TELSTRA GROUP LIMITED — Call Transcript 2006

Mar 30, 2006

31 March 2006

The Manager

Company Announcements Office Australian Stock Exchange 4^th Floor, 20 Bridge Street SYDNEY NSW 2000

Office of the Company Secretary

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

Telephone 03 9634 6400 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Transcript of presentation by Sol Trujillo CEO Telstra, at the Credit Suisse Investment Conference, Hong Kong.

In accordance with the listing rules, I attach a transcript of a presentation by Sol Trujillo, CEO Telstra at the Credit Suisse Investment Conference, for release to the market.

Yours sincerely

Pont book

Douglas Gration Company Secretary

Telstra Corporation Limited ACN 051 775 556 ABN 33 051 775 556

Friday, 31st March 2006

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MODERATOR: Our next presentation this morning is from 3 Telstra. We're very pleased to have Telstra back at the 4 conference this year. Making his first appearance at 5 the conference, I'm very pleased to welcome the chief $\epsilon$ executive officer, Mr Sol Trujillo. Thank you, Sol. $\overline{7}$ MR TRUJILLO: Thank you. Good morning, everyone. 8

I'm obviously here to talk about the leading player 9 in Australia, and when I say "the leading player", $10$ I always like to talk and think -- given the fact that $11$ $12$ I've operated in the US, I've operated in Europe, I've 13 operated basically around the world -- I always like to 14 think about scale, because scale matters in this 15 industry. You've seen it almost anywhere, any 16 continent, as you watch how the market evolves. In the case of Australia, Telstra is the player, and we do have 17 18 scale. We are the biggest player in terms of wireline, the biggest player in terms of wireless, and obviously 19 20 we are the player in terms of advertising, search, transaction capabilities. $21$

Finally in terms of our newest platform, which is 22 really critical, I think, anywhere in the world, is the 23 broadband platform, with our BigPond play. Obviously we 24 25 are the player in terms of the marketplace.

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Australia is a country that is going through a transformation, in terms of the industry, because one of the things that I think needs to happen is obviously that we transform how the structure is worked, how Telstra is competed and how aggressive we will become.

Now, also in terms of Telstra, in Australia we are $\epsilon$ the biggest brand name. Any brand recognition survey 7 that's done, Telstra is the name that everybody will R name either one, two or three in any brand survey, which 9 $10$ is something that we are starting to leverage and will continue to leverage, in terms of our business. $11$

$12$ We do have the highest share in virtually every 13 category, and most importantly, we have the ability to 14 drive economies of scale, which everywhere I've been --15 when I ran Orange, when I was at US West -- obviously 16 all those become critical, as you think about new technologies, and as you think about strong transitions. 17

18 The final point that I'd just make relative to an introduction to Telstra is that obviously, as you 19 20 look at our financials, we have a strong balance sheet, we have strong cash flows in terms of the business, in $21$ terms of being able to do the things that we need to do, 22 23 in terms of running the business and transforming the business. 24

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So, as we move to the next chart here, the way

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I like to think about what we're doing, since I arrived last July, is that we have started the transformation, and we're a business that's basically what I call on the move.

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5 We're on the move because we're changing the way that we go to market; we're changing the way we operate 6 in terms of delivering an enhanced customer experience; 7 we're changing the way that we think about revenues and 8 our sources of revenue, because one of the things that 9 $10$ I believe fundamentally is we have our old revenue $11$ streams that are under attack, either competitively or $12$ secularly in terms of some fundamental changes that are 13 occurring with things like PSTN, so we have to create 14 new ones and we have to create new applications and new 15 services. You're seeing that with what we're going to 16 be doing and are starting to do, whether it be in our $17$ BigPond space, our broadband arena, or in terms of our 18 mobile arena; and finally, in terms of how we think about our advertising business, which we have called 19 20 Sensis, which is more than printing Yellow Pages. It is about online advertising, it's about search, and it's 21 about transactions as we go forward. 22

23 So we're driving the new revenue sources. We're 24 also driving reduced complexity in terms of our business. When I say "complexity", if you look at 25

Telstra, we had about 1,250 operating systems in our business. We're going to be taking those down dramatically.

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If you look at how customers interface with 4 Telstra -- fairly complex. If you look at running three 5 wireless networks -- fairly complex. Customers have to $\epsilon$ make choices, not quite understanding the difference 7 between CDMA and GSM, and we put them into those R positions to be able to have to do that; and obviously 9 we're driving a new competitive culture. We are going $10$ to compete and we're going to compete hard, and I think $11$ $12$ those that we compete with are finding that out, with 13 some of the things that we're now starting to do in the 14 marketplace.

15 If you look at our first-half results announcements 16 and if you look in the broadband space, our nearest competitor grew one-fourth the amount of volume in terms 17 18 of broadband connections that we did. So we are competing and we are competing hard in terms of the 19 20 business.

