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Telstra Corporation Limited ACN 051 775 556
ABN 33 051 775 556
18 November 2011 The Manager Company Announcements Office Australian Securities Exchange 4
th Floor, 20 Bridge Street
SYDNEY NSW 2000
ELECTRONIC LODGEMENT
Office of the Company Secretary Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA General Enquiries 08 8308 1721 Facsimile 03 9632 3215
Dear Sir or Madam
Investor Day – media release and slide presentations
In accordance with the Listing Rules, I attach a copy of the media statement and the presentations to be delivered in the morning session at Telstra’s Investor Day, for release to the market. Yours faithfully,
Carmel Mulhern Company Secretary
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MEDIA RELEASE
Sales momentum continues, guidance confirmed, digital media division created 18 November 2011 – Telstra continues to record strong sales momentum and is on track to achieve its guidance of low single digit percentage growth in total revenue and EBITDA, CEO David Thodey said today. Speaking at Telstra’s annual update for institutional investors, Mr Thodey said that over the September 2011 quarter the company continued to record strong growth in mobile customer numbers and had also added fixed broadband customers. “Our focus on adding customers and improving satisfaction continues to bear fruit, with strong sales momentum in the opening months of fiscal 2012. Importantly, we are adding those new customers profitably and without sacrificing average revenues per customer (ARPU),” Mr Thodey said. Mr Thodey told investors the company was making substantial progress implementing its strategy first unveiled more than a year ago: to add customers, improve customer satisfaction, simplify the company, and target growth opportunities in Asia, digital media and network-based applications and services. “Our strategy is unchanged and our focus remains on execution. Already our customers are reporting higher satisfaction levels as we make the business less complex and easier to deal with,” Mr Thodey said. Telstra’s strategy has seen the entire sales workforce brought together in a single team, the introduction of clearer bill formats and simpler pricing plans, and the publication of easy-to-understand one page summaries for key products and offers. More than five million customers have called Telstra after business hours and more than 100,000 technician appointments have been scheduled for weekends, following the introduction of the services. As a result of these and other customer service improvements, in the year to September 2011 Telstra recorded 28% fewer incoming calls to customer call centres, 51% fewer ordering errors requiring manual intervention, 34% fewer repeat visits to fix recurring problems at customers’ homes and businesses, and 70% more self-service transactions using the company’s upgraded online portal. These and other similar initiatives generated $622 million in productivity benefits in fiscal 2011 and are expected to deliver an even greater benefit in fiscal 2012. Digital media division established Telstra also today announced it will consolidate its media businesses into a single division to increase focus, drive new opportunities and better utilise the company’s many media assets. “Telstra is a leader in online digital media with multiple assets which, including FOXTEL, earn $4 billion in annual revenues and employ approximately 4,000 people. Telstra’s digital media division will bring these assets together for the first time and enable us to implement a co-ordinated media strategy that delivers long-term shareholder value,” Mr Thodey said. The new division, to be known as Telstra Digital Media, will be responsible for managing Telstra’s end-to-end media capabilities including Sensis, BigPond, Trading Post, IPTV, FOXTEL and other content arrangements. “As digital media and video content continues to grow it is important that we build network infrastructure to meet this demand. We will also continue to integrate this content, making it available to our customers across multiple channels including mobiles, tablets, home entertainment systems and the internet,” Mr Thodey said.
