra as a lessor (including a dealer-lessor and an
intermediate lessor) (continued)
(c) Amounts recognised in the income statement
Table F presents amounts recognised in the income statement
during the financial year relating to our lease arrangements where
Telstra is a lessor (including an intermediate lessor).
Table F
Telstra Group
Revenue from dealer-lessor finance
leases (in revenue from other sources)
Income from operating leases,
including subleases (in revenue from
other sources)
3.2.3 Recognition and measurement
(a) Lease identification and lease term
As at 30 June
2021
2020
$m
39
$m
122
203
474
A contract is, or contains, a lease if it conveys the right to control
the use of an identified asset, including a physically distinct portion
of an asset, for a period of time in exchange for consideration. The
customer has the right to control the use of an identified asset if the
supplier has no substantive substitution rights, and the customer
obtains substantially all of the economic benefits from use of the
identified asset and has the right to direct its use.
A contract may include lease and non-lease components, which are
accounted for separately. We allocate the consideration to lease
and non-lease components based on their relative standalone
(selling) prices.
If a lease has been identified at inception of the arrangement, a
lease term is determined considering a non-cancellable period and
reasonably certain extension, termination or purchase options.
(b) Telstra as a lessee
A lessee recognises a right-of-use asset and a lease liability at a
lease commencement date. The lease liability is initially measured
as a present value of the following lease payments:
• fixed payments (including any in-substance lease payments),
less any lease incentives receivable
• variable lease payments that are based on an index or a rate,
initially using the index or rate as at the commencement date
• the exercise price of a purchase option, if the purchase option
was assessed as reasonably certain to be exercised
• payments for penalties for terminating the lease, if the lease
term reflects that the lessee will exercise that option.
Lease payments expected to be made under a reasonably certain
extension option are also reflected in the measurement of the lease
liability.
Where lease arrangements include market rent review clauses,
lease liabilities are measured excluding any expected impacts from
market rent reviews until they are legally binding and can be
reliably measured.
The lease payments are discounted using the interest rate implicit
in the lease, unless that rate is not readily determinable, in which
case the lessee’s incremental borrowing rate is used.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to the income statement over the lease
term so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Variable lease payments that do not depend on an index or a rate
are recognised in the income statement in the period in which the
event or condition that triggers those payments occurs.
Payments associated with leases of low value assets are
recognised on a straight-line basis as an expense in the income
statement.
Right-of-use assets cost comprises the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement date and any initial direct costs. Where an
obligation exists to dismantle, remove or restore a leased asset or
the site it is located on and a provision has been raised, the right-
of-use asset also includes these restoration costs.
Right-of-use assets are subsequently measured at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are generally depreciated on a straight-line
basis over the shorter of the asset’s useful life and the lease term.
If it is reasonably certain that we will exercise the purchase option,
the right-of-use asset is depreciated over the underlying asset’s
useful life. The depreciation starts at the commencement date of
the lease.
Right-of-use assets are reviewed for impairment under the same
policy as our property, plant and equipment assets. Refer to note
3.1.4 for further details regarding impairment testing.
Costs of improvements to the leased properties are capitalised as
leasehold improvements and amortised over the shorter of the
useful life of the improvements and the term of the lease.
We reassess lease liability (and a make a corresponding
adjustment to the related right-of-use asset) whenever:
• the lease term has changed (reflecting reassessment of or
exercise of an extension or termination options previously not
included in the measurement of the lease liability) or there is a
change in the assessment of exercise of a purchase options, in
which case the lease liability is remeasured by discounting the
revised lease payments using a revised discount rate
• the future lease payments change due to changes in an index or
a rate in which case the lease liability is remeasured by
discounting the revised lease payments using the initial discount
rate
• a lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using a revised discount rate.
114 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F39
F40 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 115
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 41 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 42 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
3.2 Lease arrangements (continued)
3.3 Trade and other receivables and contract assets
3.2.3 Recognition and measurement (continued)
(c) Telstra as a lessor (including a dealer-lessor and an
intermediate lessor)
We distinguish between finance leases, which effectively transfer
substantially all the risks and benefits incidental to ownership of
the leased asset from the lessor to the lessee, and operating leases
under which the lessor effectively retains substantially all such
risks and benefits. Lease classification is made at the inception
date and is only reassessed if there is a lease modification.
Where we are an intermediate lessor, we account for the head lease
and the sublease as two separate contracts. The sublease is
classified as a finance or operating lease by reference to the right-
of-use asset arising from the head lease.
Where we lease assets via a finance lease, a finance lease
receivable (i.e. a net investment in the lease) is recognised at the
lease commencement date and measured at the present value of
the lease payments receivable plus the present value of any
unguaranteed residual value expected to accrue at the end of the
lease term and discounted using the interest rate implicit in the
lease.
Finance lease receipts are allocated between finance income and a
reduction of the finance lease receivable over the term of the lease
in order to reflect a constant periodic rate of return on the net
investment outstanding in respect of the lease.
Where we are a dealer-lessor, at the commencement of the lease,
we also recognise a selling profit or loss (being the difference
between revenue from other sources and the cost of sale) from the
sale of the underlying asset in addition to the finance lease
receivable.
Income from operating leases is recognised on a straight-line basis
over the term of the relevant lease and presented as revenue from
other sources in the income statement.
(d) Sale and leaseback transactions
When we sell and lease back the same asset, the accounting
treatment depends on whether the control of the asset has been
transferred to the buyer:
• if yes, we measure the right-of-use asset arising from the
leaseback at the proportion of the previous carrying amount of
the asset that relates to the right-of-use retained by us as a
seller-lessee. Accordingly, we recognise only the amount of any
gain or loss that relates to the rights transferred to the buyer-
lessor.
• if not, as a seller-lessee we continue to recognise the transferred
asset and we recognise a financial liability equal to the transfer
proceeds.
3.3.1 Current and non-current trade and other receivables and
contract assets
Table A
Telstra Group
As at 30 June
2021
2020
Note
$m
$m
Current
Trade receivables from
contracts with customers
Finance lease receivables
3.2
Accrued revenue
Other receivables
Contract assets
Non-current
Trade receivables from
contracts with customers
Finance lease receivables
Amounts owed by joint ventures
and associated entities
Other receivables
Contract assets
3.5
3.2
6.2
3.5
3,136
3,248
80
325
253
3,794
783
4,577
694
160
79
51
984
184
1,168
90
565
355
4,258
863
5,121
977
198
16
8
1,199
229
1,428
The majority of our receivables are in the form of contracted
agreements with our customers. In general, the terms and
conditions of these contracts require settlement between 14 and
30 days from the date of invoice. Credit risk associated with trade
and other receivables and contract assets has been provided for.
Our trade receivables include receivables with deferred payment
terms over 12, 24 or 36 months arising from mass market bundled
plans of hardware and services. Amounts expected to be collected
within 12 months from the reporting date are presented as current
assets.
Trade receivables from contracts with customers represent an
unconditional right to receive consideration (primarily cash) which
normally arises when the goods and services have been delivered
and/or a valid invoice has been issued. By contrast, contract assets
relate to our rights to consideration for goods or services provided
to the customer but for which we do not have an unconditional right
to payment at the reporting date.
In general, we invoice customers in advance for services provided
under our prepaid or fixed (usually monthly) fee contracts and in
arrears for usage-based contracts (e.g. carriage services under
enterprise contracts). In those cases we would recognise a contract
liability and a contract asset, respectively.
Refer to note 3.5 for movements in net contract assets and contract
liabilities.
3.3 Trade and other receivables and contract assets
(continued)
3.3.1 Current and non-current trade and other receivables and
contract assets (continued)
(a) Impairment of trade and other receivables and contract assets
Trade and other receivables and contract assets are exposed to
customers’ credit risk and are subject to impairment assessment.
If a credit loss (i.e. a shortfall between the contractual and
expected cash flows) is expected, an allowance for doubtful debt is
raised to reduce the carrying amount of trade and other receivables
and contract assets. We estimate the expected credit loss using
one or a combination of a portfolio approach and/or an individual
account by account assessment for both receivables and contract
assets.
(i) Portfolio approach
The portfolio approach is based on historical credit loss experience
and, where appropriate, adjusted to reflect current conditions and
estimates of future economic outlook. This approach is mostly
applied to balances arising from our consumer and small business
customer contracts. Under this approach, receivables and contract
assets are grouped based on shared credit risk characteristics,
such as:
• account status (services still active or not)
• customers’ payment history
• the days past due.
For each grouping, the expected credit loss is then calculated on
the probability that an account within the group will default (i.e. it
will become past due by more than 90 days) and the expected loss
rate when they default, both represented as a percentage of the
exposure at default and determined at the customer account level.
Our provision rates range from 0.1 per cent (2020: 0.2 per cent) for
balances not past due to 91.0 per cent (2020: 81.7 per cent) for
balances where the payment is overdue by more than 90 days and
the customer’s services have been deactivated.
(ii) Individual approach
The individual approach is an account by account assessment
based on credit history, knowledge of debtor’s financial situation,
such as insolvency or entering a payment plan, or other known
credit risk specific to the debtor, such as judgement based on the
debtor’s industry. This approach is applied to balances arising from
contracts with large enterprise and government customers as well
as to other accounts in Telstra Enterprise, Telstra InfraCo and
Telstra Consumer & Small Business segments where some
detrimental change in payment behaviour has been noticed or
certain thresholds have been exceeded by a customer.
Balances arising from our transactions with nbn co (reported in
Telstra InfraCo segment and in ‘All Other’ category) are separately
assessed based on the Australian government credit risk rating.
Estimating
expected credit
losses
We apply judgement to estimate the
expected credit losses for our trade
and other receivables measured at
amortised cost and for contract
assets.
For trade receivables and contract
assets arising from our Telstra
Consumer & Small Business and
Telstra Enterprise Australian
customers, we have implemented a
scenario-based approach
incorporating base, good and bad
economic scenarios. The overall
expected credit loss was calculated
as a weighted average of the three
scenarios.
Our analysis has shown that generally
overall macroeconomic factors, such
as unemployment rates, interest
rates or gross domestic product have
no strong correlation with our bad
debt losses unless certain thresholds
are exceeded. As at 30 June 2021,
those macroeconomic factors were
within the relevant thresholds. There
have been no significant COVID-19-
specific adjustments to our allowance
for impairment this year.
The aging analysis and loss allowance in relation to trade
receivables from contracts with customers, finance lease
receivables and contract assets are detailed in Table B. The
analysis is based on the original due date of the receivables,
including where repayment terms for certain long outstanding
receivables have been renegotiated.
Table B
As at 30 June
Telstra Group
2021
2020
Gross
Allow-
ance
Gross
Allow-
ance
$m
$m
$m
$m
Not past due,
including measured
at:
- amortised cost
- fair value
Past due 1 - 30 days
Past due 31 - 60
days
Past due 61 - 90
days
Past 91 days
4,266
397
4,663
301
84
44
(47)
-
(47)
(21)
(11)
(10)
3,516
1,346
4,862
447
141
89
(33)
-
(33)
(2)
(2)
(9)
144
5,236
(110)
(199)
267
5,806
(155)
(201)
116 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F41
F42 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 117
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 43 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 44 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
3.3 Trade and other receivables and contract assets
(continued)
3.3.1 Current and non-current trade and other receivables and
contract assets (continued)
(a) Impairment of trade and other receivables and contract assets
(continued)
Contract assets are not yet due for collection, thus the entire
balance has been included in the ‘not past due’ category.
Accrued revenue, amounts owed by joint ventures and associated
entities, and other receivables (before allowance for doubtful
debts) totalling $717 million (2020: $953 million) are subject to
impairment assessment using the general approach and include
67 per cent (2020: 79 per cent) of balances with counterparties with
an external credit rating of A- or above.
We hold security for a number of trade receivables, including past
due or impaired receivables, in the form of guarantees, letters of
credit and deposits. During the financial year 2021, the securities
we called upon were insignificant. These trade receivables, along
with our trade receivables that are neither past due nor impaired,
comprise customers who have a good debt history and are
considered recoverable. Further, we limit our exposure to credit
risk from trade receivables by establishing a maximum payment
period and, in certain instances, cease providing further services
after 90 days from the past due date.
Movements in the allowance for doubtful debts in respect of all our
trade and other receivables and contracts assets, regardless of the
method used in measuring the impairment allowance, are detailed
in Table C.
Table C
Telstra Group
Opening balance 1 July
Additional allowance
Amount used
Amount reversed
Closing balance 30 June
Year ended 30 June
2021
2020
$m
(210)
(121)
26
97
(208)
$m
(152)
(113)
19
36
(210)
Impairment allowance related to accrued revenue, amounts owed
by joint ventures and associated entities, and other receivables (i.e.
balances not presented in Table B) amounted to $9 million (2020:
$9 million).
3.3.2 Recognition and measurement
Trade and other receivables and contract assets are financial
assets which are initially recorded at fair value and subsequently
measured at amortised cost using the effective interest method,
with the exception of certain trade receivables from contracts with
customers, which are subsequently measured at fair value (refer to
note 4.5.6 for further details).
Contract assets are initially recorded at the transaction price
allocated as compensation for goods or services provided to
customers for which the right to collect payment is subject to
providing other goods or services under the same contract (or group
of contracts) and/or we are yet to issue a valid invoice. Contract
assets are subsequently measured to reflect relevant transaction
price adjustments (where required) and are transferred to trade
receivables when the right to payment becomes unconditional.
(a) Impairment of financial assets
We estimate the expected credit losses for our financial assets
(including contract assets) measured at amortised cost on either of
the following basis:
• a general approach, i.e. 12-month expected credit loss which
results from all possible default events within the 12 months
after the reporting date. However, if the credit risk of a financial
asset at the reporting date has increased significantly since its
initial recognition, loss allowance is calculated based on lifetime
expected credit losses (applicable to accrued revenue, amounts
owed by joint ventures and associated entities, and other
receivables), or
• a simplified approach, i.e. lifetime expected credit loss which
results from all possible default events over the expected life of
a financial instrument (applicable to trade receivables from
contracts with customer, contract assets and lease receivables).
Any expected credit loss is discounted at the original effective
interest rate.
Any customer account with debt more than 90 days past due is
considered to be in default.
Trade and other receivables and contract assets are written off
against the impairment allowance or directly against their carrying
amounts and expensed in the income statement when all collection
efforts have been exhausted and the financial asset is considered
uncollectable. Factors indicating there is no reasonable
expectation of recovery include insolvency and significant time
period since the last invoice was issued.
3.4 Contract liabilities and other revenue received in
advance
Contract liabilities arise from our contracts with customers and
represent amounts paid (or due) to us by customers before
receiving the goods and/or services promised under the contract.
Revenue received in advance comprises of upfront consideration
under contracts giving rise to revenue from other sources or other
income, for example from nbn disconnection fees or from the sale
of assets.
Amounts expected to be recognised as revenue within 12 months
from the reporting date are presented as current liabilities.
Table A presents customer payments received in advance under
different types of our commercial arrangements.
Table A
Telstra Group
Current
As at 30 June
2021
2020
Note
$m
$m
Contract liabilities
3.5
1,534
1,540
Other revenue received in
advance
Non-current
Contract liabilities
Other revenue received in
advance
3.5
71
71
1,605
1,611
974
339
947
255
1,313
1,202
3.5 Net contract assets and contract liabilities
Contract assets and contract liabilities arise due to the timing
differences between revenue recognition and customer invoicing.
Our billing arrangements for goods and services as well as different
types of discounts, credits or other incentives can vary depending
on the type and nature of the contracts with customers. As a result,
at times under the same accounting contract, we may recognise
both a contract asset and a contract liability. At each reporting
date, any balances arising from the same accounting contract are
presented net in the statement of financial position as either a net
contract asset or a net contract liability.
The net presentation mainly impacts our small business and
enterprise framework arrangements that offer loyalty programs
and technology funds, and nbn Definitive Agreements, where
multiple legal contracts have been combined as one accounting
contract.
Table A presents opening and closing balances of our current and
non-current contract assets and contract liabilities and their total
net movement for the period.
Table A
Telstra Group
As at 30 June
2021
2020
Current contract assets
Non-current contract assets
Total contract assets
Current contract liabilities
Non-current contract liabilities
Total contract liabilities
Total net contract liabilities
Increase in net contract liabilities for
the year
$m
783
184
967
(1,534)
(974)
(2,508)
(1,541)
$m
863
229
1,092
(1,540)
(947)
(2,487)
(1,395)
(146)
(283)
Generally, contract assets increase when we recognise revenue for
goods and services transferred to the customer before billing and
decrease when we invoice customers for already provided goods
and services.
On the other hand, contract liabilities increase when we receive
consideration in advance of transferring the goods and services to
the customer, and decrease when we recognise revenue for the
goods and services previously prepaid by the customer.
Other changes in our contract assets and contract liabilities
represent movements resulting from changes in the transaction
prices due to timing of invoicing and recognition of discounts,
credits and other incentives.
The overall increase of $146 million (2020: $283 million) in the net
contract liabilities incorporated the $1,562 million (2020: $1,722
million) revenue recognised in the reporting period that was
included in the contract liabilities balance at the beginning of the
period.
Refer to note 3.3.1 for details regarding impairment assessment of
contract assets.
118 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F43
F44 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 119
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 45 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 46 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
Section 3. Our core assets, lease arrangements and working capital (continued)
3.6 Deferred contract costs
We pay dealer commissions to acquire customer contracts
and we incur upfront set-up and other costs related to
customer contracts. When those costs support the delivery of
goods and services in the future and are expected to be
recovered, they are deferred in the statement of financial
position and amortised on a basis consistent with the transfer
of goods and services to which these costs relate.
Table A provides movements in net book values of the deferred
contract costs.
Table A
Telstra Group
Net book value at 1 July 2019, comprising:
Current
Non-current
Additions
Amortisation expense
Impairment losses
Net book value at 30 June 2020, comprising:
Current
Non-current
Net book value at 1 July 2020
Additions
Amortisation expense
Impairment losses
Net book value at 30 June 2021, comprising:
Current
Non-current
Costs to
obtain a
contract
Commis-
sions
Costs to fulfil a contract
Set-up costs
Costs of
service
provider
Total
Total
deferred
contract
costs
$m
1,085
n/a
1,085
607
(407)
(124)
1,161
n/a
1,161
1,161
488
(390)
(113)
1,146
n/a
1,146
$m
57
-
57
9
(19)
-
47
-
47
47
14
(20)
-
41
-
41
$m
185
95
90
677
(634)
-
228
82
146
228
835
(795)
-
268
113
155
$m
242
95
147
686
(653)
-
275
82
193
275
849
(815)
-
309
113
196
$m
1,327
95
1,232
1,293
(1,060)
(124)
1,436
82
1,354
1,436
1,337
(1,205)
(113)
1,455
113
1,342
Amortisation
period of
deferred
contract costs
We apply judgement to estimate the
amortisation period of deferred
contract costs to obtain a contract.
For sales commissions paid on
acquisition of the initial contract
which are not commensurate with
recontracting commissions, the
amortisation period reflects the
average estimated customer life for
respective types of contracts.
3.6 Deferred contract costs (continued)
3.8 Trade and other payables
3.6.1 Recognition and measurement
We capitalise costs to obtain an accounting contract when the
costs are incremental, i.e. would not have been incurred if the
contract had not been obtained and are recoverable either directly
via reimbursement by the customer or indirectly through the
contract margin.
We immediately expense the incremental costs of obtaining
contracts if the period of benefit is one year or less.
Costs to fulfil a contract relate directly to an identified good or
service or indirectly to other activities that are necessary under the
contract but that do not result in a transfer of goods or services.
Telstra Group
Current
Trade payables
Accrued expenses
Accrued capital expenditure
Accrued interest
Other payables
Costs to fulfil a contract include set-up costs and prepaid costs of
a service provider related to goods and services which will be
transferred in the future reporting periods.
Non-current
Other payables
As at 30 June
2021
2020
$m
$m
1,204
1,723
280
185
374
3,766
9
9
988
1,774
438
221
559
3,980
4
4
Trade payables and other payables are non-interest bearing
liabilities. Our payment terms vary, however payments are
generally made within 20 days to 90 days from the invoice date.
As at 30 June 2021, no payables were financed by vendors under
the supply chain finance arrangements (2020: $143 million) as this
program was closed.
3.8.1 Recognition and measurement
Trade and other payables, including accruals, are recorded when
we are required to make future payments as a result of purchases
of assets or services. Trade and other payables are financial
liabilities initially recognised at fair value and carried at amortised
cost using the effective interest method.
We capitalise costs to fulfil a contract if:
• the costs relate directly to a contract or a specifically identified
anticipated contract
• the costs generate or enhance resources that we control and will
use when transferring future goods and services
• we expect to recover the costs.
We amortise deferred contract costs in ‘goods and services
purchased’ expense over the term that reflects the expected period
of benefit of the expense. This period may extend beyond the initial
contract term to the estimated customer life or average customer
life of the class of customers. We use the amortisation pattern
consistent with the method used to measure progress and
recognise revenue for the related goods or services.
We assess whether deferred contract costs are impaired whenever
events or changes in circumstances indicate that the carrying
amounts may not be recoverable. We recognise impairment losses
in ‘other expenses’.
3.7 Inventories
Telstra Group
Current
Goods for resale
Raw materials and network inventory
Non-current
Network inventory
As at 30 June
2021
2020
$m
$m
305
80
385
21
21
353
65
418
28
28
3.7.1 Recognition and measurement
Inventories are valued at the lower of cost and net realisable value.
For the majority of inventory items, we assign cost using the
weighted average cost basis.
Net realisable value of items expected to be sold is the estimated
selling price less estimated costs of completion and the estimated
costs incurred in marketing, selling and distribution.
Net realisable value of items expected to be consumed, for example
used in the construction of another asset, is the net value expected
to be earned through future use.
120 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 47 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 48 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Section 4. Our capital and risk management
Section 4. Our capital and risk management
This section provides information on our approach to capital
This section provides information on our approach to capital
management and our capital structure. Our total capital is
management and our capital structure. Our total capital is
defined as equity and net debt. Also outlined in this section are
defined as equity and net debt. Also outlined in this section are
the financial risks that we are exposed to and how we manage
the financial risks that we are exposed to and how we manage
these financial risks.
these financial risks.
SECTION 4. OUR CAPITAL AND RISK MANAGEMENT
4.1 Capital management
Capital management is undertaken in accordance with the financial
parameters regularly reviewed and approved by the Board.
We manage our capital structure with the aim to provide returns for
shareholders and benefits for other stakeholders, while:
• safeguarding our ability to continue as a going concern
• maintaining an optimal capital structure and cost of capital that
provides flexibility for strategic investments.
In order to maintain or adjust our capital structure, we may issue or
repay debt, adjust the amount of dividend paid to shareholders or
return capital to shareholders.
Notes 4.3 and 4.4 provide further details on each component of
capital, being equity and net debt.
4.2 Dividend
This note includes the previous year final dividend and the
current year interim dividend paid. Our dividend comprises of
ordinary and special dividends.
We currently pay dividend to equity holders of the Telstra Entity
twice a year, an interim and a final dividend. Table A below provides
details of the dividends paid during the financial year.
Table A
Year ended 30 June
Telstra Entity
2021
2020
2021
2020
Previous year final
dividend paid
Interim dividend
paid
$m
$m
cents
cents
951
951
951
952
8.0
8.0
8.0
8.0
1,902
1,903
16.0
16.0
On 12 August 2021, the Directors of Telstra Corporation Limited
resolved to pay a fully franked final dividend for the financial year
2021 of 8 cents per ordinary share, comprising a final ordinary
dividend of 5 cents and a final special dividend of 3 cents. The final
dividend will be fully franked at a tax rate of 30 per cent. The record
date for the final dividend will be 26 August 2021, with payment to
be made on 23 September 2021. From 25 August 2021, shares will
trade excluding entitlement to the dividend.
On 12 August 2021, the Board determined that the Dividend
Reinvestment Plan (DRP) will not operate for the final dividend for
the financial year 2021.
As at 30 June 2021, the final dividend for the financial year 2021
was not determined or publicly recommended by the Board.
Therefore no provision for the dividend had been raised in the
statement of financial position. A $951 million provision for the final
dividend payable has been raised as at the date of resolution.
There are no income tax consequences for the Telstra Group
resulting from the resolution and payment of the final dividend,
except for $408 million of franking debits arising from the payment
of this dividend that will be adjusted in our franking account
balance.
Table B provides information about franking credits available for
use in subsequent reporting periods.
Table B
Telstra Group
Year ended 30 June
2021
2020
Franking account balance
Franking credits that will arise from
the payment of income tax payable as
at 30 June (at a tax rate of 30% on a tax
paid basis)
$m
29
99
128
$m
98
207
305
We believe that our current balance in the franking account,
combined with the franking credits that will arise on income tax
instalments expected to be paid in the financial year 2022, will be
sufficient to fully frank our 2021 final dividend.
4.3 Equity
This note provides information about our share capital and
reserves presented in the statement of changes in equity.
We have established the Telstra Growthshare Trust to
administer the Company's employee share schemes. The trust
is consolidated as it is controlled by us. Shares held within the
trust are used to satisfy future vesting of entitlements in these
employee share schemes and reduce our contributed equity.
4.3.1 Share capital
Table A details components of our share capital balance.
Table A
Telstra Group
Contributed equity
Share loan to employees
Shares held by employee share plans
Net services received under employee
share plans
As at 30 June
2021
2020
$m
4,530
-
(69)
(25)
$m
4,530
(7)
(39)
(33)
4,436
4,451
Section 4. Our capital and risk management (continued)
4.3 Equity (continued)
4.3.1 Share capital (continued)
(a) Contributed equity
As at 30 June 2021, we had 11,893,297,855 (2020: 11,893,297,855)
authorised fully paid ordinary shares on issue. Each of our fully paid
ordinary shares carries the right to one vote at a meeting of the
Company.
Holders of our shares also have the right to receive dividends and to
participate in the proceeds from sale of all surplus assets in
proportion to the total shares issued in the event of the Company
winding up.
(b) Shares held by employee share plans
As at 30 June 2021, the number of shares held by employee share
plans totalled 19,895,768 (2020: 9,107,647).
During the financial year 2021, Telstra Growthshare Pty Ltd (the
trustee of the Telstra Growthshare Trust) purchased 11,620,823
shares on-market for the purposes of the employee incentive
schemes at the average price per share of $2.88.
It also purchased 1,510,500 shares off-market from Telstra ESOP
Trustee Pty Ltd (the trustee of the Telstra Employee Share
Ownership Plan Trust II (TESOP99)) on the winding up of that trust,
at $3.55 per share, which was the market closing price at the date
of purchase. As a result of the off-market purchase, TESOP99
related share loans to employees have been fully repaid.
(c) Net services received under employee share plans
We measure the fair value of services received under employee
share plans by reference to the fair value of the equity instruments
granted. The net services received under employee share plans
represent the cumulative value of all instruments issued.
4.3.2 Reserves
Table B details our reserve balances.
Table B
Telstra Group
Balance at 1 July 2019
Other comprehensive income
Balance at 30 June 2020
Other comprehensive income
Balance at 30 June 2021
Cash flow
hedging
reserve
Foreign
currency
transla-
tion
reserve
Foreign
currency
basis
spread
reserve
Fair value
of equity
instru-
ments
reserve
General
reserve
Total
reserves
$m
109
21
130
(95)
35
$m
(209)
32
(177)
51
(126)
$m
(21)
(4)
(25)
(38)
(63)
$m
70
14
84
215
299
$m
(7)
-
(7)
-
(7)
$m
(58)
63
5
133
138
The table below details the nature and purpose of our reserves.
Reserve
Nature and purpose
Foreign currency
translation reserve
Represents exchange differences arising from the conversion of the non-Australian controlled entities’
financial statements into Australian dollars. This reserve is also used to record our percentage share
of exchange differences arising from our equity accounted non-Australian investments in joint
ventures and associated entities.
Cash flow hedging
reserve
Represents the effective portion of gains or losses on remeasuring the fair value of hedge instruments,
where a hedge qualifies for hedge accounting.
Foreign currency basis
spread reserve
Represents changes in the fair value of our derivative financial instruments attributable to movements
in foreign currency basis spread. Currency basis is included in interest on borrowings in the income
statement over the life of the borrowing.
Fair value of equity
instruments reserve
Represents changes in fair value of equity instruments we have elected to measure at fair value
through other comprehensive income.
General reserve
Represents other items we have taken directly to equity.
122 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 49 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 50 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
Table B summarises the key movements in net debt during the
financial year and provides our gearing ratio. Our gearing ratio
equals net debt divided by total capital, where total capital equals
equity, as shown in the statement of financial position, plus net
debt.
4.4 Net debt (continued)
4.4.1 Borrowings
Table C details the carrying and fair values of borrowings included
in the statement of financial position.
Table B
Telstra Group
Year ended 30 June
2021
2020
Table C
Telstra Group
4.3 Equity (continued)
4.3.3 Recognition and measurement
Issued and paid up capital is recognised at the fair value of the
consideration received by the Telstra Entity.
Any transaction costs arising on the issue of ordinary shares are
recognised directly in equity, net of income tax, as a reduction of
the share proceeds received.
Services received under employee share plans (i.e. share-based
payments) increase our share capital balance and vested employee
share plans decrease the share capital balance resulting in a net
movement in our equity. Non-recourse loans provided to
employees to participate in these employee share plans are
recorded as a reduction in share capital.
We also record purchases of the Telstra Entity shares underpinning
our employee share plan as a reduction in share capital.
4.4 Net debt
As part of our capital management we monitor net debt. Net
debt equals total interest-bearing financial liabilities and
derivative financial instruments, less cash and cash
equivalents. This note provides information about
components of our net debt and related finance costs.
Table A lists the carrying value of our net debt components (both
current and non-current balances).
Table A
Telstra Group
Lease liabilities
Borrowings
Net derivative financial instruments
Gross debt
Cash and cash equivalents
Net debt
As at 30 June
2021
2020
$m
(3,305)
(14,136)
1,053
(16,388)
1,125
(15,263)
$m
(3,298)
(15,829)
1,784
(17,343)
499
(16,844)
No components of net debt are subject to any externally imposed
capital requirements. We did not have any defaults or breaches
under any of our agreements with our lenders during the financial
year 2021, except for a breach by one of our subsidiaries on an $8
million loan, which was subsequently repaid in full in January 2021.
There are no breaches under any of our borrowing agreements as at
30 June 2021.
Opening net debt at 1 July
Debt issuance
Drawings (bilateral bank loans)
Commercial paper (net)
Revolving bank facilities (net)
Debt repayments
Lease liability payments
Net cash outflow
Fair value gain/(loss) impacting:
Equity
Other expenses
Finance costs
Other non-cash movements
Lease liability (Telstra as a lessee)
Other loans
Total non-cash movements
Total decrease/(increase) in gross
debt
Net increase/(decrease) in cash and
cash equivalents (includes effects of
foreign exchange rate changes)
Total decrease/(increase) in net debt
Closing net debt at 30 June
Total equity
Total capital
Gearing ratio
$m
(16,844)
(449)
(753)
(463)
260
2,357
706
1,658
15
31
10
(713)
(46)
(703)
955
$m
(14,727)
(1,178)
(2)
(255)
(260)
2,781
993
2,079
50
(24)
(5)
(4,000)
(112)
(4,091)
(2,012)
626
(105)
1,581
(15,263)
(15,275)
(30,538)
%
50.0%
(2,117)
(16,844)
(15,147)
(31,991)
%
52.7%
Debt issued during the financial year 2021 of $449 million
(Australian dollar equivalent), comprised of:
• $414 million proceeds from sale and leaseback (recognised as a
financial liability under the accounting standards) of the
underlying land and buildings housing the Clayton data centre in
Victoria, Australia. The term of this liability is for an initial period
of 30 years with two 10-year options to extend the lease.
• $35 million other loans.
As at 30 June 2021
As at 30 June 2020
Carrying
value
Fair value
Carrying
value
Fair value
$m
$m
$m
$m
2,704
65
862
3,631
9,425
667
413
10,505
14,136
2,727
65
864
3,656
10,151
686
416
11,253
14,909
1,956
432
375
2,763
12,787
279
-
13,066
15,829
1,966
435
378
2,779
13,963
285
-
14,248
17,027
Current borrowings
Unsecured notes
Bank and other loans - unsecured
Commercial paper - unsecured
Non-current borrowings
Unsecured notes
Bank and other loans - unsecured
Other financial liabilities
Total borrowings
Unsecured notes comprise bonds and private placements.
Other financial liabilities represent amounts arising from sale and
leaseback transactions accounted as financial liabilities under the
accounting standards.
(a) Recognition and measurement
Recognition and measurement
Initial recognition and
measurement
Borrowings are recognised initially on the trade date (the date on which we become a party to the
contractual provisions of the instrument).
All loans and borrowings are initially recorded at fair value, which typically reflects the proceeds
received, net of directly attributable transaction costs.
Subsequent
measurement
After initial recognition, all interest-bearing loans and borrowings are stated at amortised cost,
using the effective interest method. Any difference between proceeds received net of direct
transaction costs and the amount payable at maturity is recognised over the term of the borrowing
using the effective interest method.
Loans or borrowings that are in designated fair value hedge relationships are adjusted for fair value
movements attributable to the hedged risk. Refer to note 4.5.5 for our hedging policies.
Gains or losses are recognised in the income statement when the loan or borrowing is derecognised.
Derecognition
Borrowings are derecognised when our contractual obligations are discharged, canceled or expired.
Borrowings are classified as non-current borrowings except for
those that mature in less than 12 months from the reporting date,
which are classified as current borrowings.
124 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 51 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 52 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
4.4 Net debt (continued)
4.4.2 Derivatives
Derivatives are financial instruments that derive their value
from the price of an underlying item such as interest rate,
foreign currency exchange rate, credit spread or other index.
We enter into derivative transactions in accordance with
policies approved by the Board to manage our exposure to
market risks and volatility of financial outcomes that arise as
part of our normal business operations. We do not
speculatively trade in derivative financial instruments.
Table D shows the carrying value of each class of derivative
financial instruments.
Table D
Telstra Group
Current derivative financial instruments
Cross currency swaps
Interest rate swaps
Forward foreign exchange contracts
Non-current derivative financial instruments
Cross currency swaps
Interest rate swaps
Total derivative financial instruments
The terms of a derivative contract are determined at inception,
therefore any movements in the price of the underlying item over
time will cause the contract value to fluctuate, which is reflected in
the change in fair value of the derivative.
Where the fair value of a derivative is positive, it is carried as an
asset, and where negative, as a liability. Both parties are therefore
exposed to the credit quality of the counterparty. We are exposed to
credit risk on derivative assets as a result of the potential failure of
the counterparties to meet their contractual obligations.
Refer to note 4.5.3 for information about our credit risk policies.
As at 30 June 2021
As at 30 June 2020
Assets
Liabilities
Assets
Liabilities
$m
552
42
30
624
728
58
786
1,410
$m
-
(15)
(11)
(26)
(223)
(108)
(331)
(357)
$m
128
18
1
147
1,781
230
2,011
2,158
$m
-
(2)
(52)
(54)
(91)
(229)
(320)
(374)
4.4 Net debt (continued)
4.4.2 Derivatives (continued)
(a) Recognition and measurement
Initial recognition and
subsequent
measurement
Derivative financial instruments are initially recognised at fair value on the date on which a derivative
contract is entered into and subsequently remeasured at fair value at each reporting date. Refer to
note 4.5.6 for details on the determination of fair value.
Right to set-off
We record derivative financial instruments on a net basis in our statement of financial position where
we:
• have a legally recognised right to set-off the derivative asset and the derivative liability, and we
intend to settle on a net basis or simultaneously
• enter into master netting arrangements relating to a number of financial instruments, have a legal
right of set-off, and intend to exercise that right.
For our interest rate swaps, we do not offset the receivable or payable with the underlying financial
asset or financial liability being hedged as the transactions are usually with different counterparties
and are not generally settled on a net basis.
Derecognition
Derivative assets are derecognised when the rights to receive cash flows from the derivative assets
have expired or have been transferred and we have transferred substantially all the risks and rewards
of the asset.
Derivative liabilities are derecognised when the contractual obligations are discharged, cancelled or
expired.
Impact to the income
statement
The method of recognising the resulting gain or loss depends on the designation of the derivative as a
hedging instrument and the nature of the item being hedged.
Derivative financial instruments are included as non-current
assets or liabilities, except for those that mature in less than 12
months from the reporting date, which are classified as current.
Derivatives embedded in host contracts that are financial assets
are not separated from financial asset hosts and a hybrid contract
is classified in its entirety at either amortised cost or fair value.
Derivatives embedded in other financial liabilities or host contracts
are treated as separate financial instruments when their risks and
characteristics are not closely related to those of the host
contracts and the host contracts are not measured at fair value
through profit or loss.
126 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 53 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 54 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
4.4 Net debt (continued)
4.4.3 Finance costs
4.5 Financial instruments and risk management
4.5 Financial instruments and risk management (continued)
Our net exposure on these financial instruments is to Australian
dollar BBSW as receive and pay cash flows denominated in foreign
currency are perfectly matched.
Table E presents our net finance costs. Interest expense on
borrowings are net amounts after offsetting interest income and
interest expense on associated derivative instruments.
Our underlying business activities result in exposure to
operational risks and financial risks, including interest rate
risk, foreign currency risk, credit risk and liquidity risk.
Table E
Telstra Group
Year ended 30 June
2021
2020
Interest income
Finance income from finance leases
(Telstra as a lessor)
Finance income from contracts with
customers
Net interest income on defined benefit
plan
Total finance income
Interest expense on borrowings
Interest expense on lease liabilities
Gross interest on debt
Finance costs from contracts with
customers
Net gains on financial instruments
included in remeasurements
Interest capitalised
Total finance costs
Net finance costs
$m
12
10
79
2
103
(518)
(83)
(601)
(134)
26
(108)
55
(654)
(551)
$m
13
13
244
4
274
(678)
(109)
(787)
(326)
11
(315)
57
(1,045)
(771)
Net gains on derivative financial instruments included in
remeasurements within net finance costs comprise unrealised
valuation impacts on our borrowings and derivatives. These include
net unrealised gains or losses which arise from changes in the fair
value of derivative financial instruments to the extent that hedge
accounting is not achieved or is not effective. These fair values
increase or decrease because of changes in financial indices and
prices over which we have no control.