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MEDIA RELEASE
The new division will be headed by Rick Ellis, an experienced media executive who will join Telstra in early 2012 after completing his role as chief executive of the New Zealand broadcast television and digital media company, Television New Zealand. “I am delighted that Rick Ellis, a media executive with vast experience and strong networks, will be leading our media strategy. Rick has led a complex media organisation, established digital businesses and cultivated strong relationships with content generators, integrators and distributors around the world,” Mr Thodey said. Mr Ellis will commence in January 2012. He will report directly to David Thodey and join Telstra’s leadership team. Bruce Akhurst, the CEO of Sensis, and JB Rousselot, the head of Media, will report to Mr Ellis. Mr Thodey also said that Telstra will invest $100 million over four years to upgrade its media infrastructure. The investment will help bring to life Telstra’s digital home, and enable Telstra’s enterprise and business customers to more efficiently deliver broadcast-quality video streaming services to end-users over any device connected to the internet. Outlook Whilst re-affirming guidance, Mr Thodey noted there had been a shift in the mix of growth expected in fiscal 2012. Sensis has experienced satisfactory but lower than expected take-up of digital products by SME customers. Revenues are also lower than expectations because sales completions are taking longer than expected and sales to new customers have been limited as a result. Additionally, the rate of decline in Yellow print directories has also risen significantly as market dynamics change more rapidly than expected. These trends will put pressure on Sensis, resulting in an expectation of revenue percentage declines in the high teens for the full year, driven mostly by Yellow print directory and EBITDA margin compression. Mr Thodey noted the Telstra Group was, however, recording better than expected results in growth businesses such as mobiles, fixed broadband and network-based applications and services. “Our strong performance in core and growth businesses, coupled with strong mobile profitability and productivity improvements, means Telstra remains on track to meet guidance for fiscal 2012,” Mr Thodey concluded. Media contact: Andrew Maiden (0458 487 754) Email: [email protected] www.telstra.com.au/abouttelstra/media-centre/ Reference: 352/2011 Attachment: biography of Rick Ellis
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MEDIA RELEASE
Notes: Rick Ellis is Chief Executive Officer of TVNZ, New Zealand’s leading broadcast television and digital media company, a position he has held for a total of 10 years. Rick began his career in the IT industry in Brisbane in the late 1970s, and during the following 20 years in that industry held a number of senior leadership positions in the United Kingdom and New Zealand. He served as Chief Executive Officer of Ansett New Zealand in 1995 and subsequently moved to Melbourne as General Manager Sales and Marketing for Ansett Airlines of Australia. In 1998 he was first appointed CEO of TVNZ and during the period 2002-2006 was Vice President and Managing Director of EDS New Zealand. Rick holds a Bachelor of Commerce from Auckland University and is married with three adult children. A high-resolution image of Rick is available on request.
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BUSINESS OVERVIEW DAVID THODEY, CHIEF EXECUTIVE OFFICER
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DISCLAIMER
• These presentations include certain forward-looking statements that are based on information and assumptions known to date and are subject to various risks and uncertainties. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, these forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Telstra, which may cause actual results to differ materially from those expressed in the statements contained in these presentations. For example, the factors that are likely to affect the results of Telstra include general economic conditions in Australia; exchange rates; competition in the markets in which Telstra will operate; the inherent regulatory risks in the businesses of Telstra; the substantial technological changes taking place in the telecommunications industry; and the continuing growth in the data, internet, mobile and other telecommunications markets where Telstra will operate. A number of these factors are described in Telstra’s Financial Report dated 11 August 2011 and 2011 Annual Debt Issuance Prospectus lodged with the ASX.
• All forward-looking figures in this presentation are unaudited and based on A-IFRS. Certain figures may be subject to rounding differences. All market share information in this presentation is based on management estimates based on internally available information unless otherwise indicated.
• All amounts are in Australian Dollars unless otherwise stated.
® ™ Registered trademark and trademark of Telstra Corporation Ltd. Other trademarks are the property of their respective owners.