Our overall risk management program seeks to mitigate these
risks in order to reduce volatility of our financial performance
and to support the delivery of our financial targets. Financial
risk management is carried out centrally by our treasury
department under policies approved by the Board.
Our financial risk management strategies ensure that we can
withstand market disruptions for extended periods.
This note summarises how we manage these financial risks.
There have been no material changes to our risk management
policies since 30 June 2020.
4.5.1 Managing our interest rate risk
Interest rate risk arises from changes in market interest rates.
Borrowings issued at fixed rates expose us to fair value
interest rate risk. Variable rate borrowings give rise to cash
flow interest rate risk, which is partially offset by cash and
cash equivalents balances held at variable rates.
We manage interest rate risk on our net debt portfolio by:
• setting a target ratio of fixed interest debt to variable interest
debt, as required by our debt management policy
• ensuring access to diverse sources of funding
• reducing risks of refinancing by establishing and managing our
target maturity profiles
• entering into cross currency and interest rate swaps. Refer to
note 4.4.2 for further details on derivatives.
(a) Exposure
The use of cross currency and interest rate swaps allows us to
manage the level of exposure our borrowings have to interest rate
risks. Table A shows our fixed to floating ratio based on the carrying
value of our borrowings. The post hedge position differs from the
pre hedge position where we have derivative hedging instruments
in place.
Table A
Telstra Group
Floating rate
borrowings
Fixed rate
borrowings
Other financial
liabilities
Total borrowings
As at 30 June
2021
As at 30 June
2020
Pre
hedge
Post
hedge
Pre
hedge
Post
hedge
$m
$m
$m
$m
(1,321)
(5,236)
(980)
(6,035)
(12,402)
(8,487)
(14,849)
(9,794)
(413)
(413)
-
-
(14,136)
(14,136)
(15,829)
(15,829)
Refer to note 4.4.1 for further details on our borrowings.
4.5.1 Managing our interest rate risk (continued)
(a) Exposure (continued)
Table B summarises as at 30 June our floating rate derivative
instruments in hedging relationships that would be affected by
IBOR reform, showing estimated gross nominal floating rate
interest cash flows until maturity, associated nominal amounts in
the underlying currency and weighted average maturity.
Table B
Telstra Group
Interest rate
swaps
3MBBSW
3MBBSW
3MEURIBOR
3MLIBOR
Cross currency
swaps
3MBBSW
3MEURIBOR
3MLIBOR
Net
3MBBSW
(b) Sensitivity
As at June 2021
As at June 2020
Native
currency
Receive/
(pay)
Nominal
interest
flows
Nominal/
Principal
amounts
Weighted
average
maturity
Nominal
Interest
flows
Nominal/
Principal
amounts
Weighted
average
maturity
$m
$m
years
$m
$m
years
AUD
AUD
EUR
USD
AUD
EUR
USD
AUD
Receive
Pay
Pay
Pay
Pay
Receive
Receive
7
(3)
(17)
(6)
(381)
17
6
2,223
(50)
(1,750)
(1,000)
(5,495)
1,750
1,000
1.4
2.5
1.1
0.3
2.5
1.1
0.3
9
(4)
(49)
(28)
(428)
49
28
2,283
(50)
(2,250)
(1,000)
(6,313)
2,250
1,000
2.3
3.5
1.8
1.3
3.1
1.8
1.3
Pay
(377)
(3,322)
(423)
(4,080)
We have performed a sensitivity analysis based on the interest rate
risk exposures of our financial instruments as at 30 June. In
accordance with our policy to swap foreign currency borrowings
into Australian dollars, interest rate sensitivity relates primarily to
movements in the Australian interest rates.
We have selected a sensitivity range of plus 100 basis points (2020:
100 basis points) and minus 25 basis points (2020: 25 basis points)
as a reasonably possible shift in interest rates taking into account
the current level of both short-term and long-term interest rates,
historical volatility and market expectations of future movements.
The sensitivity reflects a change in benchmark rates only. This is
not a forecast or prediction of future market conditions.
Table C shows the results of our sensitivity analysis on the impacts
to profit after tax and on equity.
Table C
As at 30 June
Telstra Group
2021
2020
Basis point
Basis point
Gain/(loss)
Equity
Net
profit/
(loss)
Net
profit/
(loss)
Equity
$m
(28)
7
$m
(11)
3
$m
(36)
10
$m
37
(10)
Interest rates
(+100bp)
Interest rates
(-25bp)
The results of the sensitivity analysis are driven primarily from the
following factors:
• any increase or decrease in interest rates will impact our net
unhedged floating rate financial instruments and therefore will
directly impact profit or loss
• changes in the fair value of derivatives which are part of effective
cash flow hedge relationships are deferred in equity.
The analysis does not include the impact of any management action
that might take place if the interest rate shifts were to occur.
128 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 55 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 56 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
4.5 Financial instruments and risk management (continued)
4.5.2 Managing our foreign currency risk
Foreign currency risk is our risk that the value of a financial
commitment, forecast transaction, recognised asset or
liability will fluctuate due to changes in foreign exchange
rates. We issue debt offshore and operate internationally and
hence we are exposed to foreign exchange risk from various
currencies.
This risk exposure arises primarily from:
• borrowings denominated in foreign currencies
• trade and other creditor balances denominated in foreign
currencies
• firm commitments or highly probable forecast transactions
for receipts and payments settled in foreign currencies or
with prices dependent on foreign currencies
• translation risk associated with our net investments in
foreign controlled entities (foreign operations).
(a) Borrowings
We mitigate the foreign currency exposure on foreign currency
denominated borrowings by converting these borrowings to
Australian dollars using cross currency swaps.
Table D shows the Australian dollar equivalent carrying value of
offshore bonds and private placements by underlying currency.
Table D
Telstra Group
Euro
United States dollar
Japanese yen
Other
Total offshore bonds and private
placements
As at 30 June
2021
2020
$m
(7,511)
(3,321)
(62)
(194)
$m
(8,697)
(3,628)
(138)
(248)
(11,088)
(12,711)
As at 30 June 2021, we also held $650 million (2020: $260 million)
United States dollar denominated commercial paper with an
Australian dollar equivalent carrying value of $862 million (2020:
$375 million). Commercial paper denominated in United States
dollars was converted into Australian dollars using foreign
exchange swaps.
(b) Trading
We have some exposure to foreign currency risk from our operating
(transactional) activities. We manage this risk by:
• hedging a proportion of the exposure of foreign exchange
transaction risk arising from firm commitments or highly
probable forecast transactions denominated in foreign
currencies in accordance with our risk management policy. These
transactions may be physically settled in a foreign currency or in
Australian dollars but with direct reference to quoted currency
rates in accordance with a contractual formula.
• economically hedging a proportion of foreign currency risk
associated with trade and other creditor balances.
We hedge the above risks using forward foreign exchange
contracts.
4.5 Financial instruments and risk management (continued)
4.5.2 Managing our foreign currency risk (continued)
(b) Trading (continued)
Table E summarises the impact of outstanding forward foreign
exchange contracts that are hedging our transactional currency
exposures.
Table E
Telstra Group
As at 30 June 2021
As at 30 June 2020
Exposure
Forward foreign exchange
contract receive/(pay)
Exposure
Forward foreign exchange
contract receive/(pay)
Local currency
Austra-
lian
dollars
Average
exchange
rate
Local currency
Austra-
lian
dollars
Average
exchange
rate
m
m
$m
$
m
m
$m
$
Commercial paper borrowings
United States dollars
Transactions to and from WOCE
British pounds sterling
United States dollars
Other (various currencies)
Forecast transactions
United States dollars
Indian rupee
Philippine peso
Trade payables
United States dollars
Total in Australian dollars
(650)
650
(858)
0.76
(260)
(38)
-
-
(340)
(6,999)
(1,188)
19
-
-
157
2,800
475
(52)
52
(34)
-
10
(200)
(47)
(13)
(67)
(1,209)
0.54
-
-
0.78
59.60
37.92
(27)
(372)
-
(447)
(1,413)
-
0.78
(65)
260
30
200
-
195
565
-
65
(396)
0.66
(54)
(314)
6
(289)
(11)
-
(98)
(1,156)
0.55
0.64
-
0.66
51.95
-
0.67
At 30 June 2021, we also have a $438 million United States dollar
liability exposure relating to transactions with wholly-owned
controlled entities (WOCE) that is partially hedged with a $175
million bank deposit in the same currency. For the financial year
2020 this exposure was hedged using forward foreign exchange
contracts.
(c) Natural offset
Our direct foreign exchange exposure arising from the impact of
translation of the results of our foreign entities to Australian dollars
is, in part, naturally offset at the Group level by foreign currency
denominated operating and capital expenditure of functions, for
which we do not have hedges in place.
(d) Sensitivity
We have performed a sensitivity analysis based on our foreign
currency risk exposures existing at balance date. Table F shows the
impact that a 10 per cent shift in applicable exchange rates would
have on our profit after tax and on equity.
Table F
As at 30 June
Telstra Group
2021
2020
Gain/(loss)
Equity
Net
profit/
(loss)
Net
profit/
(loss)
Equity
$m
40
(49)
$m
(33)
40
$m
26
(32)
$m
(56)
68
Exchange rates
(+10%)
Exchange rates
(-10%)
A shift of 10 per cent has been selected as a reasonably possible
change taking into account the current level of exchange rates and
the volatility observed both on a historical basis and on market
expectations of future movements. This is not a forecast or
prediction of future market conditions. We have disclosed the
sensitivity analysis on a total portfolio basis and not separately by
currency.
130 | Telstra Corporation Limited and controlled entities
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F56 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 57 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 58 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
We also manage our credit exposure using a value at risk (VaR)
methodology, which is an industry standard measure that
estimates the maximum potential exposure of our risk positions as
a result of future movements in market rates. This helps to ensure
that we do not underestimate credit exposure with any single
counterparty. Using VaR analysis at 30 June 2021, 94 per cent
(2020: 95 per cent) of our derivative credit exposure was with
counterparties that have a credit rating of A- or better.
4.5.4 Managing our liquidity risk
Our objective is to maintain a balance between continuity and
flexibility of funding through the use of liquid financial instruments,
long-term and short-term borrowings, and committed available
bank facilities.
We manage liquidity risk by:
• defining minimum levels of cash and cash equivalents
• defining minimum levels of cash and cash equivalents plus
undrawn bank facilities
• closely monitoring rolling forecasts of liquidity reserves on the
basis of expected business cash flows
• using instruments which trade in highly liquid markets with
highly rated counterparties
• investing surplus funds in liquid instruments.
Our access to commercial paper programs continue to be
supported by a combination of liquid financial assets, and access
to committed bank facilities. Table G shows our total and undrawn
committed bank facilities. As at 30 June 2021, $200 million will
mature in the next 12 months. Drawings under our bank facilities
and commercial paper issues are shown on a gross basis in the
statement of cash flows.
Table G
Telstra Group
Facilities available
Facilities used
Facilities unused
As at 30 June
2021
2020
$m
2,800
(300)
2,500
$m
4,090
(260)
3,830
4.5 Financial instruments and risk management (continued)
4.5.2 Managing our foreign currency risk (continued)
(d) Sensitivity (continued)
Any unhedged foreign exchange positions associated with our
transactional exposures will directly affect profit or loss as a result
of foreign currency movements.
Our largest concentration of foreign currency risk on our offshore
borrowings is attributable to the Euro and United States dollar.
However, there is no significant impact on profit or loss from
foreign currency movements associated with our borrowings
portfolio in effective fair value or cash flow hedges as an offsetting
entry will be recognised on the associated hedging instrument.
We are exposed to equity impacts from foreign currency
movements associated with our offshore investments and our
derivatives in cash flow hedges. The translation of our foreign
entities’ results into the Group’s presentation currency has not
been included in the above sensitivity analysis as this represents
translation risk rather than transaction risk.
The analysis does not include the impact of any management action
that might take place if these events occurred.
4.5.3 Managing our credit risk
Credit risk is the risk that a counterparty will default on its
contractual obligations resulting in a financial loss. We are
exposed to credit risk from our operating activities (primarily
customer credit risk) and financing activities.
We manage credit risk by:
• applying Board approved credit policies
• monitoring exposure to high-risk debtors
• requiring collateral where appropriate
• assigning credit limits to all financial counterparties.
We may also be subject to credit risk on transactions not included
in the statement of financial position, such as when we provide a
guarantee for another party. Details of our contingent liabilities are
disclosed in note 7.3.3.
(a) Customer credit risk
Trade and other receivables and contract assets consist of a large
number of customers, spread across the consumer, business,
enterprise, government and international sectors. Other than nbn
co, we do not have any significant credit risk exposure to a single
customer or group of customers.
Refer to note 3.3 for details about our trade and other receivables
and contract assets and how we manage customer credit risk.
(b) Treasury credit risk
We are exposed to credit risk from the investment of surplus funds
(primarily deposits) and from the use of derivative financial
instruments.
We have a number of exposures to individual counterparties. To
manage this risk, we have Board approved policies that limit the
amount of credit exposure to any single counterparty. Counterparty
credit ratings and market conditions are reviewed continually with
limits being revised and utilisation adjusted where appropriate.
4.5 Financial instruments and risk management (continued)
4.5.4 Managing our liquidity risk (continued)
Table H shows the maturity profile of our financial liabilities
including estimated interest payments. We reduce refinancing risk
by ensuring that our borrowings mature in different periods.
The amounts disclosed are undiscounted contractual future cash
flows and therefore do not reconcile to the amounts in the
statement of financial position.
Table H
Telstra Group
Unsecured notes
Commercial paper
Bank and other loans
Other financial liabilities
Interest on unsecured
notes, bank and other
loans
Lease liabilities
Trade/other payables and
accrued expenses
Derivative financial assets
Derivative financial
liabilities
Total
4.5.5 Hedge accounting
Contractual maturity
As at 30 June 2021
As at 30 June 2020
Less
than 1
year
$m
(2,658)
(865)
(65)
(18)
1 to 2
years
2 to 5
years
$m
(2,084)
-
(227)
(20)
$m
(4,331)
-
(440)
(55)
More
than 5
years
$m
(2,957)
-
-
(725)
Total
$m
(12,030)
(865)
(732)
(818)
Less
than 1
year
$m
(1,932)
(377)
(432)
-
1 to 2
years
2 to 5
years
$m
(2,820)
-
(53)
-
$m
(5,464)
-
(227)
-
More
than 5
years
$m
(4,302)
-
-
-
Total
$m
(14,518)
(377)
(712)
-
(339)
(241)
(386)
(125)
(1,091)
(809)
(348)
(702)
(214)
(2,073)
(566)
(577)
(1,118)
(1,444)
(3,705)
(633)
(471)
(1,105)
(1,560)
(3,769)
(3,766)
(9)
-
-
(3,775)
(3,980)
(4)
-
-
(3,984)
4,046
1,784
4,580
2,511
12,921
2,504
2,972
5,384
3,920
14,780
(3,541)
(1,517)
(4,422)
(2,756)
(12,236)
(2,474)
(2,314)
(4,650)
(3,945)
(13,383)
(7,772)
(2,891)
(6,172)
(5,496)
(22,331)
(8,133)
(3,038)
(6,764)
(6,101)
(24,036)
Hedging refers to the way in which we use financial instruments,
primarily derivatives, to manage our exposure to financial risks. The
gain or loss on the underlying item (the ‘hedged item’) is expected
to move in the opposite direction to the gain or loss on the derivative
(the ‘hedging instrument’), therefore offsetting our risk position.
Hedge accounting allows the matching of the gains and losses on
hedged items and associated hedging instruments in the same
accounting period to minimise volatility in the income statement.
In order to qualify for hedge accounting, prospective hedge
effectiveness testing must meet all of the following criteria:
• an economic relationship exists between the hedged item and
hedging instrument
• the effect of credit risk does not dominate the value changes
resulting from the economic relationship
• the hedge ratio is the same as that resulting from actual amounts
of hedged items and hedging instruments for risk management.
The impact of the COVID-19 pandemic has had no impact to our
hedge relationships which continue to meet the criteria for hedge
accounting.
132 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 59 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 60 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
4.5 Financial instruments and risk management (continued)
4.5.5 Hedge accounting (continued)
To the extent permitted by Australian Accounting Standards, we
formally designate and document our financial instruments by
hedge type as follows:
Fair value hedges
Cash flow hedges
Objectives of this hedging
arrangement
To hedge the exposure to changes in the
fair value of borrowings which are issued at
a fixed rate, or denominated in foreign
currency, by converting to floating rate
borrowings denominated in Australian
dollars.
Instruments used
We enter into cross currency and interest
rate swaps to mitigate our exposure to
changes in the fair value of our long-term
borrowings.
To hedge the exposure to changes in cash
flows from borrowings that bear floating
interest rates or are denominated in foreign
currency. Cash flow hedging is also used to
mitigate the foreign currency exposure
arising from highly probable and
committed future foreign currency cash
flows.
We enter into cross currency and interest
rate swaps to hedge future cash flows
arising from our borrowings.
We use forward foreign exchange contracts
to hedge a portion of firm commitments
and highly probable forecast transactions.
Economic relationships
In all our hedge relationships, the critical terms of the hedging instrument and hedged item
(including face values, cash flows and currency) are aligned.
Discontinuation of hedge
accounting
Hedge accounting is discontinued when a hedging instrument expires, is sold, terminated,
or no longer meets the criteria for hedge accounting. At that time, any cumulative gains or
losses relating to cash flow hedges recognised in equity are initially retained in equity and
subsequently recognised in the income statement as the previously hedged item affects
profit or loss. For fair value hedges, the cumulative adjustment recorded against the
carrying value of the hedged item at the date hedge accounting ceases is amortised to the
income statement using the effective interest method.
4.5 Financial instruments and risk management (continued)
(b) Fair value hedges
4.5.5 Hedge accounting (continued)
Table I shows the carrying value of each component of our gross
debt including derivative financial instruments categorised by
hedge type.
Table I
Telstra Group
Borrowings by hedge designation
Fair value hedges
Cash flow hedges
Not in a hedge relationship
Total borrowings
Lease liabilities
Total borrowings and lease liabilities
Derivative assets by hedge
designation
Fair value hedges
Cash flow hedges
Not in a hedge relationship
Total derivative assets
Derivative liabilities by hedge
designation
Fair value hedges
Cash flow hedges
Not in a hedge relationship
Total derivative liabilities
Total gross debt
As at 30 June
2021
2020
$m
$m
(3,912)
(7,029)
(3,195)
(14,136)
(3,305)
(17,441)
622
769
19
1,410
(5,052)
(7,522)
(3,255)
(15,829)
(3,298)
(19,127)
945
1,213
-
2,158
(109)
(237)
(11)
(357)
(16,388)
(50)
(279)
(45)
(374)
(17,343)
The principal value of our gross debt on an equivalent basis is
$16,070 million (2020: $17,018 million). Principal value represents
contractual obligations less future finance charges, excluding fair
value remeasurements and for foreign denominated balances
equates to the principal value in the underlying currency converted
at the spot exchange rate as at 30 June 2021.
(a) Derivatives not in a formal hedge relationship
Some derivatives may not qualify for hedge accounting or are
specifically not designated as a hedge as natural offset achieves
substantially the same accounting results. This includes forward
foreign currency contracts that are used to economically hedge
exchange rate fluctuations associated with trade payables or other
liability and asset balances denominated in a foreign currency.
All changes in the fair value of the underlying item relating to the
hedged risk are recognised in the income statement together with
the changes in the fair value of derivatives. The net difference is
recorded in the income statement as ineffectiveness. The carrying
value of borrowings in effective fair value hedge relationships is
adjusted for gains or losses attributable to the risk(s) being hedged.
Table J outlines the cumulative amount of fair value hedge
adjustments that are included in the carrying amount of borrowings
in the statement of financial position.
Table J
Telstra Group
Principal value
Unamortised discounts/premiums
Amortised cost
Cumulative fair value hedge
adjustments
Carrying amount
As at 30 June
2021
2020
$m
(3,792)
10
(3,782)
$m
(4,799)
8
(4,791)
(130)
(261)
(3,912)
(5,052)
Table K shows the ineffectiveness recognised in the income
statement. We have excluded foreign currency basis spreads from
our designated fair value and cash flow hedge relationships.
Table K
Telstra Group
Remeasurement of hedged item used
to measure ineffectiveness
Change in value of hedging
instruments
Net (gain)/loss before tax from
ineffectiveness
Net (gain)/loss after tax
Year ended 30 June
2021
(Gain)/
loss
2020
(Gain)/
loss
$m
(254)
249
(5)
(4)
$m
(111)
122
11
8
134 | Telstra Corporation Limited and controlled entities
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F60 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 61 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 62 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
Table M shows when the cash flows are expected to occur with
respect to items in cash flow hedges (i.e. notional cash outflows).
These amounts are the undiscounted cash flows reported in
Australian dollars and represent our foreign currency exposures at
the reporting date.
Table M
Telstra Group
Non-capital items
Within 1 year
Capital items
Within 1 year
Borrowings
Within 1 year
Within 1 to 5 years
After 5 years
As at 30 June
2021
2020
$m
$m
(556)
(592)
(55)
(85)
(1,491)
(4,498)
(1,687)
(8,287)
(275)
(5,086)
(3,061)
(9,099)
Non-capital items will be recognised in the income statement in the
same period in which the cash flows are expected to occur. For
capital items, the hedged assets affect the income statement as
the assets are depreciated over their useful lives.
4.5 Financial instruments and risk management (continued)
4.5.5 Hedge accounting (continued)
(c) Cash flow hedges
The portion of the gain or loss on the hedging instrument that is
effective (offsets the movement on the hedged item) is recognised
directly in the cash flow hedging reserve in equity and any
ineffective portion is recognised within finance costs directly in the
income statement.
Gains or losses deferred in the cash flow hedging reserve are
subsequently:
• transferred to the income statement when the hedged
transaction affects profit or loss
• included in the measurement of the initial cost of the assets
where the hedged item is for purchases of property, plant and
equipment
• transferred immediately to the income statement if a forecast
hedged transaction is no longer expected to occur.
During the current and prior financial years, there was no material
impact on profit or loss resulting from ineffectiveness of our cash
flow hedges or from discontinuing hedge accounting for forecast
transactions no longer expected to occur.
Table L presents the hedge gains or losses transferred to and from
the cash flow hedging reserve.
Table L
Telstra Group
Year ended 30 June
2021
2020
Changes in fair value of cash flow
hedges
Changes in fair value transferred to
other expenses
Changes in fair value transferred to
goods and services purchased
Changes in fair value transferred to
finance costs
Changes in fair value transferred to
property, plant and equipment
Cash flow hedging reserve
Income tax on movements in the cash
flow hedging reserve
$m
(515)
439
16
124
4
68
(20)
48
$m
72
(115)
(27)
128
(4)
54
(16)
38
4.5 Financial instruments and risk management (continued)
4.5.6 Valuation and disclosures within fair value hierarchy
The financial instruments included in the statement of
financial position are measured either at fair value or their
carrying value approximates fair value, with the exception of
borrowings, which are held at amortised cost.
To determine fair value, we use both observable and
unobservable inputs. We classify the inputs used in the
valuation of our financial instruments according to a three
level hierarchy as shown below. The classification is based on
the lowest level input that is significant to the fair value
measurement as a whole.
During the financial year 2021, there were no changes in valuation
techniques for recurring fair value measurements of our financial
instruments. There were also no transfers between fair value
hierarchy levels.
The table below summaries the methods used to estimate the fair
value of our financial instruments.
Level
Financial instrument
Fair value
Level 1: quoted (unadjusted)
market prices in active
markets for identical assets
or liabilities
Level 2: the lowest level input
that is significant to the fair
value measurement is directly
(as prices) or indirectly
(derived from prices)
observable
Listed investments in equity
instruments
Quoted prices in active markets.
Borrowings, cross currency and
interest rate swaps
Valuation techniques maximising the use of observable
market data. Present value of the estimated future cash
flows using appropriate market-based yield curves,
which are independently derived. Yield curves are
sourced from readily available market data quoted for
all major currencies.
Forward foreign exchange
contracts
Quoted forward exchange rates at reporting date for
contracts with similar maturity profiles.
Level 3: one or more key
inputs for the instrument are
not based on observable
market data (unobservable
inputs)
Trade receivables from contracts
with customers
Unlisted investments in equity
instruments
Trade receivables from contracts with customers
measured at fair value are such where, due to the
variability of the contractual cash flows, the instrument
does not meet the classification requirements of
financial assets at amortised cost.
A valuation technique is used, where the estimated
future cash flows are discounted to their present value
using a discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset. Expected cash flows are
estimated based on the terms of the customer contract
taking into account possible variations in the amount
and timing of cash flows. The discount rate is
determined using a risk-free rate plus a risk adjustment
reflecting the credit risk associated with the cash flows.
Valuation techniques (where one or more of the
significant inputs is not based on observable market
data) include reference to discounted cash flows and
fair values of recent orderly sell transactions between
market participants involving instruments that are
substantially the same.
Contingent consideration
Initial recognition: expectations of future performance
of the business. Subsequent measurement: present
value of the future expected cash flows.
136 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F61
F62 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 137
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 63 Wednesday, August 11, 2021 4:34 PM
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Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
Section 4. Our capital and risk management (continued)
4.5 Financial instruments and risk management (continued)
4.5.6 Valuation and disclosures within fair value hierarchy
(continued)
Table N categorises our financial instruments which are measured
at fair value, according to the valuation methodology applied.
Table N
Telstra Group
As at 30 June 2021
As at 30 June 2020
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
Assets
Trade receivables from contracts
with customers
Derivative financial instruments
Investments in unlisted securities
Liabilities
Derivative financial instruments
Total
-
-
-
-
-
-
-
-
1,410
-
1,410
(357)
(357)
1,053
397
-
15
412
-
-
412
397
1,410
15
1,822
(357)
(357)
1,465
-
-
-
-
-
-
-
-
2,158
-
2,158
(374)
(374)
1,784
1,346
-
21
1,367
-
-
1,367
1,346
2,158
21
3,525
(374)
(374)
3,151
Fair value of borrowings presented in Table C in note 4.4.1 was
measured using level 2 inputs.
Table O details movements in trade receivables from contracts with
customers measured using level 3 inputs.
Table O
Telstra Group
Opening balance 1 July
Originated during the period
Settlements by customers
Net interest income recognised in the
income statement
Remeasurements recognised in the
income statement
Closing balance 30 June
Year ended 30 June
2021
2020
$m
1,346
-
(960)
4
7
$m
1,506
1,564
(1,756)
37
(5)
397
1,346
We recognise trade receivables from contracts with customers as
part of our ordinary activities. Settlements of those receivables are
part of the receipts from customers in the operating cash flows.
4.5 Financial instruments and risk management (continued)
4.5.7 Offsetting and netting arrangements
Table P presents financial assets and financial liabilities that are
offset, or subject to enforceable master netting arrangements or
other similar agreements but not offset.
The column ‘net amounts’ shows the impact on the statement of
financial position if all set-off rights were exercised.
‘Related amounts not offset in the statement of financial position’
reflect amounts subject to conditional offsetting arrangements.
Table P
Telstra Group
Effects of offsetting in the statement of
financial position
Related amounts not offset in the
statement of financial position
Gross
amounts
Gross
amounts
offset in the
statement of
financial
position
Net amounts
presented in
the
statement of
financial
position
Financial
instruments
Collateral
received or
pledged
Net amounts
$m
$m
$m
$m
$m
$m
A
B
C=A-B
D
E
F=C-D-E
Trade and other receivables and
contract assets
Trade and other payables
Derivative financial assets
Derivative financial liabilities
Total
Trade and other receivables and
contract assets
Trade and other payables
Derivative financial assets
Derivative financial liabilities
Total
311
(209)
1,410
(357)
1,155
328
(246)
2,158
(374)
1,866
As at 30 June 2021
247
(145)
1,410
(357)
1,155
As at 30 June 2020
251
(169)
2,158
(374)
1,866
58
(58)
287
(287)
-
67
(67)
344
(344)
-
64
(64)
-
-
-
77
(77)
-
-
-
9
-
-
-
9
10
-
-
-
10
180
(87)
1,123
(70)
1,146
174
(102)
1,814
(30)
1,856
Our rights of set-off that are not otherwise included in column B,
related to:
• our inter-operative tariff arrangements with some of our
international roaming partners, where we have executed
agreements that allow the netting of amounts payable and
receivable by us on cessation of the contract
• our wholesale customers, where we have executed Customer
Relationship Agreements that allow for the netting of amounts
payable and receivable by us in certain circumstances where
there is a right to suspend the supply of services or on the
expiration or termination of the agreement
• our derivative financial instruments, where we have executed
master netting arrangements under our International Swaps and
Derivatives Association agreements. These agreements allow for
the netting of amounts payable and receivable by us or the
counterparty in the event of default or a credit event. In line with
contractual provisions, in the event of insolvency all derivatives
with a positive or negative fair value that exist with the respective
counterparty are offset against each other, leaving a net
receivable or liability.
138 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F63
F64 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 139
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 65 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 66 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Section 5. Our people
Section 5. Our people
We are working to attract and retain employees with the
We are working to attract and retain employees with the skills
skills and passion to best serve our markets. This section
and passion to best serve our markets. This section provides
provides information about our employee benefits
information about our employee benefits obligations. It also
obligations. It also includes details of our employee share
includes details of our employee share plans and compensation
plans and compensation paid to key management
paid to key management personnel.
personnel.
Notes to the financial statements (continued)
Section 5. Our people (continued)
5.2 Employee share plans
SECTION 5. OUR PEOPLE
5.1 Employee benefits
5.1.1 Aggregate employee benefits
Our employee related obligations include:
• liabilities for wages and salaries and related on-costs (presented
within current trade and other payables)
• annual leave, long service leave and employee incentives
(presented within current and non-current employee benefits)
and
• redundancy provisions (presented within current other
provisions).
Table A provides a summary of all these employee obligations.
Table A
Telstra Group
Accrued labour and on-costs
Current employee benefits
Non-current employee benefits
As at 30 June
2021
2020
$m
515
682
150
1,347
$m
424
727
127
1,278
No provisions for redundancies were recognised as at 30 June 2021
(2020: nil).
Long service
leave provision
We applied judgement to determine
the following key assumptions used in
the calculation of long service leave
entitlements:
• 3 per cent (2020: 3.5 per cent)
weighted average projected
increases in salaries
• 2.5 per cent (2020: 2.3 per cent)
discount rate.
The discount rate used to calculate
the present value has been
determined by reference to market
yields at 30 June 2021 on nine year
(2020: nine year) high quality
corporate bonds which have due
dates similar to those of our
liabilities.
For the amounts of the provision presented as current, we do not
have an unconditional right to defer settlement for any of these
obligations. However, based on experience, we do not expect all
employees to take the full amount of accrued leave or require
payment within the next 12 months. Amounts disclosed in Table B
have been determined in accordance with an actuarial assessment
and reflect leave that is not expected to be taken or paid within the
next 12 months.
Table B
Telstra Group
Leave obligations expected to be
settled after 12 months
5.1.2 Recognition and measurement
As at 30 June
2021
2020
$m
398
$m
435
The liabilities for employee benefits relating to wages and salaries,
annual leave and other current employee benefits are accrued at
their nominal amounts. These are calculated based on
remuneration rates expected to be current at the settlement date
and include related costs.
Certain employees who have been employed by Telstra for at least
10 years are entitled to long service leave of three months or more
depending on the actual length of employment. We accrue
liabilities for long service leave not expected to be paid or settled
within 12 months of the reporting date at present values of future
amounts expected to be paid. This is based on the projected
increases in wage and salary rates over an average of 10 years,
experience of employee departures and periods of service.
Provisions are recognised when:
• the Telstra Group has a present legal or constructive obligation to
make a future sacrifice of economic benefits as a result of past
transactions or events
• it is probable that a future sacrifice of economic benefits will
arise
• a reliable estimate can be made of the amount of the obligation.
We recognise a provision for redundancy costs when a detailed
formal plan for the redundancies has been developed and a valid
expectation has been created that the redundancies will be carried
out in respect of those employees likely to be affected.
We have a number of employee share plans pursuant to which equity is awarded to executives and employees as part of their total
remuneration. Active share plans are conducted through the Telstra Growthshare Trust (Growthshare). Telstra wholly owns Telstra
Growthshare Pty Ltd, the corporate trustee for Growthshare (the Trustee). The results of the Trustee are consolidated into our Telstra
Group Financial Report.
A transaction will be classified as share-based compensation where the Group receives services from employees and pays for these
either in shares or similar equity instruments or in cash but the amounts due are based on the Telstra share price.
This note summarises the primary employee share plans conducted through Growthshare and the key events in the share-based
payment arrangements that have occurred during the financial year.
We have granted the following types of equity instruments as part
of our equity-settled employee share plans:
Retention rights are rights to Telstra shares subject to satisfaction
of service conditions.
• restricted shares
• performance rights
• retention rights.
Restricted shares are Telstra shares that are subject to a
restriction period.
Performance rights are rights to Telstra shares subject to the
satisfaction of certain performance measures and service
conditions over a defined performance period.
Telstra has discretion to provide the holder with a share or a cash
amount equivalent to the value of a share on vesting of a
performance right and retention right. Further information can be
found in note 5.2.1.
Table A below provides a summary of the instruments granted
under the main equity-settled employee share plans outstanding at
30 June 2021.
Table A
Telstra Group
Type of equity
instrument
Financial year
granted
Restriction
period
Date of testing
against
performance
hurdles
Performance
hurdles
n/a
n/a
Number of
instruments
allocated and
outstanding at
30 June 2021
The restricted
shares for FY21 are
expected to be
allocated in the
first half of the
FY22
EVP restricted
shares
FY21
FY20
FY19
FY21
FY20
FY19
FY18
Short-term
incentive (STI)
restricted
shares
Four equal tranches
with the respective
tranches restricted
from one to four
years from the end
of the initial
performance period
Four equal tranches
with the respective
tranches restricted
from one to four
years from the end
of the initial
performance period
One tranche
restricted for two
years from the end
of the initial
performance period
One tranche
restricted for three
years from the end
of the performance
period
n/a
n/a
1,694,774
n/a
n/a
1,252,021
n/a
n/a
6,325,934
140 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F65
F66 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 141
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 67 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 68 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 5. Our people (continued)
Section 5. Our people (continued)
5.2 Employee share plans (continued)
5.2 Employee share plans (continued)
(b) EVP performance rights
5.2.1 Description of share based payment arrangements
(continued)
Table B provides a weighted average of the inputs used in
measuring the fair value of EVP performance rights at grant date.
Table A
(continued)
Telstra Group
Type of equity
instrument
EVP
performance
rights
Financial year
granted
Restriction
period
Date of testing
against
performance
hurdles
Performance
hurdles
FY21
n/a
30 June 2025
Relative Total
Shareholder
Return (RTSR)
Number of
instruments
allocated and
outstanding at
30 June 2021
The performance
rights for FY21 are
expected to be
allocated in the
first half of the
FY22
FY20
FY19
FY18
n/a
n/a
n/a
30 June 2024
RTSR
1,936,886
30 June 2023
RTSR
1,878,032
50% 30 June 2021
RTSR
416,541
50% 30 June 2022
(a) Executive Variable Remuneration Plan (EVP) (continued)
(ii) Performance rights (equity-settled) (continued)
No performance rights will vest if Telstra’s RTSR ranks below the
50th percentile of the Comparator Group. Any performance rights
that do not vest following testing against the RTSR measure will
lapse.
The FY19 and FY18 EVP performance rights will vest if Telstra’s
RTSR ranks at the 50th percentile or greater against the
Comparator Group over the performance period. If the RTSR
measure is not satisfied, all of the applicable performance rights in
the relevant tranche will lapse. Testing of 50 per cent of FY18 EVP
performance rights as at 30 June 2021 resulted in all performance
rights lapsing due to RTSR performance hurdle not being met.
No dividends are paid on performance rights prior to vesting. For
performance rights that do vest, a cash payment equivalent to
dividends paid by Telstra during the period between allocation of
the performance rights and vesting will be made at or around the
time of vesting, subject to applicable taxation. This cash
entitlement is not included in the grant date fair values of the
performance rights as this is accounted for separately.
(iii) Cash rights (cash-settled)
As at 30 June 2021 we recorded a $4 million liability (2020: $4
million) pertaining to the outstanding cash rights issued to certain
former executives that ceased employment for a permitted reason
in prior financial years.
n/a
n/a
7,412,658
(b) Retention rights (equity-settled)
Retention rights
FY19
Two tranches
restricted until 31
December 2019
and 30 June 2021
Provided they have not been forfeited earlier, the EVP and STI
restricted shares, as well as shares allocated on the vesting of EVP
performance rights or retention rights, will be transferred to the
relevant executive on the first day of the first trading window
occurring under Telstra’s Securities Trading policy following the
end of the relevant restriction period or the vesting date, as
applicable.
The definition of RTSR is set out in the Remuneration Report
Glossary.
5.2.1 Description of share based payment arrangements
(a) Executive Variable Remuneration Plan (EVP)
Under the EVP, the amount earned by the CEO and eligible Group
Executives is determined at the end of an initial one year
performance period based on certain factors, including Telstra’s
performance against certain predetermined performance
measures and the executive’s individual performance (including
their performance relative to other executives), with the Board
retaining discretion to adjust the outcome to ensure it is
appropriate. A component of the amount earned under the EVP is
provided in restricted shares and a component in performance
rights. Refer to the Remuneration Report for further details on the
FY21 EVP structure.
The allocation of restricted shares and performance rights under
the FY21 EVP is expected to be made shortly after the 2021 Annual
General Meeting. Shareholder approval will be sought at the 2021
Annual General Meeting for the CEO’s FY21 EVP allocation.