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1. PERSPECTIVE ON KEY INDUSTRY TRENDS
2. PROGRESS ON STRATEGY
3. DETAILED UPDATE ON KEY FOCUS AREAS
TODAY’S OBJECTIVES
4. FISCAL 2012 GUIDANCE CONFIRMED
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AGENDA
1. Business Overview David Thodey
2. Financial and NBN Update John Stanhope
3. Simplification Program Update Robert Nason
4. Retail Business Update Gordon Ballantyne
PLENARY PRESENTATIONS: 9AM – 11AM
QUESTION AND ANSWER: 11AM – 12PM
LUNCH
BREAK OUT SESSIONS: 12.30PM – 3PM
NAS & IP THE CONNECTED HOME MOBILITY BRANDING Brendon Riley Paul McManus Philip Jones
Hugh Bradlow Mike Wright Warwick Bray
Mark Buckman For
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OUR INDUSTRY IS UNDERGOING A SIGNIFICANT CHANGE
The “ME” generation – consumer is king… or queen
ASIA to contribute 40% OF WORLD GROWTH BY 2015
WEB SEARCHES
5x growth in INTERACTIONS 300B emails 20B SMS 7B calls 0.2BTweets/day
Per day
PERSONALISED DEVICES
800M Smarthphones by 2013
CLOUD & APPLICATIONS
INTELLIGENT NETWORKS
NETWORK GROWTH
Mobile connections 5B in 2010 50B in 2020 TRILLION in 2030
VIDEO CONTENT GROWTH
35 hours of YouTube content added every 1 minute
BANDWIDTH DEMAND 1B Terabytes over networks by 2012
DIGITAL CONTENT GROWTH 5M Terabytes of information created every 48 hours
~2B
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THIS HAS REQUIRED US TO MAKE A NUMBER OF CHANGES…
MOBILES – LTE, COVERAGE FIXED – IPV6, TOP HAT, HFC
CHIEF CUSTOMER OFFICER CHIEF MARKETING OFFICER
BRAND LAUNCH CULTURE CHANGE
CUSTOMER SATISFACTION FOCUS 1. BUILDING SALES, SERVICE & MARKETING
CAPABILITY
2. INVESTING IN CORE NETWORK CAPABILITY
3. NAS & CLOUD CAPABILITY
4. NEW BUSINESS MODEL
5. PRODUCT INNOVATION
6. DIGITAL MEDIA
7. ASIA
FOCUS AREAS
MILESTONES
PROJECT NEW / SIMPLIFICATION
PRODUCTIVITY & PROCESS IMPROVEMENT
DIGITAL BUSINESS
INDUSTRY VERTICAL SOLUTIONS
M2M
IPTV (T-BOX)
DEDICATED BUSINESS UNIT
FOXTEL
CHINA, REACH, CSL
DEDICATED BUSINESS UNITS (NAS & CLOUD)
CLOUD INVESTMENT
T-SUITE EXPANSION APPLICATIONS AND VENTURES GROUP
TELSTRA INNOVATION TEAM
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OUR PRIORITIES REMAIN UNCHANGED AND WE ARE MAKING PROGRESS
1. IMPROVE CUSTOMER SATISFACTION
2. RETAIN AND GROW CUSTOMER NUMBERS
3. SIMPLIFY THE BUSINESS
4. BUILD NEW GROWTH BUSINESSES
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…AND WE ARE PREPARING FOR AN NBN WORLD
DIFFERENTIATION
• Intelligent network capability build
• New tariff structures
• New product portfolio
• NBN content and applications
THE NBN DOES NOT CHANGE OUR STRATEGY – WE WILL CONTINUE TO DIFFERENTIATE
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Video Conferencing
Video Telephony
Multimedia Contact Centre
UC&C as a Service
PaaS
Federated Clouds
IaaS
SaaS
Contextual Networking
Network Intelligence
Unified Security Services
IP Networking
Discreet Products
Packaged Products
Bundled Offerings
Integrated Services
Industry Solutions Converged
Service Desk
Professional Services
Unified Service Delivery
Media
Health
Education
Finance
Government
Secure Intelligent Networks Cloud Services
Unified Communications
Industry Solutions
Managed Services
Integrated Solutions
OUR NAS STRATEGY IS DELIVERING RESULTS
• FY11 REVENUES +11% TO $1.1B • STRONG PIPELINE OF OPPORTUNITIES FOR FY12
1. Dedicated NAS & Cloud Delivery
2. Strong offering portfolio
3. Capability & resourcing
4. Strong customer base
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WE ARE BUILDING GREATER VALUE IN ASIA