If an executive leaves Telstra other than for a Permitted Reason (the
definition of which is set out in the Remuneration Report Glossary)
before the end of the relevant performance or restriction period,
their performance rights will lapse and restricted shares will be
forfeited. Performance rights and restricted shares may also lapse
or be forfeited if certain clawback (malus) events occur before the
performance rights vest or restricted shares are transferred to the
executive following the end of the relevant restriction period.
(i) Restricted shares (equity-settled)
Table A lists the restriction periods for each EVP restricted share
plans. No further performance hurdles will apply once the
restricted shares are allocated. During the restriction period,
executives are entitled to vote and earn dividends on their
restricted shares from the actual allocation date. However, they are
restricted from dealing with the shares during this period.
(ii) Performance rights (equity-settled)
Once allocated, the EVP performance rights are tested against a
RTSR measure over a four or five year period (refer to Table A for
testing dates) inclusive of the initial one year performance period.
The FY21 and FY20 EVP performance rights will vest on a straight-
line scale, with 50 per cent of the performance rights vesting if
Telstra’s RTSR ranks at the 50th percentile against a comparator
group comprising the ASX100, excluding resource companies
(Comparator Group) over the performance period, up to 100 per
cent of the performance rights vesting where Telstra’s RTSR ranks
at the 75th percentile of the Comparator Group or above.
Telstra issued 13 million retention rights to eligible employees in
the financial year 2019. Five million of those retention rights vested
in the financial year 2020 and the remaining seven million vested on
30 June 2021.
(c) STI restricted shares
Under the STI arrangements, 25 per cent of an eligible executive’s
actual STI payment is provided as restricted shares which are
restricted for three years from the end of the performance period.
Performance hurdles are applied in determining the number of
restricted shares allocated to executives, and therefore, restricted
shares are not subject to any other performance hurdles once they
have been allocated. During the restriction period, from the actual
grant date, executives are entitled to vote and earn dividends on
their restricted shares. However, they are restricted from dealing
with the shares during this period.
If an executive leaves Telstra other than for a Permitted Reason
before the end of the relevant restriction period, their restricted
shares are forfeited. Restricted shares may also be forfeited if
certain clawback (malus) events occur before the restricted shares
are transferred to the executive following the end of the relevant
restriction period.
5.2.2 Fair value measurement
(a) EVP restricted shares
EVP restricted shares were measured based on the Board approved
dollar amount outcome for the financial year 2021, with a final
number of shares to be allocated shortly after Telstra’s 2021
Annual General Meeting. The estimated fair value per share granted
in the financial year 2021 was $3.75 (2020: $3.44).
Table B
Year ended 30 June
Telstra Group
Share price
Risk free rate
Dividend yield
Expected life in years
Expected stock volatility
Fair value ($)
2021
$3.28
0.37%
5.58%
4.6 years
22%
$1.63
2020
$3.87
0.67%
5.22%
4.9 years
19%
$1.91
The expected stock volatility is a measure of the amount by which
the price is expected to fluctuate during a period. This is based on
an annualised historical daily volatility of closing share prices over
a certain period to the measurement date.
5.2.3 Expense recognised in the income statement
Refer to note 2.3 for details about the related employee benefit
expenses.
5.2.4 Recognition and measurement
For each of our equity-settled share plans, we measure the fair
value of the equity instrument at grant date and recognise the
expense over the relevant vesting period in the income statement
with a corresponding increase in equity (i.e. share capital). The
expense is adjusted to reflect actual and expected levels of vesting.
Grant date is the date when there is a shared understanding
between employees and Telstra of the terms and conditions of the
plan and the employees have accepted the offer. This often occurs
prior to the allocation of equity instruments to the employees.
The fair values of our equity instruments are calculated by taking
into account the terms and conditions of the individual plan and as
follows:
Equity instrument
Fair value approach
Restricted shares
Performance rights
We measure the value of the
award by reference to the
dollar amount outcome
approved by the Board
Black-Scholes methodology
and utilises Monte Carlo
simulations
A liability is recognised for the fair value of cash-settled
transactions. The fair value is measured initially and at each
reporting date up to and including the settlement date, with
changes in fair value recognised in employee benefits expense in
the income statement.
142 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F67
F68 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 143
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 69 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 70 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 5. Our people (continued)
Section 5. Our people (continued)
5.3 Post-employment benefits
(a) Fair value of defined benefit plan assets
5.3 Post-employment benefits (continued)
(d) Actuarial assumptions and sensitivity analysis
We participate in, or sponsor, defined benefit and defined
contribution schemes for our employees. This note provides
details of our Telstra Superannuation Scheme (Telstra Super)
defined benefit plan.
Our employer contributions to Telstra Super are based on the
recommendations from the actuary of Telstra Super in line
with any legislative requirements. The net defined benefit
asset/(liability) at balance date is also affected by the
valuation of Telstra Super’s investments and our obligations
to members of Telstra Super.
5.3.1 Net defined benefit plan asset/(liability)
Table A details our net defined benefit plan asset/(liability)
recognised in the statement of financial position.
Table A
Telstra Group
Fair value of defined benefit plan
assets
Present value of the defined benefit
obligation
Net defined benefit asset
Attributable to:
Telstra Super
Other
As at 30 June
2021
2020
$m
$m
1,704
1,781
1,559
1,666
145
155
(10)
145
115
123
(8)
115
5.3.2 Telstra Superannuation Scheme (Telstra Super)
The Telstra Entity participates in Telstra Super, a regulated fund in
accordance with the Superannuation Industry Supervision Act
governed by the Australian Prudential Regulation Authority.
Telstra Super’s board of directors operates and governs the plan,
including making investment decisions.
Telstra Super has both defined benefit and defined contribution
divisions. The defined benefit divisions, which are closed to new
members, provide benefits based on years of service and final
average salary paid as a lump sum. Post-employment benefits do
not include payments for medical costs.
On an annual basis, we engage qualified actuaries to calculate the
present value of the defined benefit obligations.
Contribution levels made to the defined benefit divisions are
determined by Telstra after obtaining the advice of the actuary and
in consultation with Telstra Super Pty Ltd (the Trustee). These are
designed to ensure that benefits accruing to members and
beneficiaries are fully funded as they fall due. The benefits received
by members of each defined benefit division take into account
factors such as each employee’s length of service, final average
salary, and employer and employee contributions.
Telstra Super is exposed to Australia’s inflation, credit risk,
liquidity risk and market risk. Market risk includes interest rate
risk, equity price risk and foreign currency risk. The strategic
investment policy of the fund is to build a diversified portfolio of
assets to match the projected liabilities of the defined benefit plan.
Table B provides a reconciliation of fair value of defined benefit
plan assets from the opening to the closing balance.
Table B
Telstra Super
Fair value of defined benefit plan
assets at the beginning of the year
Employer contributions
Member contributions
Benefits paid (including contributions
tax)
Plan expenses after tax
Interest income on plan assets
Actual asset gain/(loss)
Fair value of defined benefit plan
assets at the end of the year
As at 30 June
2021
2020
$m
$m
1,781
2,108
15
18
15
24
(226)
(400)
(6)
35
87
(7)
49
(8)
1,704
1,781
(b) Present value of the wholly funded defined benefit obligation
Table C provides a reconciliation of the present value of defined
benefit obligation from the opening to the closing balance.
Table C
Telstra Super
Present value of defined benefit
obligation at the beginning of the year
Current service cost
Interest cost
Member contributions
Past service (credit)
Benefits paid
Actuarial loss due to change in
financial assumptions
Actuarial loss due to change in
demographic assumptions
Actuarial loss due to experience
Present value of wholly funded
defined benefit obligation at the end
of the year
As at 30 June
2021
2020
$m
$m
1,658
1,876
51
33
7
(1)
(226)
(9)
-
36
61
45
10
(8)
(400)
49
1
24
1,549
1,658
The actual return on defined benefit plan assets was 5.8 per cent
(2020: 1.5 per cent).
Net actuarial gain recognised in other comprehensive income for
Telstra Super amounted to $60 million (2020: $82 million net loss).
As a result of restructuring program, we settled the defined benefit
plan obligations relating to the employees impacted by the
redundancy and recognised a $1 million gain (2020: $8 million) on
settlement. This is reflected in the past service credit.
5.3.2 Telstra Superannuation Scheme (Telstra Super) (continued)
(c) Categories of plan assets
Table D details the weighted average allocation as a percentage of
the fair value of total defined benefit plan assets by class based on
their nature and risks.
Defined benefit
plan
Table D
Telstra Super
As at 30 June
2021
2020
Asset allocations
Equity instruments
Australian equity ¹
International equity ¹
Private equity
Debt instruments
Fixed interest ¹
Other
Property
Cash and cash equivalents
Other
%
9
10
2
64
10
5
-
100
%
6
7
2
63
9
11
2
100
The following key assumptions were
used in the calculation of our defined
benefit obligations:
• 2.5 per cent (2020: 2.5 per cent)
average expected rate of increase
in future salaries
• 2.2 per cent (2020: 2.1 per cent)
discount rate.
We have used an eight year (2020:
eight year) high quality corporate
bond rate to determine the discount
rate as the term matches closest to
the term of the defined benefit
obligations.
Our assumption for the salary
inflation rate for Telstra Super
reflects our long-term expectation for
salary increases.
If the estimates prove to be different
to actual experience, this may
materially affect balances in the next
reporting period.
1 These assets have quoted prices in active markets.
(i) Related party disclosures
The related party disclosures below relate to Telstra Super as a
whole, rather than just the defined benefit plan.
As at 30 June 2021, Telstra Super owned 56,797,514 (2020:
49,396,553) shares in the Telstra Entity at a cost of $181 million
(2020: $184 million) and a market value of $214 million (2020: $155
million). All these shares were fully paid at 30 June 2021. During the
financial year 2021, we paid a dividend to Telstra Super of $8 million
(2020: $8 million). We own 100 per cent of the equity of Telstra
Super Pty Ltd, the Trustee of Telstra Super.
Telstra Super also holds promissory notes and bonds issued by the
Telstra Entity. As at 30 June 2021, these securities had a cost of $10
million (2020: $16 million) and a market value of $10 million (2020:
$17 million).
Table E summarises how the defined benefit obligation as at 30
June 2021 would have increased/(decreased) as a result of a
change in the respective assumptions by one percentage point
(1pp).
Table E
Telstra Super
Discount rate
Expected rate of increase in future
salaries
(e) Employer contributions
Defined benefit
obligation
1pp
increase
1pp
decrease
$m
(107)
107
$m
122
(97)
All purchases and sales of Telstra shares, promissory notes and
bonds by Telstra Super are on an arm’s length basis and are
determined by the Trustee and/or its investment managers on
behalf of the members of Telstra Super.
During the financial year, we paid contributions totalling $15 million
(2020: $15 million) at the average rate of five per cent (2020: five per
cent) to our defined benefit divisions, following recommendations
from the actuary of Telstra Super.
The current five per cent contribution rate is subject to review in the
upcoming actuarial review as at 30 June 2021, to be completed by
31 December 2021. It could change depending on market
conditions and actuarial review during the financial year 2022.
144 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F69
F70 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 145
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 71 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 72 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Actuarial gains and losses are based on an actuarial valuation of
each defined benefit plan at a reporting date. Actuarial gains and
losses represent the differences between previous actuarial
assumptions of future outcomes and the actual outcome, in
addition to the effect of changes in actuarial assumptions.
5.4 Key management personnel compensation
Key management personnel (KMP) refer to those who have
authority and responsibility for planning, directing and
controlling the activities of the Telstra Group. KMP are
deemed to include the following:
• the non-executive Directors of the Telstra Entity
• certain executives in the Chief Executive Officer’s (CEO’s)
senior leadership team, including the CEO.
5.4.1 KMP aggregate compensation
During the financial years 2021 and 2020, the aggregate
compensation of our KMP was:
Telstra Group
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
As at 30 June
2021
2020
$000
19,075
311
772
1,154
8,534
29,846
$000
18,052
301
555
1,100
5,826
25,834
Refer to the Remuneration Report, which forms part of the
Directors’ Report for further details regarding KMP remuneration.
5.4.2 Other transactions with our KMP and their related parties
During the financial years 2021 and 2020, apart from transactions
trivial and domestic in nature and on normal commercial terms and
conditions, there were no other transactions with our KMP and
their related parties.
Section 5. Our people (continued)
5.3 Post-employment benefits (continued)
5.3.2 Telstra Superannuation Scheme (Telstra Super) (continued)
(e) Employer contributions (continued)
Table F shows the expected proportion of benefits paid from the
defined benefit obligation in future years.
Table F
Telstra Super
Year ended 30 June
2021
2020
Within 1 year
Between 1 and 4 years
Between 5 and 9 years
Between 10 and 19 years
After 20 years
%
7
23
26
39
5
100
%
13
22
23
36
6
100
The weighted average duration of the defined benefit plan
obligations at the end of the reporting period was eight years (2020:
eight years).
5.3.3 Other defined benefit schemes
Our controlled entities also participate in both funded and
unfunded defined benefit schemes, which are individually and in
aggregate immaterial.
5.3.4 Recognition and measurement
(a) Defined contribution plans
Our commitment to defined contribution plans is limited to making
contributions in accordance with our minimum statutory
requirements and other obligations. The contributions are recorded
as an expense in the income statement as they become payable.
We recognise a liability when we are required to make future
payments as a result of employee services provided.
(b) Defined benefit plans
(i) Telstra Superannuation Scheme
We currently sponsor a post-employment defined benefit plan
under the Telstra Superannuation Scheme.
At a reporting date, where the fair value of the plan assets is less
than the present value of the defined benefit obligations, the net
deficit is recognised as a liability. In the reverse situation, the net
surplus is recognised as an asset. We recognise the asset to the
extent that we have the ability to control this surplus to generate
future funds that will be available to us in the form of reductions in
future contributions or as a cash refund.
The actuaries use the projected unit credit method to estimate the
present value of the defined benefit obligations of the plan. This
method determines each year of service as giving rise to an
additional unit of benefit entitlement. Each unit is measured
separately to calculate the final obligation. The present value is
determined by discounting the estimated future cash outflows
using rates based on high quality corporate bonds.
We recognise all our defined benefit costs in the income statement,
with the exception of actuarial gains and losses that are recognised
directly in other comprehensive income.
Section 6. Our investments
Section 6. Our investments
This section outlines our group structure and includes information
This section outlines our group structure and includes information
about our controlled entities, joint ventures and associated
about our controlled entities, joint ventures and associated
entities. It provides details of changes to these investments and
entities. It provides details of changes to these investments and
their effect on our financial position and performance during the
their effect on our financial position and performance during the
financial year. It also includes the results of our material joint
financial year. It also includes the results of our material joint
ventures and associated entities.
ventures and associated entities.
SECTION 6. OUR INVESTMENTS
6.1 Investments in controlled entities
6.1.1 Investments in controlled entities
Telstra Group has a direct or indirect interest in over 150
subsidiaries with our international presence spanning over 20
countries. We have controlled entities in Australia, North Asia,
South Asia, New Zealand, Europe, Middle East and the United
States of America. We conduct most of our business through the
Telstra Entity and none of our controlled entities is individually
material to the Group’s EBITDA.
As at 30 June 2021, our controlled entity The Exchange Trust, which
holds a portfolio of 36 Telstra exchanges in Australia, had a 49 per
cent (2020: 49 per cent) non-controlling interest balance of $700
million (2020: $700 million). The trustee of the property trust is
Merricks NewCo Pty Ltd, our wholly-owned controlled entity.
During the financial year 2021 we paid the minority unit holder of
the trust a $30 million (2020: $23 million) dividend.
A complete list of our controlled entities is available online at
www.telstra.com/investor.
6.1.2 Acquisition of Epicon
On 30 November 2020, we acquired 100% of Epicon IT Solutions Pty
Ltd (including its wholly owned subsidiary, Service Potential Pty
Ltd) and Epicon Software Pty Ltd via a share purchase for an
upfront consideration of $25 million. The Epicon companies provide
IT management services to large enterprise and government
customers.
6.1.3 Sale of controlled entities and other businesses
In December 2020, we disposed of Telstra’s Velocity business
providing high speed broadband to Telstra Velocity estates and
South Brisbane Exchange (Velocity) regions. The $140 million sales
proceeds are receivable in instalments, with $85 million received in
December 2020 and the remainder over a three-year period.
Following the disposal, we will lease back the assets sold until the
network integration and customer transition work is completed in
each region, subsequent to which we will service the premises in
those regions as a Retail Service Provider of the purchaser. A $60
million net gain from disposal represented mainly a gain on sale
and leaseback transaction.
In December 2020, we disposed of the assets and liabilities of our
e-commerce platform for total sale proceeds of $55 million and
recognised a net gain of $45 million.
In March 2021, we disposed of our controlled entity Sunshine
NewCo Pty Limited, holding our minority investment in Project
Sunshine I Pty Ltd (Sensis), for total sale proceeds of $78 million
and recognised a net gain of $1 million, including the $34 million
impairment loss recognised on the remeasurement of this
investment to its fair value less costs to sell at 31 December 2020.
Refer to note 2.4.1 for details on deferred tax impact.
In total during the financial year 2021 we have deconsolidated $186
million assets and $98 million liabilities on disposal of controlled
entities and other businesses.
6.1.4 Deed of cross guarantee
Telstra Corporation Limited and each of the wholly-owned
subsidiaries set out below (together the ‘Closed Group’), are
party to a deed of cross guarantee (Deed), as defined in
Australian Securities and Investments Commission (ASIC)
legislative instrument: ‘ASIC Corporations (Wholly-owned
Companies) Instrument 2016/785’ (ASIC Instrument).
The effect of the Deed is that each entity in the Closed Group
guarantees the payment in full of all debts of the other entities
in the Closed Group in the event of their winding up.
Pursuant to the ASIC Instrument, the wholly-owned
subsidiaries within the Closed Group are relieved from the
requirement to prepare and lodge separate financial
statements, directors’ reports and auditors’ reports.
The statement of comprehensive income and statement of
financial position disclosed in this section present
consolidated results of the Closed Group.
The following entities are party to the Deed and part of the Closed
Group:
• Telstra Corporation Limited
• Bridge Point Communications Pty Ltd
• Epicon IT Solutions Pty Ltd
• Kloud Solutions Pty Ltd
• Merricks NewCo Pty Ltd
• Mobile Tracking and Data Pty Ltd
• MTData Holdings Pty Ltd
• Network Design and Construction Limited
• O2 Networks Pty Ltd
• Pacnet Internet (A) Pty Ltd
• Telstra Broadcast Services Pty Limited
• Telstra Communications Limited
• Telstra Energy (Holdings) Pty Ltd
• Telstra Energy (Retail) Pty Ltd
• Telstra Energy (Generation) Pty Ltd
• Telstra Purple Pty Ltd
• Telstra Health Pty Ltd
• Telstra Holdings Pty Ltd
• Telstra International (Aus) Limited
• Telstra Multimedia Pty Limited
• Telstra Pay TV Pty Ltd
• Telstra Plus Pty Ltd
• Telstra Services Solutions Holdings Limited
• Telstra Software Group Pty Ltd
• Telstra Ventures Pty Limited
• Virtual Machine Technology Pty Ltd.