LEVERAGING OUR INTERNATIONAL ASSETS AND CAPABILITIES 1. Extend our Asia IP network and NAS/Cloud capabilities (Reach)
2. Continue to leverage mobile assets (CSL)
3. Extract value from China Digital Media assets
Sydney Auckland (New Zealand)
Perth
Indonesia Singapore
Malaysia Thailand
India
Philippines
Hong Kong
China
Seoul (Korea)
Tokyo (Japan)
London
San Jose
Los Angeles
New York/ New Jersey
Stanley Satellite Earth Station, Hong Kong
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WE HAVE ESTABLISHED A NEW DIGITAL MEDIA BUSINESS UNIT
EXISTING PORTFOLIO OF ASSETS AND PARTNERS NEW DIGITAL MEDIA BUSINESS UNIT
TELSTRA DIGITAL MEDIA
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CASH MANAGEMENT WILL BE KEY TO OUR FUTURE
DIVIDENDS
DEBT
CAPITAL RETURNS
INVESTMENTS
IMPORTANT FOR MANY SHAREHOLDERS, STRONG BOARD COMMITMENT
WE ARE WITHIN FINANCIAL PARAMETERS
TO BE CONSIDERED POST NBN DEAL
PRUDENT ASSESSMENT OF VALUE ACCRETIVE ORGANIC & MODEST INORGANIC OPPORTUNITIES
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SUMMARY
OUR STRATEGIES ARE WORKING
WE ARE WELL PLACED AND WE WILL BE NBN READY
WE CAN CONTINUE TO DIFFERENTIATE
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FINANCIAL UPDATE JOHN STANHOPE, CFO
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TELSTRA SHAREHOLDER APPROVAL AGM VOTE
ACCC ACCEPTANCE OF STRUCTURAL SEPARATION UNDERTAKING AND APPROVAL OF MIGRATION PLAN
REVISED SSU TO BE SUBMITTED
ATO TAX RULINGS TELSTRA RULING RECEIVED
NBN UPDATE - KEY CONDITIONS PRECEDENT
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REPORTING THE FINANCIAL IMPACT OF NBN
6 months ended Dec 10 June 11
Physicals ('000s)
Basic access (PSTN) lines 8,533 8,370 o/w WLR lines 1,235 1,212 ULL lines 914 1,001 ISDN lines 1,318 1,316 Lines disconnected to NBN 0 0 Telstra retail lines through NBN 0 0
Financial ($m)
Infrastructure revenues (sales revenue) 0 0 Disconnect ion revenues (other income) 0 0 NBN access costs 0 0 Remediation Costs 0 0 Copper network maintenance TBC TBC
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M2M – ANOTHER GROWTH ENGINE FOR MOBILES
Note: FY11 Mobile SIO growth of 1.7m included 100k M2M adds
FY11 REPORTED
High margin Low ARPU
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POSTPAID HANDHELD 6.1m SIOs $64 ARPU
M2M 0.6m SIOs $10 ARPU
M2M 0.3m SIOs
M2M 0.3m SIOs
MBB 2.3m SIOs $41 ARPU
POSTPAID HANDHELD 6.5m SIOs $61 ARPU
MOBILE BROADBAND 2.6m SIOs $38 ARPU
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• Market’s shift to digital marketing occurring faster than expected
• Good take up from existing customers, limited sales to new customers as sales completion taking longer than expected
• Rate of decline in Yellow Print has risen significantly
• One off digital sales and production costs higher than expected in FY12
• End user demand for Yellow products remains solid
• Cost-out programme accelerated – limited impact in FY12, more in FY13
SENSIS TRANSITION
5
PROGRESS ON DIGITAL STRATEGY
EXPECT HIGH TEENS REVENUE DECLINE AND MARGIN COMPRESSION IN FY12
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GUIDANCE AND H1 PROFILE
Measure FY11 Reported FY12 Guidance*
Total Revenue $25.09bn Low single-digit growth
EBITDA $10.15bn Low single-digit growth
Capex 14% of sales
Free cashflow $4.5 - $5.0 billion
Dividend** 28 cps fully franked (FY12 and FY13)
* Guidance assumes wholesale product price stability and excludes any further impairments to investments and proceeds on the sale of businesses