The following entities were added as parties to the Deed via an
assumption deed on 13 May 2021 and are also part of the Closed
Group:
• Epicon IT Solutions Pty. Ltd.
• Telstra Energy (Holdings) Pty Ltd
• Telstra Energy (Retail) Pty Ltd
• Telstra Energy (Generation) Pty Ltd.
146 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F71
F72 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 147
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 73 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 74 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 6. Our investments (continued)
Section 6. Our investments (continued)
6.2 Investments in joint ventures and associated entities
We account for joint ventures and associated entities using
the equity method. Under this method, we recognise the
investment at cost and subsequently adjust it for our share of
profits or losses, which are recognised in the income
statement and our share of other comprehensive income,
which is recognised in the statement of comprehensive
income. Generally, dividend received reduces the carrying
value of the investment.
The movements in the carrying amount of equity accounted
investments in our joint ventures and associated entities are
summarised in Table A.
Table A
Telstra Group
Carrying amount of investments at beginning of year
Additions
Disposals
Net impairment loss recognised in the income statement
Share of net loss
Share of distributions
Share of reserves
Carrying amount of investments at end of year
Net impairment loss recognised in the income statement includes
$34 million (2020: nil) impairment loss recognised on the
remeasurement of our investment in Project Sunshine I Pty Ltd to
its fair value less costs to sell at 31 December 2020. Refer to note
6.1.3 for further details on disposal of this investment.
Share of net loss for the financial year includes nil impairment of
our investments in associated entities (2020: $308 million
impairment of our investment in NXE Australia Pty Limited).
Share of joint ventures’ reserves includes $292 million (2020: $16
million) of our share of other comprehensive income.
As at 30 June
Joint ventures
Associated entities
2021
2020
2021
2020
$m
266
79
-
-
345
(8)
(51)
292
578
$m
348
28
-
-
376
(9)
(117)
16
266
$m
631
13
(153)
(30)
461
(16)
(8)
3
440
$m
950
5
(4)
-
951
(296)
(18)
(6)
631
6.1 Investments in controlled entities (continued)
6.1.4 Deed of cross guarantee (continued)
Table A
Closed Group
On 18 March 2021, a revocation deed was lodged with ASIC to
revoke and release O2 Networks Pty Ltd and Virtual Machine
Technology Pty Ltd from the Deed in preparation for the voluntary
deregistration of these entities. The revocation deed will take effect
on the day following expiration of six months from the date of
lodgement with ASIC, at which point these entities will cease being
members of the Closed Group.
There are no other members of the Extended Closed Group (as
defined in the ASIC Instrument). Telstra Finance Limited is trustee
under the Deed. However, it is not a member of the Closed Group or
the Extended Closed Group.
Financial information of the members of the Closed Group
presented in Tables A to C excludes Telstra Finance Limited.
Transactions between the members have been eliminated.
Table A
Closed Group
Current assets
Cash and cash equivalents
Trade and other receivables and
contract assets
Deferred contract costs
Inventories
Derivative financial assets
Prepayments
Total current assets
Non-current assets
Trade and other receivables and
contract assets
Deferred contract costs
Inventories
Investments – controlled entities
Investments – accounted for using the
equity method
Investments – other
Property, plant and equipment
Right-of-use assets
Intangible assets
Derivative financial assets
Defined benefit asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Other provisions
Lease liabilities
Borrowings
Derivative financial liabilities
Current tax payables
Contract liabilities and other revenue
received in advance
Total current liabilities
As at 30 June
2021
2020
$m
$m
936
3,843
109
364
624
255
6,131
1,175
1,342
21
3,112
1,036
10
20,032
2,649
5,982
786
155
36,300
42,431
3,425
665
85
455
4,761
26
103
1,523
489
4,330
78
398
147
211
5,653
1,429
1,354
28
3,165
909
16
20,567
2,823
6,138
2,011
123
38,563
44,216
3,528
710
123
553
3,951
54
209
1,522
11,043
10,650
Non-current liabilities
Other payables
Employee benefits
Other provisions
Lease liabilities
Borrowings
Derivative financial liabilities
Deferred tax liabilities
Contract liabilities and other revenue
received in advance
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Equity available to the closed group
Table B
Closed Group
Profit for the year for the Closed Group
Total other comprehensive income for
the Closed Group
Total comprehensive income for the
year for the Closed Group
As at 30 June
2021
2020
$m
$m
5
149
118
2,577
11,913
331
1,529
4
126
135
2,485
14,465
320
1,546
774
613
17,396
28,439
13,992
4,436
243
9,313
13,992
19,694
30,344
13,872
4,451
19
9,402
13,872
Year ended 30 June
2021
2020
$m
1,745
267
$m
1,710
(9)
2,012
1,701
Table C provides a reconciliation of retained profits of the Closed
Group from the opening to the closing balance.
Table C
Closed Group
Retained profits at the beginning of
the financial year available to the
Closed Group
Effect on retained profits from
addition of entities to the Closed
Group
Effect on retained profits from
removal of entities to the Closed Group
Total comprehensive income
recognised in retained profits
Dividend
Retained profits at the end of the
financial year available to the Closed
Group
Year ended 30 June
2021
2020
$m
$m
9,402
9,702
23
3
(2)
(48)
1,787
1,653
(1,902)
(1,903)
9,313
9,402
148 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F73
F74 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 149
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 75 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 76 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 6. Our investments (continued)
Section 6. Our investments (continued)
6.2 Investments in joint ventures and associated entities
(continued)
6.2.1 List of our investments in joint ventures and associated
entities
Table B presents a list of our investments in joint ventures and
associated entities, their principal place of business/country of
incorporation and our ownership interest.
Table B
Telstra Group
Name of entity
Principal activities
Principal place of
business/country of
incorporation
Joint ventures
3GIS Pty Ltd
ProQuo Pty Ltd
Reach Limited
Management of former 3GIS Partner-
ship (non-operating)
Australia
Digital marketplace for small busi-
nesses
Australia
International connectivity services
Bermuda
Telstra Ventures Fund II, L.P.
Venture capital
Guernsey
Associated entities
Asia Netcom Philippines Corporation
Ownership of physical property
Philippines
Australia-Japan Cable Holdings Limited
Network cable provider
Dacom Crossing Corporation
Network cable provider
Digitel Crossing Inc.
Telecommunication services
enepath (Group Holdings) Pte Ltd
Trading turret and calling software
provider
NXE Australia Pty Limited
Pay television
Pacific Carriage Holdings Limited
Network cable provider
Pacific Carriage Holdings Limited Inc.
Network cable provider
Pivotal Labs Sydney Pty Ltd
Software development
Project Sunshine I Pty Ltd
Holding entity of Sensis Pty Ltd (di-
rectory services)
Southern Cross Cables Holdings Limited
Network cable provider
Telstra Super Pty Ltd
Superannuation trustee
Telstra Ventures Fund III, L.P.
Venture capital
Bermuda
Korea
Philippines
Singapore
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Guernsey
Ownership interest
As at 30 June
2021
2020
%
%
50.0
50.0
45.0
50.0
62.5
40.0
46.9
49.0
48.0
-
35.0
25.0
25.0
20.0
-
45.0
50.0
62.5
40.0
46.9
49.0
48.0
28.1
35.0
25.0
25.0
20.0
30.0
25.0
100.0
55.0
25.0
100.0
-
6.2 Investments in joint ventures and associated entities
(continued)
6.2.1 List of our investments in joint ventures and associated
entities (continued)
Significant
influence over
Telstra Super
Pty Ltd
We applied judgement to determine
that we do not control Telstra Super
Pty Ltd even though we own 100 per
cent of its equity.
Telstra Super Pty Ltd is a trustee for
the Telstra Superannuation Scheme.
We do not consolidate Telstra Super
Pty Ltd as we do not control the board
of directors. The board of directors
consists of an equal number of
employer and member
representatives and an independent
chairman. Our voting power over the
relevant activities is 44 per cent,
which is equivalent to our
representation on the board. The
entity is therefore classified as an
associated entity as we have
significant influence over it.
(a) Additions
On 21 April 2021, we acquired 55 per cent interest in Telstra
Ventures Fund III, L.P., which is accounted as an associated entity.
As at 30 June 2021, the investment value of the fund was $9 million.
Joint control of
Telstra
Ventures Fund
II, L.P.
We applied judgement to determine
that we have joint control of our
investment in Telstra Ventures Fund
II, L.P.. While we hold 62.5 per cent of
the partnership interest on a fully
committed basis, key decisions for
the entity require the unanimous
approval of the Advisory Committee,
on which we hold one of the two seats,
or a majority of at least 75.0 per cent
of the fully committed capital.
(b) Disposals
On 25 September 2020 and on 2 March 2021 respectively, we sold
our investments in enepath (Group Holdings) Pte Ltd and in Project
Sunshine I Pty Ltd. Refer to note 6.1.3 for further details regarding
the disposal of our investment in Project Sunshine I Pty Ltd.
(c) NXE Australia Pty Limited
Telstra has a 35 per cent interest in NXE Australia Pty Limited, an
associated entity which provides subscription TV and streaming
services. In the consolidated financial statements Telstra's interest
in NXE Australia Pty Limited is accounted for using the equity
method.
Financial information of NXE Australia Pty Limited and its
controlled entities for the financial year 2021 is summarised in
Table C based on their consolidated management financial
statements prepared in accordance with the Australian Accounting
Standards. The information disclosed reflects the amounts
presented in the financial statements of NXE Australia Pty Limited
and not Telstra’s share of those amounts. The management
financial information has been adjusted to reflect adjustments
made by Telstra when using the equity accounting method,
including fair value adjustments and modifications for differences
in accounting policy and impairment of our investment.
Table C
Year ended 30 June
NXE Australia Pty Limited
2021
2020
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Telstra's share in equity 35% (2020:
35%)
Equity accounting adjustments
Telstra's carrying amount of the
investment
Revenue
Operating expenses
Loss before tax
Income tax benefit
Loss for the year
Other comprehensive income
Total comprehensive income for the
year
Equity accounting adjustments
Adjusted comprehensive income for
the period
Telstra's share of comprehensive
income for the year (35%)
$m
575
4,039
(756)
(2,847)
1,011
354
61
415
2,767
(2,958)
(191)
54
(137)
9
$m
530
4,563
(763)
(3,182)
1,148
402
28
430
2,801
(3,893)
(1,092)
7
(1,085)
(16)
(128)
(1,101)
86
(42)
(15)
143
(958)
(335)
150 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F75
F76 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 151
Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 77 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 78 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Notes to the financial statements (continued)
Section 6. Our investments (continued)
6.2 Investments in joint ventures and associated entities
(continued)
6.2.2 Other joint ventures and associated entities
Table D presents our share of the aggregate financial information of
joint ventures and associated entities.
6.2.4 Transactions with our joint ventures and associated entities
We transact with our associate NXE Australia Pty Limited and its
subsidiaries (NXE Group). A summary of the key transactions with
those entities is provided below.
(a) Sale and purchase of goods and services
Table D
Year ended/As at 30 June
Telstra Group
Joint ventures
Associated
entities
2021
2020
2021
2020
$m
578
$m
266
$m
440
$m
631
(8)
(12)
(16)
(294)
292
13
3
(6)
284
1
(13)
(300)
Carrying amount of
investment
Group's share of:
Loss
Other
comprehensive
income
Total
comprehensive
income
Impairment of
equity
accounted
investments
We apply judgement to determine the
recoverable amount of the
investments using a ‘value in use’
method. Significant assumptions
include selection of terminal growth
rate and discount rate based on past
experience and our expectations for
the future.
6.2.3 Suspension of equity accounting
Table E presents our unrecognised share of profits/(losses) for the
financial year and cumulatively for our entities where equity
accounting has ceased and the investment is recorded at zero due
to losses made by these entities and/or reductions in the equity
accounted carrying amount.
Table E
Year ended 30 June
Telstra Group
Period
Cumula
-tive
Period
Cumula
-tive
Joint ventures
Reach Limited
Associated entities
Australia-Japan
Cable Holdings
Limited
2021
2021
2020
2020
$m
$m
$m
$m
(3)
(553)
(3)
(550)
(1)
(4)
(68)
(621)
2
(1)
(67)
(617)
We sold and purchased goods and services, and received interest
from our associated entities. These transactions were in the
ordinary course of business and on normal commercial terms and
conditions.
Details of individually significant transactions were as follows:
• We purchased pay television services amounting to $625 million
(2020: $706 million) from NXE Group. The purchases enabled
resale of Foxtel services, including Pay TV content, to our existing
customers as part of our ongoing product bundling initiatives.
• We sold Foxtel broadband system services, network access
services and other professional services for $109 million (2020:
$123 million) and wholesale services for $64 million (2020: $57
million).
(b) Amounts owed by joint ventures and associated entities
In February 2020, we entered into a subordinated loan agreement
with NXE Australia Pty Limited under which we made available to
NXE Australia Pty Limited a loan facility of up to $170 million at
commercial rates of interest. The facility matures on 22 December
2027. As at 30 June 2021 the balance drawn under this facility was
$79 million (2020: $16 million).
(c) Trade payables
As at 30 June 2021, we had $58 million (2020: $62 million) trade
payables to NXE Group for purchases of pay television services.
6.2.5 Recognition and measurement
(a) Investments in joint ventures
A joint venture is a joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the
arrangement. Our interests in joint ventures are accounted for
using the equity method of accounting.
(b) Investments in associated entities
These are investments in entities over which we have the ability to
exercise significant influence but we do not control the decisions of
the entity. Our interests in associated entities are accounted for
using the equity method of accounting.
(c) Equity method of accounting
Investments in associated entities and joint ventures are carried in
the consolidated balance sheet at cost plus post-acquisition
changes in our share of the investment’s net assets and net of
impairment loss. Goodwill relating to an investment in an
associated entity or joint venture is included in the carrying value of
the investment and is not amortised. When Telstra’s share of losses
exceeds our investment in an associated entity or joint venture, the
carrying amount of the investment is reduced to nil and no further
losses are recognised.
The equity accounted investments are assessed for impairment
annually basis or when there are impairment indicators.
Section 7. Other information
Section 7. Other information
This section provides information and disclosures not included
This section provides information and disclosures not
in the other sections, for example our external auditor’s
included in the other sections, for example our external
remuneration, commitments and contingencies, parent entity
auditor’s remuneration, commitments and contingencies,
disclosures and significant events occurring after reporting date.
parent entity disclosures and significant events occurring
after reporting date.
SECTION 7.
7.1 Auditor’s remuneration
OTHER INFORMATION
Telstra Group
Our external auditor of the Group is Ernst & Young (EY). In
addition to the audit and review of our financial reports, EY
provides other services throughout the year. This note details
the total fees to our external auditors.
Current other provisions
Non-current other provisions
As at 30 June
2021
2020
$m
87
126
213
$m
124
143
267
Telstra Group
Fees to Ernst & Young (Australia)
Category 1
Category 3
Category 4
Total fees to Ernst & Young (Australia)
Fees to other overseas member firms
of Ernst & Young (Australia)
Category 1
Category 2
Category 4
Total fees to overseas member firms
of Ernst & Young (Australia)
Total auditor’s remuneration
Year ended 30 June
2021
2020
$m
$m
8.272
2.806
0.407
11.485
2.349
0.049
0.069
2.467
7.741
2.009
0.107
9.857
2.429
0.054
0.054
2.537
13.952
12.394
Audit and non-audit fees are disclosed in the following categories:
• Category 1: fees to the group auditor for auditing the statutory
financial report of the parent covering the group, and for auditing
the statutory financial report of any controlled entities
• Category 2: fees for assurance services that are required by
legislation to be provided by the auditor
• Category 3: fees for other assurance and agreed-upon
procedures services where there is discretion as to whether the
service is provided by the auditor or another firm
• Category 4: fees for other services (e.g. tax compliance).
Services in Category 3 included IT security control assessments
and various agreed-upon procedures services.
Services in Category 4 included tax services and other advisory
services.
We have processes in place to maintain the independence of our
external auditor, including the nature of expenditure on non-audit
services. EY also has specific internal processes and policies in
place to ensure auditor independence.
7.2 Other provisions
The table below provides a summary of our current and non-current
other provisions.
7.2.1 Provision for Australian Competition and Consumer
Commission (ACCC) investigation
In June 2020, we raised a $50 million provision for any potential
penalties arising from the investigation by the ACCC into our sales,
complaint handling and debt collection practices, with a specific
focus on conduct towards Indigenous Australians, including in
particular locations in the NT, WA, QLD, NSW and SA. The penalty
was paid in June 2021 subsequent to its approval by the Federal
Court.
Refer to note 7.3.3 for further details regarding contingent
liabilities related to investigations by regulators.
7.3 Parent entity disclosures
This note provides details of Telstra Entity’s financial
performance and financial position as a standalone entity.
The results include transactions with its controlled entities.
Tables A and B provide a summary of the financial information for
the Telstra Entity.
Table A
Telstra Entity
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Share capital
Cash flow hedging reserve
Foreign currency basis spread reserve
General reserve
Retained profits
Total equity
As at 30 June
2021
2020
$m
$m
7,302
38,425
45,727
14,753
16,811
31,564
4,436
(126)
(63)
201
9,715
14,163
6,248
41,352
47,600
14,025
19,592
33,617
4,451
(177)
(25)
201
9,533
13,983
152 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F77
F78 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 153
Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 79 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 80 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Notes to the financial statements (continued)
Section 7. Other information (continued)
Section 7. Other information (continued)
7.3 Parent entity disclosures (continued)
7.3.3 Contingent liabilities and guarantees
Table B
Telstra Entity
Statement of comprehensive income
Profit for the year
Total comprehensive income
Year ended 30 June
2021
2020
$m
$m
2,042
2,097
1,764
1,735
Total non-current assets include $150 million (2020: $329 million)
impact of impairment losses recognised during the financial year.
Within that amount, impairment losses relating to our associated
entities were $34 million (2020: $308 million), and relating to our
controlled entities amounted to $106 million (2020: $16 million).
The latter has been eliminated on consolidation of the Telstra
Group. Refer to note 6.2 for further details regarding impairment of
our associated entities.
7.3.1 Strategic partner in Telstra’s towers business
On 30 June 2021, we announced that a consortium comprising the
Future Fund, Commonwealth Superannuation Corporation and
Sunsuper will become a strategic partner in Telstra’s towers
business after agreeing to acquire a 49 per cent interest. At
completion of the transaction we expect to receive net cash
proceeds after transaction costs of $2.8 billion. There are no
conditions precedent to completion, however, to prepare for the
sale, internal restructure steps must be undertaken, and the
Telstra’s towers business must be operational from the completion
date which is expected in the first quarter of the financial year
2022.
We will retain a 51 per cent majority ownership of Telstra’s towers
business and continue to own the active parts of its network,
including the radio access equipment and spectrum assets, to
ensure it continued to maintain its industry leading mobile
coverage and network superiority.
At the Telstra Group level we will continue to consolidate Telstra’s
towers business, however, in the Telstra Entity financial
statements we have classified $496 million assets and $452 million
liabilities of the towers business as held for sale pending its
disposal by the Telstra Entity at the completion date of the
transaction.
We have also recognised $444 million deferred tax asset for
previously unrecognised capital tax losses which has been offset
against the estimated capital gain on the towers business sale
transaction. Refer to note 2.4.2 for further details about our tax
losses.
7.3.2 Property, plant and equipment commitments
As at 30 June 2021 Telstra Entity’s commitments for the acquisition
of property, plant or equipment amounted to $124 million (2020:
$331 million).
(a) Investigations by regulators
Telstra is subject to a range of laws and regulations in Australia and
overseas, including in the areas of telecommunications, corporate
law, consumer and competition law and occupational health and
safety. In Australia, the principal regulators who enforce these laws
and regulations and who Telstra interacts with are the Australian
Competition and Consumer Commission (ACCC), the Australian
Communications and Media Authority (ACMA), the Australian
Securities and Investments Commission (ASIC) and the Australian
Securities Exchange (ASX).
Telstra is subject to investigations and reviews from time to time by
regulators, including certain current investigations into whether
Telstra has complied with relevant laws and regulations. These are
taking place in an environment of heightened scrutiny and regulator
expectation and where Telstra has self-reported issues where it
has not complied with relevant laws and regulations. In the ordinary
course of our business, we identify, and may continue to identify,
issues that have the potential to impact our customers and
reputation, which do not meet relevant laws or regulations, or
which do not meet our standards. Where we identify these issues,
we make disclosures in accordance with the accounting standards,
or our other legal disclosure obligations, or provide for such
liabilities as required.
Regulatory investigations and reviews may result in enforcement
action, litigation (including class action proceedings), and penalties
(both civil and in limited circumstances, criminal). One such matter
is litigation commenced by the ACCC in August 2021 alleging
representations made by Telstra to customers about the maximum
internet speeds they would receive for certain nbn services, and the
steps Telstra would take to check speeds and offer remedies where
maximum speeds were not available, were misleading or false in
breach of the Competition and Consumer Act 2010 (Act). The
proceedings follow Telstra providing an Enforceable Undertaking
under s87B of the Act to the ACCC in November 2017 in respect of
similar conduct, and self-reporting breaches of that Undertaking to
the ACCC. We are in the process of remediating all customers
affected by these representations, with the financial impacts of the
estimated refunds reflected in our 2021 financial results. We have
self-reported similar issues to the ACMA, which resulted in a
remedial direction in June 2021 which requires Telstra to appoint
an independent third party auditor to review its systems, processes
and practices for notifying customers about their maximum
internet speeds on the nbn, and offering remedies where
appropriate.
Given that the outcome of the ACCC proceedings is uncertain,
including the extent of any penalties or other remedies awarded as
part of those proceedings, no provision has been made to cover
liabilities that may arise from these proceedings as at 30 June
2021.
• our interests in associated entities and joint ventures, including
partnerships, are accounted for using the cost method of
accounting and are included within non-current assets.
7.4 Commitments and contingencies
This note provides details of our commitments for capital
expenditure arising from our contractual agreements.
This note also includes information about contingent liabilities
for which no provisions have been recognised due to the
uncertainty regarding the outcome of future events and/or
inability to reliably measure such liabilities.
7.4.1 Capital expenditure commitments
Table A shows capital expenditure commitments contracted for at
balance date but not recorded in the financial statements. It
includes Telstra Entity’s commitments disclosed in note 7.3.2.
Table A
Telstra Group
Property, plant and equipment
commitments
Intangible assets commitments
As at 30 June
2021
2020
$m
130
282
$m
336
62
7.4.2 Contingent liabilities and contingent assets
Details and estimated maximum amounts (where reasonable
estimates can be made) of contingent liabilities for the Telstra
Entity are disclosed in note 7.3.3.
Other contingent liabilities identified for the Telstra Group relate to
the ASIC deed of cross guarantee. A list of the companies that are
part of the deed are included in note 6.1.4. Each of these companies
(except Telstra Finance Limited) guarantees the payment in full of
the debts of the other named companies in the event of their
winding up.
We have no significant contingent assets as at 30 June 2021.
7.5 Events after reporting date
We are not aware of any matter or circumstance that has occurred
since 30 June 2021 that, in our opinion, has significantly affected or
may significantly affect in future years:
• our operations
• the results of those operations, or
• the state of our affairs
other than the following:
7.5.1 Final dividend
The details of the final dividend for the financial year 2021 are
disclosed in note 4.2.
7.3 Parent entity disclosures (continued)
7.3.3 Contingent liabilities and guarantees (continued)
(b) Common law claims
Certain common law claims by employees and third parties are yet
to be resolved. As at 30 June 2021, management believes that the
resolution of these contingencies will not have a significant effect
on the Telstra Entity’s financial results. The maximum amount of
these contingent liabilities cannot be reliably estimated.
(c) Indemnities, performance guarantees and financial support
We have provided the following indemnities, performance
guarantees and financial support through the Telstra Entity:
• indemnities to financial institutions to support bank guarantees
to the value of $303 million (2020: $292 million) in respect of the
performance of contracts
• indemnities to financial institutions and other third parties in
respect of performance and other obligations of our controlled
entities, with the maximum amount of our contingent liabilities of
$126 million (2020: $126 million)
• letters of comfort to indicate support for certain controlled
entities to the amount necessary to enable those entities to meet
their obligations as and when they fall due, subject to certain
conditions (including that the entity remains our controlled
entity)
• during the financial year 1998, we resolved to provide IBM Global
Services Australia Limited (IBMGSA) with guarantees issued on a
several basis up to $210 million as a shareholder of IBMGSA.
During the financial year 2000, we issued a guarantee of $68
million on behalf of IBMGSA. During the financial year 2004, we
sold our shareholding in this entity. The $68 million guarantee,
provided to support service contracts entered into by IBMGSA
and third parties, was made with IBMGSA bankers or directly to
IBMGSA customers. As at 30 June 2021, this guarantee remains
unchanged and $142 million (2020: $142 million) of the $210
million guarantee facility remains unused. Upon sale of our
shareholding in IBMGSA and under the deed of indemnity
between shareholders, our liability under these performance
guarantees has been indemnified for all guarantees that were in
place at the time of sale. Therefore, the overall net exposure to
any loss associated with a claim has effectively been offset.
(d) Other
In addition to the above matters, entities within the Telstra Group
may be recipients of, or defendants in, certain claims, regulatory or
legal proceedings and/or complaints made, commenced or
threatened. At 30 June 2021, management believes that the
resolution of these contingencies will not have a material effect on
the financial position of the Telstra Group, or are not at a stage
which supports a reasonable evaluation of the likely outcome of the
matter.
7.3.4 Recognition and measurement
The accounting policies for the Telstra Entity are consistent with
those of the Telstra Group, except for those noted below:
• under our tax funding arrangements, amounts receivable (or
payable) recognised by the Telstra Entity for the current tax
payable (or receivable) assumed from our Australian wholly-
owned entities are booked as current assets or liabilities
• investments in controlled entities, included within non-current
assets, are recorded at cost less impairment of the investment
value. Where we hedge the value of our investment in an overseas
controlled entity, the hedge is accounted for in accordance with
note 4.5.5. Refer to note 6.1 for details on our investments in
controlled entities.
154 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | F79
F80 | Telstra Corporation Limited and controlled entities
Telstra Corporation Limited and controlled entities | 155
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 81 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 82 Wednesday, August 11, 2021 4:34 PM
Notes to the financial statements (continued)
Telstra Financial Report 2021
Section 7. Other information (continued)
7.5 Events after reporting date (continued)
7.5.2 Acquisition of MedicalDirector
On 6 August 2021, Telstra Health entered into a binding agreement
to acquire 100 per cent of the shares in Clinical Technology
Holdings Pty Ltd and its subsidiaries (MedicalDirector) for an
enterprise value of $350 million (subject to completion
adjustments). MedicalDirector is a leading general practice clinical
and practice management software company. The acquisition is
expected to complete in the first quarter of the financial year 2022.
7.5.3 On-market share buy-back
On 12 August 2021, Telstra announced that it intends to return up
to $1.35 billion of net proceeds from its towers business
transaction to shareholders during the financial year 2022 via an
on-market share buy-back.
The purchase of shares is likely to commence after 16 September
2021. The on-market share buy-back will be conducted in the
ordinary course of trading. The exact amount and timing of the on-
market buy-back will be dependent on market conditions.
Directors’
Declaration
Directors’ Declaration
This Directors’ Declaration is required by the Corporations Act 2001
of Australia.
The Directors of Telstra Corporation Limited have made a resolution
that declared:
(a) in the Directors’ opinion, the financial statements and
notes of the Telstra Group for the financial year ended 30
June 2021 as set out in the financial report:
(i)
comply with the Accounting Standards applicable in
Australia, International Financial Reporting
Standards and Interpretations (as disclosed in note
1.1 to the financial statements), and Corporations
Regulations 2001
(ii) give a true and fair view of the financial position of
Telstra Corporation Limited and the Telstra Group as
at 30 June 2021 and of the performance of Telstra
Corporation Limited and the Telstra Group, for the
year ended 30 June 2021
(iii) have been made out in accordance with the
Corporations Act 2001.
(b) they have received declarations as required by section
295A of the Corporations Act 2001
(c) at the date of this declaration, in the Directors’ opinion,
there are reasonable grounds to believe that Telstra
Corporation Limited will be able to pay its debts as and
when they become due and payable
(d) at the date of this declaration there are reasonable
grounds to believe that the members of the extended
closed group identified in note 6.1.4 to the financial
statements, as parties to a Deed of Cross Guarantee, will
be able to meet any liabilities to which they are, or may
become, subject to because of the Deed of Cross
Guarantee described in note 6.1.4.
For and on behalf of the board
John P Mullen
Chairman
12 August 2021
Andrew R Penn
Chief Executive Officer and
Managing Director
156 | Telstra Corporation Limited and controlled entities
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F82 | Telstra Corporation Limited and controlled entities
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Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 83 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 84 Wednesday, August 11, 2021 4:34 PM
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor’s Report to the Shareholders of Telstra Corporation Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Telstra Corporation Limited (the Company) and its subsidiaries (collectively the Group), which
comprises the consolidated statement of financial position as at 30 June 2021, the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for
the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the Directors'
Declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial
performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in
accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards)
(the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of
the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion
thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed
the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report,
including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.
Revenue recognition
Why significant
The Group exercises significant judgement relating to revenue
recognition in the following areas:
• accounting for new products and plans including bundles of
products and/or services;
• accounting for large Network Application Services (NAS)
contracts;
• accounting for NBN revenue under the revised Definitive
Agreements (DAs) with nbn co and the Commonwealth
Government;
• determination of standalone selling prices for products sold in
bundles; and
• assessment of significant financing components.
The accuracy of amounts recorded as revenue is an inherent
industry risk due to the complexity of billing systems, the
complexity of products and services, and the combination of
products sold and price changes in the year.
How our audit addressed the key audit matter
We evaluated the design and operating effectiveness of key
controls over the capture and measurement of revenue
transactions across all significant revenue streams, including
evaluating the relevant IT systems.
We examined the process and controls over the capture and
assessment of the timing of revenue recognised for new products
and plans, as well as performed testing of a sample of new plans to
supporting evidence.
For all significant revenue streams, for a sample of revenue
transactions recorded during the year, we obtained supporting
evidence such as customer contracts, statements of work, other
contractual agreements, service detail records and evidence of
customer payment.
We also considered the impact of recent regulatory investigations
on the recognition of revenue to date.
For the NAS contracts, we focused our work on those which we
regarded as higher risk because of the nature of the contract, its
stage of delivery or the quantum of the related assets and those
which were significant by size.
Revenue recognition (continued)
Why significant
The complexity of the billing systems was also considered as part
of the reliance on automated processes and controls key audit
matter outlined below.
How our audit addressed the key audit matter
In performing this testing, we assessed the appropriateness of the
assumptions and estimates supporting the accounting for these
major contracts as follows:
Disclosures relating to revenue recognition can be found at Section
2.1 Segment Information and 2.2 Income.
Reliance on automated processes and controls
Why significant
A significant part of the Group’s financial processes are heavily
reliant on IT systems with automated processes and controls over
the capturing, valuing and recording of transactions. This is a key
part of our audit because of the:
• complex IT environment supporting diverse business
processes;
• mix of manual and automated controls;
• multiple internal and outsourced support arrangements; and
• complexity of the billing systems which result in revenue being
recognised.
The Group continues to enhance its IT systems and during the year
continued its implementation of new systems which were
significant to our audit.
• We tested the effectiveness of controls that operate across
the contract life cycle for major contracts.
• We obtained and read the relevant sections of certain
contracts, to identify the contracted revenues, key provisions
in the event of contract termination (such as penalties or the
ability for the Group to recover costs) and other significant
obligations.
• We determined whether the future forecasts reflected the
contract terms, testing any significant changes (such as new
services) to contract amendments or other supporting
documentation.
• For a sample of recorded revenue and cost transactions we
obtained evidence to support delivery and/or customer
acceptance.
• We compared the historical forecast results of certain
contracts with the actual results to assess the performance of
the contract and the historical accuracy of forecasting.
• We considered the future forecast profitability and the
contractual terms to assess the recoverability of the contract-
specific assets and to determine if any contracts required loss
provisions.
We assessed the appropriateness of the assumptions and
estimates supporting the accounting for the revised DAs including
understanding the timing of disconnections, the progress of the
NBN rollout and the transfer of the copper and Hybrid Fibre Coaxial
(HFC) networks to nbn co.
We assessed the Group accounting policies as set out in Section
2.2, and the adequacy of disclosures for compliance with the
revenue recognition requirements of Australian Accounting
Standards.
How our audit addressed the key audit matter
Our IT specialists assessed the Group’s manual and automated
controls relating to IT systems relevant to financial reporting,
including the recognition of revenue. When testing controls was not
considered an appropriate or efficient testing approach,
alternative audit procedures were performed on the financial
information being produced by systems.
Our IT specialists analysed the impact on our audit of new systems
that are significant to our audit. This included assessing the design
of relevant automated processes and controls.
We evaluated the effectiveness of the controls in the new systems.
158
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
F83
F84
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Liability limited by a scheme approved under Professional Standards Legislation
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT 2021.Financial Report.book Page 85 Wednesday, August 11, 2021 4:34 PM
2021.Financial Report.book Page 86 Wednesday, August 11, 2021 4:34 PM
Capitalisation of assets, including useful lives, amortisation and impairment
Why significant
There are a number of areas where judgements significantly impact
the carrying value of property, plant and equipment, software
intangible assets and their respective depreciation and
amortisation profiles. These areas are as follows:
• the decision to capitalise or expense costs;
• the annual asset life review;
How our audit addressed the key audit matter
Our audit procedures included the following:
• Assessed the effectiveness of the Group’s controls over the
acquisition and disposal of assets.
• Evaluated the appropriateness of capitalisation policies.
• Selected a sample of costs capitalised during the year to
determine whether capitalisation was appropriate.
• the timeliness of the transfer from assets in the course of
• Assessed the appropriateness of the date from which assets
construction; and
commenced being depreciated.
• significant changes that have taken place during the period or
are expected to take place in the near future, which will impact
the extent to which, or manner in which, an asset is used or is
expected to be used.
Changes in these judgements have a significant impact on the
results of the Group. Accordingly, this was considered a key audit
matter.
Disclosures relating to the capitalisation and write-off of assets
can be found at Section 3.1 Property, Plant and Equipment and
Intangible Assets.
We assessed the application of the Group’s annual asset life
review. This included assessing judgements made by the Group on:
• the nature of underlying costs capitalised; and
• the appropriateness of asset lives applied in the calculation of
depreciation and amortisation.
We evaluated management’s impairment assessment of property,
plant and equipment and software intangible assets. This included
assessing judgements made by the Group on:
• the nature and impact of changes on the business from the
Telstra 2022 (T22) strategy, including which specific assets are
impacted;
• the extent of the impact of these changes on the carrying value
of identified property, plant and equipment, software
intangible assets; and
• the completeness of the listing of impacted assets.
We evaluated the adequacy of disclosures included in Section 3.1.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the information included in the Group’s 2021
Annual Report other than the financial report and our auditor’s report thereon. We obtained the directors’ report that is to be included in
the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the
date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance
conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to
be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there
is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud
or error.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional
scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial
report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group
to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial
report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2021.
In our opinion, the Remuneration Report of Telstra Corporation Limited for the year ended 30 June 2021, complies with section 300A of
the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing,
as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Ernst & Young
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
Andrew Price
Partner
Melbourne
12 August 2021
160
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
F85
F86
161
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Notes to the financial statements (continued)Notes to the financial statements (continued)Telstra Financial Report 2021FINANCIAL REPORT Shareholder information
Shareholder information | Telstra Annual Report 2021
Listing information
Voting rights
Substantial shareholders
Stock Exchange Listing
We are solely1 listed, and our issued shares are quoted on the
Australian Securities Exchange (ASX).
Markets on which our debt securities are listed
We also have debt securities listed on the Australian Securities
Exchange, the London Stock Exchange and the Singapore Stock
Exchange.
Shareholders (whether residents or non-residents of Australia)
may vote at a meeting of shareholders in person, directly or by
proxy, attorney or representative, depending on whether the
shareholder is an individual or a company.
Subject to any rights or restrictions attaching to our shares, on a
show of hands each shareholder present in person or by proxy,
attorney or representative has one vote and, on a poll, has one
vote for each fully paid share held. Presently, we have only one
class of fully paid ordinary shares and these do not have any
voting restrictions. If shares are not fully paid, on a poll the
number of votes attaching to the shares is pro-rated accordingly.
Distribution of securities and security holdings
The following table shows the number of listed shares on issue at 23 July 2021:
Title of class
Listed shares
Identity of person or group
Amount owned
Listed shareholders
11,893,297,855
%
100
Distribution of shares
The following table summarises the distribution of our listed shares as at 23 July 2021:
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
Number of shareholders
%
Number of shares
%
597,840
47.62%
326,794,575
2.75%
444,855
35.43%
1,061,544,968
8.93%
111,217
8.86%
797,903,575
6.71%
98,099
7.81%
2,372,005,452
19.94%
3,435
0.27%
7,335,049,285
61.67%
1,255,446
100.00%
11,893,297,855
100.00%
The number of shareholders holding less than a marketable parcel of shares was 28,170 holding 2,042,726 shares (based on the
closing market price on 23 July 2021).
1. Telstra delisted from the Main Board of NZX Limited (“NZX”) at the close of business Friday 18 June 2021. The sole listing on the Australian Securities Exchange (“ASX”)
commenced on Monday 21 June 2021.
As at 23 July 2021, we are not aware of any substantial shareholders.