** Dividend subject to the Board’s normal approval process for dividend declaration and no unexpected material events.
FY12 PROFILE H1 V H2
• Smoother profile than FY11 • Revenue and EBITDA
growth in H1 with slight margin expansion
• Mix change with improving telco product contributions offset by accelerated revenue decline from Sensis
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SIMPLIFICATION AND CUSTOMER SERVICE PROGRAM UPDATE ROBERT NASON, GMD PROJECT NEW AND CUSTOMER EXPERIENCE
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PROJECT NEW OBJECTIVES
2 Source: 2010 Investor Day Presentation, Robert Nason
Simplify • Fast, lean and competitive operating model and culture • Value propositions clear and simple to communicate • Processes streamlined to reduce time-to-market by 30%
Theme Objectives
Serve • Best customer satisfaction rating compared to rest of market • Channel mix transitioned to 35% online / self help transactions • Further sustained reduction of TIO complaints
Save • Significant cost benefits will emerge
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PROJECT NEW SCOPE
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New Lean Operating
Model
End-to-End Customer Process Improvement
Sales & Service Channel Enhancements
Pricing Simplification
A New Customer Focused Culture
Third Party Spend & Productivity Improvement Program
Source: 2010 Investor Day Presentation, Robert Nason
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STATUS OF PROGRAM OUTCOMES
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70% 80% Operating Model
40% 70% Process and System Improvements
30% 70% Online Presence
60% 100% Productivity
50% 75% Pricing Simplification
0% 100%
30% 100% Culture Change
Benefits implemented Benefits identified Total opportunity For
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OPERATING MODEL CREATING A SIMPLER, CUSTOMER CENTRIC ORGANISATION
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Creation of a single Retail customer business unit
Marketing, channel management, pricing, innovation, technology, communications and shared services functions streamlined with clear accountabilities
Over 25,000 job roles changed
Executive head count reduction by ~13%
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Rationalised the number of vendors
Optimised strategic relationships with third parties
Working cooperatively to achieve ongoing productivity improvements
Better engaging with our partners through training and other collaborative activities
OPERATING MODEL BETTER LEVERAGING OUR PARTNERS
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PROCESS AND SYSTEM IMPROVEMENTS
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PROCESS AND SYSTEM IMPROVEMENTS
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TIO Complaints
PROCESS AND SYSTEM IMPROVEMENTS
~50%
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10
% of Field Revisits
~34%
PROCESS AND SYSTEM IMPROVEMENTS
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ONLINE PRESENCE
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Homepage
Online Shop
Facebook and Twitter Services
CrowdSupport
Mobile website
Consumer Services
ONLINE PRESENCE
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We have refreshed our mobile wireless cap, business and account managed plans
We have improved our Fixed and Bundles offer
Data allowances have increased at no extra cost for some plans
Key nuisance fees and charges have been removed
PRICING SIMPLIFICATION DELIVERING GREATER VALUE FOR OUR CUSTOMERS
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Improved Brochures New My Offer Summaries Simplified Bill Format
+ +
PRICING SIMPLIFICATION ENHANCING THE PURCHASING AND BILLING EXPERIENCE
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PRODUCTIVITY $622M OF PRODUCTIVITY BENEFITS DELIVERED IN FY11
15
FY10 OPEX
REPORTED
+6.8%
$15,154m
FY11 OPEX
REPORTED
$14,184m
DVCs
+$823m
-$622m
Productivity Benefits
Natural disasters
+$53m
STI
+$93m
Price
+$277m
Redundancy
+$96m
One-offs Growth Productivity
Impairments & Other
-$141m
New Business
Growth
+$231m +$160m
Programme costs & other
Source: FY11 End of Year Results CEO/CFO Presentation
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CULTURE CHANGE DRIVEN BY THE ‘OUR CUSTOMER CONNECTION’ PROGRAM
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54 OCC sessions have been held engaging over 5,400 people leaders:
23 sessions in Melbourne (2,200+ people)
16 sessions in Sydney (1,500+ people)
6 sessions in the Philippines (800+ people)
9 sessions held with our industry partners (900+ people)
Source: Visualisation created during an OCC session to capture outcomes for participants
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FOCUS OF THE SIMPLIFICATION AND CUSTOMER SERVICE PROGRAM GOING FORWARD
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EMBEDDING CONTINUOUS IMPROVEMENT
IMPLEMENTING CULTURE CHANGE
SECOND WAVE OF PRODUCTIVITY IMPROVEMENT
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EMBEDDING CONTINUOUS IMPROVEMENT
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Process Owner Framework
PREPARE SERVE SUPPORT
Product Management
Product Development
Pricing
Promotions and Advertising
IT and Network Management
Order to Activate
Assurance
Billing
Explore
Customer Management
Corporate Planning
Financial and Risk Management
People Management
Communications Management
Enterprise Effectiveness
Procurement and Partner Management
Implementation underway Implementation by end of FY12
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IMPLEMENTING CULTURE CHANGE
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Net Promoter Score system implementation
Sales and service training
Changing the way we work
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SECOND WAVE OF PRODUCTIVITY IMPROVEMENT
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Focus on capital as well as OPEX
Broader scope
Deeper set of changes
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1 Telstra Corporation: [email protected]
TELS
TRA T
EM
PLATE 4
X3 B
LUE B
ETA
|
TELP
PTV4
TELS
TRA T
EM
PLATE 4
X3 B
LUE B
ETA
|
TELP
PTV4
GORDON BALLANTYNE CHIEF CUSTOMER OFFICER
CUSTOMER SATISFACTION IMPROVED MOMENTUM
2
TELSTRA OVERALL CUSTOMER SATISFACTION
JUN 10 FEB 11 OCT 11 JUN 11 OCT 10 For
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2 Telstra Corporation: [email protected]
RECAP - LAST YEAR’S KEY BATTLEGROUNDS
3
RETAIL FIXED BROADBAND QUARTERLY SIO GROWTH
CORE PRODUCT MOMENTUM HAS CARRIED INTO 2012…
*
* June Q11 excludes the removal of 65k non-revenue generating services from the base
RETAIL MOBILE QUARTERLY SIO GROWTH
CONSUMER BUNDLES GROWTH POSTPAID HANDHELD ARPU
4
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3 Telstra Corporation: [email protected]
ORGANISING TO WIN
CHIEF CUSTOMER OFFICER
STRATEGY & OPERATIONS
CUSTOMER SERVICE
TELSTRA CONSUMER &
COUNTRY WIDE
TELSTRA BUSINESS
TELSTRA ENTERPRISE & GOVERNMENT
TELSTRA CLEAR
5
GROW MOBILE
BUNDLES
NAS
DRIVING VALUE FROM THE DOMESTIC CORE OUR KEY GROWTH AREAS REMAIN UNCHANGED
6
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4 Telstra Corporation: [email protected]
DRIVING VALUE FROM THE DOMESTIC CORE
7
STILL A LONG WAY TO GO WE HAVE MORE DETRACTORS THAN PROMOTERS
Illustrative purposes only 8
For
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5 Telstra Corporation: [email protected]
TO CHANGE THE WAY OUR CUSTOMERS TALK ABOUT TELSTRA
9
OUR AMBITION
For
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l use
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y