Twenty largest shareholders as at 23 July 2021
The following table sets out the Top 20 holders of our shares (when multiple holdings are grouped together):
Shareholder name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
ARGO INVESTMENTS LIMITED
NETWEALTH INVESTMENTS LIMITED
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
NAVIGATOR AUSTRALIA LTD
TELSTRA GROWTHSHARE PTY LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
UBS NOMINEES PTY LTD
AMP LIFE LIMITED
MILTON CORPORATION LIMITED
MCCUSKER HOLDINGS PTY LTD
ECAPITAL NOMINEES PTY LIMITED
BUTTONWOOD NOMINEES PTY LTD
BKI INVESTMENT COMPANY LIMITED
THE SENIOR MASTER OF THE SUPREME COURT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total for Top 20
Total other Investors
Grand Total
On-market share buy-back
Amount owned
2,537,293,511
1,364,254,008
1,002,867,181
628,114,475
568,047,203
54,510,000
46,514,800
46,453,651
27,013,498
23,330,875
18,385,268
16,743,032
16,619,452
16,444,683
15,236,961
12,050,000
11,008,836
10,287,255
8,524,451
8,494,630
6,432,193,770
5,461,104,085
11,893,297,855
%
21.33%
11.47%
8.43%
5.28%
4.78%
0.46%
0.39%
0.39%
0.23%
0.20%
0.15%
0.14%
0.14%
0.14%
0.13%
0.10%
0.09%
0.09%
0.07%
0.07%
54.08%
45.92%
100.00%
On 12 August 2021, Telstra announced that it intends to return up to $1.35 billion of net proceeds from its towers business
transaction to shareholders during the financial year 2022 via an on-market share buy-back. The on-market share buy-back will
be conducted in the ordinary course of trading over 12 months. The exact amount and timing of the on-market buy-back will be
dependent on market conditions. The on-market buy-back will be within the ‘10/12’ limit permitted under the Corporations Act.
As at the date of this Annual Report, no shares have been bought back under the on-market buy-back.
162
163
Reference tables
Reference tables | Telstra Annual Report 2021
Guidance versus reported results
This schedule details adjustments made to the reported results for the current and comparative periods to reflect the
performance of the business on the basis on which we provided guidance to the market, which is EBITDA on an underlying basis
and 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 as 'operating cash flows' less 'investing cash flows' less 'payments for operating
lease liabilities', and excludes spectrum and guidance adjustments.
The following adjustments provide a detailed reconciliation from reported to guidance results for each guidance measure:
Total Income
FY20
$m
FY21
$m
Underlying EBITDA
FY20
$m
FY21
$m
Reported
Total Income
26,161
23,132
Reported
EBITDA
.8,905
.7,638
Reported
Free Cashflow
Adjustments
Free Cashflow
FY20
$m
FY21
$m
.4,034
.4,887
M&A adjustment1
(20)
(106) M&A adjustment1
(20)
(96) M&A adjustment1
(39)
164)
Impairment2
n/a
n/a
Impairment2
308
34
Impairment2
Pitt St sale
and leaseback3
n/a
(102)
Pitt St sale
and leaseback3
0
(102)
Pitt St sale
and leaseback3
Restructuring costs4
Net one-off
NBN receipts5
Spectrum payments6
Lease7
n/a
n/a
n/a
n/a
n/a
Restructuring costs4
246
211
Restructuring costs4
n/a
Net one-off
NBN receipts5
(1,536)
(802)
Net one-off
NBN receipts5
n/a
Spectrum payments6
n/a
n/a
Spectrum payments6
435
0
0
n/a
n/a
0
(282)
n/a
n/a
88
Continuing operations
$m
$m
$m
$m
$m
Total income (excluding finance income)
23,132
26,161
27,807
28,841
28,205
2021
2020
2019
20181
2017
EBITDA2
EBIT
Profit for the year
Dividends declared per share (cents)
Total assets
Gross debt
Net debt
Total equity
Capital expenditure3
Free cashflow
Earnings per share (cents)
Dividend payout ratio (%)4
7,638
2,992
1,902
16.0
8,905
3,567
1,839
16.0
7,984
10,197
10,679
3,702
2,149
16.0
5,727
3,557
22.0
6,238
3,874
31.0
42,525
44,403
42,589
42,634
42,133
16,388
17,343
15,331
15,368
16,218
15,263
16,844
14,727
14,739
15,280
15,275
15,147
14,530
14,556
14,560
3,020
4,887
15.6
103
3,233
4,034
15.3
99
4,140
3,068
18.1
88
4,717
4,695
30.2
73
4,606
3,496
32.5
95
1. FY18 results have been restated to account for the adoption of AASB15.
2. Operating profit before interest, depreciation and amortisation and income tax expense. EBITDA is used as a measure of financial performance by excluding certain
variables that affect operating profits but which may not be directly related to all financial aspects of the operations of the company. EBITDA is not a measure of
operating income, operating performance or liquidity under A-IFRS. Other companies may calculate EBITDA in a different manner to us.
3. Capex is measured on an accrued basis and excludes spectrum and guidance adjustments, externally funded capex, and capitalised leases.
n/a
Lease7
(494)
(194)
Lease7
(1,015)
(717)
4. Ordinary dividend as a proportion of underlying earnings.
Guidance
Total Income
26,141
22,924
Guidance
Underlying EBITDA
7,409
6,689
Guidance
Free Cashflow
3,415
3,812
The adjustments set out in the above tables have been reviewed by our auditor for consistency with the guidance basis as set out
on this page.
Notes:
1. Adjustments relating to acquisition and disposals of controlled entities, joint ventures, associates and other investments and any associated net gains or losses and
contingent consideration. During FY21 we disposed of our e-commerce platform business, our FTTP Velocity business and acquired Epicon IT Solutions Pty Ltd
(including its wholly owned subsidiary, Service Potential Pty Ltd), Epicon Software Pty Ltd and the business and assets of Mediacloud Ltd. FY20 includes adjustments
relating to the disposal of our investment in Chief Entertainment Pty Ltd, Snap Inc and PharmX Pty Ltd, and a data centre held by Telstra Singapore Pte Ltd, the
execution of a warrant we held in Ooyala Inc, and additional investments in our interest in the Telstra Ventures Fund II, L.P., Telstra Ventures Fund III, L.P. and Southern
Cross Cable Holdings Limited.
2. Adjustment related to impairment loss for our investment in Project Sunshine 1 Pty Limited (Sensis). FY20 adjustments relating to impairment of our investment in NXE
Australia Pty Ltd (Foxtel).
3. Adjustment relating to the sale and leaseback transaction of the Pitt Street exchange property.
4. Adjustments for the strategic focus (T22 program) to improve customer experience, simplify structure and cut costs, in addition to our normal business as usual
redundancies for the period.
5. Adjustments for net one-off nbn receipts which is defined as net nbn one off Definitive Agreement receipts (consisting of PSAA, Infrastructure Ownership and
Retraining) less nbn net cost to connect.
6. Adjustment relating to the impact on free cashflow associated with our spectrum purchases and renewals for the period including:
– $56m for the first (of five) annual instalment payments for our new 26 GHz spectrum licence;
– $28m for renewal of spectrum licences in the 900 MHz band; and
– minor payments for spectrum and apparatus licences in various other spectrum bands
7. Adjustment for EBITDA impact for depreciation of mobile lease right-of-use assets. Adjustment for Free Cashflow impact of lease payments related to leases classified
as operating leases prior to transition to AASB 16: 'Leases' (ie. before 1 July 2019) and to any new leases accounted for after 1 July 2019.
n/a Adjustment not relevant to the respective guidance measure.
164
165
REFERENCE TABLES Task Force on Climate-related Financial Disclosures
We have begun to align our reporting with the recommendations outlined in the G20’s Financial Stability Board Task Force on
Climate-related Financial Disclosures (TCFD). TCFD provides a voluntary framework for organisations to assess and disclose
material forward-looking financial risks and opportunities arising from climate change impacts.
TCFD Recommendations
Reference
Report
Location
Governance – Disclose the organisation’s governance around climate-related risks and opportunities
a) Describe the board’s oversight of climate-related
Governance
risks and opportunities
Governance and
compliance
Managing our risks
2021 Bigger Picture
Sustainability Report
Board Charter
Environmental action
Board reserved powers
and responsibilities
2021 Corporate
Governance Statement
Assurance and risk
management
b) Describe management’s role in assessing and
Governance
managing climate-related risks and opportunities
2021 Bigger Picture
Sustainability Report
Environmental action
Managing our risks
2021 Corporate
Governance Statement
Assurance and risk
management
Strategy – Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy,
and financial planning where such information is material
a) Describe the climate-related risks and opportunities
Adapt to climate impacts
2021 Bigger Picture
Sustainability Report
Environmental action
TCFD Appendix
the organisation has identified over the short,
medium, and long term
b) Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy, and financial planning
c) Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario
Adapt to climate impacts
2021 Bigger Picture
Sustainability Report
Environmental action
TCFD Appendix
Adapt to climate impacts
2021 Bigger Picture
Sustainability Report
Environmental action
TCFD Appendix
Adapt to climate impacts
2021 Bigger Picture
Sustainability Report
Environmental action
TCFD Appendix
Risk Management – Disclose how the organisation identifies, assesses, and manages climate-related risks
a) Describe the organisation’s processes for identifying
Risk management
and assessing climate-related risks
Environmental risk
management
Managing our risks
b) Describe the organisation’s processes for managing
Adapt to climate impacts
climate-related risks
c) Describe how processes for identifying, assessing,
Risk management
and managing climate-related risks are integrated into
the organisation’s overall risk management
Environmental risk
management
Managing our risks
2021 Bigger Picture
Sustainability Report
2021 Bigger Picture
Sustainability Report
Environmental action
TCFD Appendix
2021 Corporate
Governance Statement
Assurance and risk
management
2021 Bigger Picture
Sustainability Report
Environmental action
TCFD Appendix
2021 Bigger Picture
Sustainability Report
2021 Bigger Picture
Sustainability Report
Environmental action
TCFD Appendix
2021 Corporate
Governance Statement
Assurance and risk
management
Metrics & Targets – Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such
information is material
a) Disclose the metrics used by the organisation to
Progress
assess climate-related risks and opportunities in line
with its strategy and risk management process
b) Disclose Scope 1, Scope 2, and if appropriate, Scope 3
greenhouse gas GHG emissions, and the related risks
Climate change
& energy use
c) Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets
Climate change
& energy use
Resource efficiency
2021 Bigger Picture
Sustainability Report
Environmental action
2021 Bigger Picture
Sustainability Report
2021 Bigger Picture
Sustainability Report
2021 Bigger Picture
Sustainability Report
Environmental action
Environmental action
Environmental action
166
167
REFERENCE TABLES Glossary
Glossary | Telstra Annual Report 2021
4G
Bundle
Dark fibre
Free cashflow
Mobile data
Spectrum
The fourth generation of wireless mobile
networks, with typically faster download
and upload speeds and better response
times than previous generations.
4GX
The evolution of our initial 4G offering,
4GX is capable of faster network speeds
and adds another lane of capacity to the
Telstra mobile network.
5G
The fifth generation of wireless mobile
networks, 5G delivers a step change
in typical network speeds, with lower
latency and much greater capacity to
help address the explosion in wireless
devices and data usage.
Agile
Agile is a way of working that brings
people with different skills into one team
and works in short sprints to deliver with
faster speed to market, at a lower cost,
and with a better experience for our
people and customers.
Average Revenue Per User (ARPU)
The measure of the average revenue
generated per unit or user.
Broadband
Describes a class of internet access
technologies, such as ADSL, HFC
cable and Wi-Fi, offering a data rate
significantly higher than narrowband
services. These services typically do
not tie up a telephone line exclusively
for data.
A combination of products. For example,
a customer can bundle a fixed-line home
phone service and internet connection.
An optical fibre network used for data
transmission.
Definitive Agreement (DA)
The documents that record the final,
binding arrangements between Telstra
and nbn co for Telstra’s participation in
the nbnTM network rollout.
Digital transformation
The adoption of digital technologies to
improve processes and productivity, and
deliver better customer and employee
experiences.
Dividend per share (DPS)
A dividend is a payment of a portion of
our earnings to our shareholders and is
most often quoted in terms of the
amount each share receives.
Earnings before interest, income tax
expense, depreciation and
amortisation (EBITDA)
An indicator of a company’s operational
profitability.
Earnings per share (EPS)
The portion of profit allocated to each
share.
Fixed line
Refers to the delivery of telephone and/or
internet services over a cable, rather than
the mobile or wireless phone network.
Fixed line is also a term used to describe
a customer segment, for example ‘fixed
line customers’.
C2C
Cost to connect.
Capital expenditure (capex)
Funds invested to purchase, upgrade
or improve long-term assets such as
property, infrastructure or equipment
to create future benefit.
Carbon neutral
Where the amount of carbon dioxide
produced has been reduced to nothing
or is balanced by actions that protect
the environment.
Cleaner Pipes
An initiative to help reduce instances
of customer data being compromised
through malware, ransomware and
phishing. It involves significantly
upscaling our Domain Name System
(DNS) filtering, where millions of malware
communications are being proactively
and automatically blocked every week as
they try to cross Telstra’s infrastructure.
Cloud
The provision of services, software,
storage and security over the internet,
typically on a pay-for-use basis.
Cloud can allow access to information
and programs on multiple devices in
multiple locations.
Cyber security
The safe use of information and
telecommunications technology
(including mobile phones) and
the internet.
nbn™, nbn co and other nbn™ logos and brands are trade marks of nbn co limited and used under licence.
Kayo is a registered trade mark of Streamotion Pty Ltd.
Foxtel is a registered trade mark of Twentieth Century Fox Film Corporation.
Binge is a registered trade mark of Foxtel Management Pty Limited.
Xbox is a registered trade mark of Microsoft Corporation, a Washington corporation.
All amounts are expressed in Australian dollars ($A) unless otherwise stated.
The cash that a company is able to
generate from its operations after
spending money required to maintain
or expand its asset base.
Wireless internet access delivered
over the mobile network to computers
and other digital devices using portable
modems.
Wireless communications signals travel
through the air via radio frequency,
known also as spectrum. The government
grants licences for dedicated use of
portions (bands) of spectrum.
Hybrid Fibre Coaxial (HFC)
A way of delivering video, voice and data
using both coaxial and fibre optic cables.
Internet of Things (IoT)
The connectedness of ‘things’ (for
example machinery, vehicles, appliances)
to the internet via sensors and actuators
that collect information about the state
and condition of those things, and
transmit that data to software platforms
that can help people make sense of the
information and take appropriate action.
Memorandum of Understanding
(MoU)
A document describing the broad
outlines of an agreement that two
or more parties have reached.
Messaging
A way for Telstra customers to
communicate with a Telstra consultant
via the My Telstra app regarding queries
with billing, service, faults, and sales for
consumer and small business customers.
Millimetre wave (mmWave)
A technology that operates on shortrange,
high-frequency spectrum and will play
an important role in delivering on 5G’s
full potential with faster speeds and
greater capacity.
Mobile Virtual Network Operator
(MVNO)
T22
Mobile providers re-selling services via
the Telstra wholesale mobile network.
Narrowband (NB) IoT
An Internet of Things (IoT) technology
that operates over Telstra’s 4GX.
Narrowband IoT is suited to stationary
applications that send very small
amounts of data infrequently and
operate with longer battery life.
Net profit after tax (NPAT)
The total revenue minus all expenses
and taxes.
Return on Invested Capital (ROIC)
A measure of how efficiently a company
is using capital to generate income.
If ROIC is greater than a company’s
weighted average cost of capital (WACC),
value is being created for investors.
Telstra’s strategy, announced on 20 June
2018, to lead the Australian market by
simplifying its operations and product
set, improving customer experience and
reducing its cost base.
Transacting Minimum Monthly
Commitment (TMMC)
This represents the average minimum
monthly commitment, excluding
hardware, of new and existing customers
that have taken up new plans in the
period.
Universal service obligation (USO)
Obligations placed on Telstra to ensure
that standard telephone services,
payphones and prescribed carriage
services are reasonably accessible to
all people in Australia on an equitable
basis, wherever they reside or carry
on business.
Roaming
Wi-Fi
A service which allows customers to
use their mobile phone while in a service
area of another carrier.
The most prevalent form of wireless local
area network (WLAN) technology. WLANs
are small-scale wireless networks with
a typical radius of several hundred feet.
Service in Operation (SIO)
Refers to an active telecommunications
service to an end-user.
168
169
GLOSSARY Keeping informed
To keep up to date with the latest news about Telstra:
• follow us on Twitter @Telstra_news
• follow us on LinkedIn
• subscribe to our media releases on our website at
telstra.com.au/aboutus/media/rss-feeds
• subscribe to our sustainability newsletter at
telstra.com/sustainability/subscribe
• visit Telstra Exchange at exchange.telstra.com.au
Indicative financial calendar1
Half year results announcement
Thursday 17 February 2022
Ex-dividend share trading commences
Wednesday 2 March 2022
Record date for interim dividend
Thursday 3 March 2022
DRP election date
Friday 4 March 2022
Interim dividend paid
Friday 1 April 2022
Director nominations open
Friday 3 June 2022
Annual results announcement
Thursday 11 August 2022
Ex-dividend share trading commences
Wednesday 24 August 2022
Record date for final dividend
Thursday 25 August 2022
DRP election date
Friday 26 August 2022
Final dividend paid
Thursday 22 September 2022
Annual General Meeting
Tuesday 11 October 2022
Director nominations close (by 5pm)
Friday 5 August 2022
1. Timing of events may be subject to change. Any change will be notified to the
Australian Securities Exchange (ASX).
Contact details
Registered Office
Online Shareholder information
Level 41, 242 Exhibition Street
Melbourne, Victoria 3000 Australia
Sue Laver
Company Secretary
Email: companysecretary@team.telstra.com
General Enquiries – Registered Office
Website: telstra.com.au/aboutus/contactus
Customer enquiries: 13 2200
Shareholder Enquiries
Telstra Share Register
Link Market Services Limited
PO Box A942, Sydney South NSW 1234 Australia
Australia: 1300 88 66 77
All Other: +61 1300 88 66 77
Fax: +61 2 9287 0303
Email: telstra@linkmarketservices.com.au
Website: linkmarketservices.com.au/telstra
Investor Relations
Level 28, 242 Exhibition Street
Melbourne, Victoria 3000 Australia
Australia: 1800 880 679
All Other: +61 3 8647 4954
Email: investor.relations@team.telstra.com
Sustainability
Level 39, 242 Exhibition Street
Melbourne, Victoria 3000 Australia
Email: sustainability@team.telstra.com
Telstra’s Investor Centre at telstra.com/investor has the latest
news and information available for shareholders.
Shareholders can also easily manage their shareholding online
at linkmarketservices.com.au/telstra. Use the Portfolio Login
to securely access your shareholding. If you do not have a
Portfolio Login, please click ‘Register Now’ to create your login.
To add your Telstra shareholding to your portfolio you need your
SRN or HIN. This can be found on your Holding Statement.
Select the following menu to access or update your details:
• Payments & Tax – for dividend payment history, tax information,
payment instructions and to provide your TFN. This is where you
update your payment instructions (bank account details or
register for the DRP if eligible. Please read the DRP rules at
telstra.com/drp). A foreign currency payment service is also
available to individual registered holders to pay dividends in
various currencies.
• Communication – to update your postal and email addresses.
Telstra Corporation Limited
ABN 33 051 775 556
Incorporated in the Australian Capital Territory.
Telstra is solely listed on the Australian Securities Exchange.
Websites
Telstra Investor Centre: telstra.com/investor
Telstra Sustainability: telstra.com/sustainability/report
Telstra Corporate Governance: telstra.com/governance
Telstra Customer Enquiries: telstra.com
Contact Telstra: telstra.com.au/aboutus/contactus
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