Finally in terms of being on the move, we are $21$ aggressively working a new regulatory agenda. That 22 23 receives a lot of publicity and gets a lot of coverage, in terms of the marketplace, and in particular the 24 25 media, but it is critical as well. But I just want to

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emphasise, that's only one dimension of the full set of issues and initiatives that we have within the business.

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In terms of the move, in terms of reminding 3 ourselves about scale, in terms of what I've just talked 4 about, it's important to keep in mind that there's 5 a reason for all this. Why transform? Why drive the $\epsilon$ business the way we're doing? Why be so aggressive on 7 regulation? Why be so aggressive in terms of the cost 8 structure and the numbers of people, the numbers of 9 $10$ costs that we're going to take out of the business, and why are we going to push so hard on innovation within $11$ $12$ the business?

13 Here's why. It's basically that if you look at our 14 business today, we've had a lot of pressures that have 15 been hitting at this company for the last few years. We 16 have PSTN revenues that are in decline. We announced in terms of our H1 that our PSTN revenues were declining 17 18 7.6 per cent. If you look at our cost structure, when I got there and we announced our last year's results for 19 20 '04/'05, our retail revenues were essentially flat, while our expenses were increasing, at retail, at about 21 10 per cent. If you looked at our wholesale business, 22 23 our wholesale revenues and wholesale costs were running at about the same amount, 13/14 per cent, at that point 24 25 in time. We're going through a migration in terms of

our revenue streams.

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If you look at PSTN declining at 7.6 per cent, $\overline{2}$ you're talking about a portion of the business that used 3 to be, if you look back five or ten years ago, probably 4 70 to 80 per cent of the revenues of the business, and 5 clearly 100 per cent of the profitability of the $\epsilon$ business. All of that has been eroding, so now I like 7 to remind people that there's a principle in life in 8 terms of almost any business in any industry: not all 9 revenue dollars are created equal. $10$

What I mean by that is that the margins are $11$ $12$ different. When you look at a PSTN business, where you 13 didn't have to market, promote, spend a lot of dollars 14 to generate the dollars, because they were on, you know, 15 recurring-revenue kinds of plans, which are stated on 16 your monthly bill, as opposed to items that you have to re-contract literally every day in terms of your 17 18 business, and you have a customer base that's continuing 19 to change.

20 Well, we're having to deal with all of that. We've got pricing pressures, we've got Cap plans, we've got 21 a lot of things that are happening on the mobile side 22 23 that are changing the structure of the business.

Finally, we have a whole layer of complexity within 24 25 this business, with technology change. When you think

about migrating into an IP kind of world, the customers $\mathbf 1$ are ready now to move into that. If you listen to any $\overline{2}$ of the banking industry folks talk or if you listen to 3 virtually any other industry, they're changing their 4 cost structures by leveraging the technologies that we $\overline{5}$ can deliver, or, if we don't deliver, they will find $\epsilon$ somebody that will deliver. 7

So there's a whole lot of pressures in terms of our 8 business today that says we do have to change, we do 9 have to transform. My belief is that we need to do it $10$ faster than anyone, we have to do it bigger than anyone, $11$ $12$ because the rewards and the price are much better than 13 anybody else's that we compete with within Australia.

14 If you look at our first-half results then, I won't 15 spend a lot of time because all of you get this 16 information and it's all publicly available, but when we look at the results you can see that we're basically on 17 18 plan.

What I want to do is remind you that, as we go 19 20 forward, the plan that we have is extremely aggressive, because we're fundamentally changing our go-to-market 21 with our market-based management system that we're 22 23 putting in place, the cost take-outs, but it also means the network transformation that we're doing, as well as 24 25 the IT transformation that we're doing, because just

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doing the network without the IT is really a waste of money, in terms of how I think about a business like this. So we are in fact moving hard.

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But in terms of our results that we announced first 4 half, you know, we were on plan. Our mobile results 5 were what I would just call okay. They weren't great, $\epsilon$ they weren't bad; they were just okay. In terms of 7 Sensis, they were okay for first half, but obviously we 8 have an aggressive plan for the rest of the year, as 9 $10$ well as for the five-year period, in terms of Sensis.

In terms of our broadband, it was strong; it was $11$ $12$ very strong. I think all of you saw that vis-a-vis 13 those that we compete with. Obviously our dividends and 14 our dividend payment, we said we were going to pay the 15 dividend, fully franked, and we stayed on what we've 16 said.

In terms of our full-year guidance, we've 17 18 communicated that and we will continue to communicate the same quidance that we have qiven before. 19

So let me again then revisit our strategic 20 priorities. I like using this language inside the $21$ company, but I also like to use it when I'm talking to 22 23 some of our investors that I've met with over the period of time that I've been in Australia. We do have to take 24 25 some tough medicine. This is not about just deploying

"a" network element. It's not about changing $\mathbf 1$ "a" operating system. It's not just about introducing $\overline{2}$ "a" new product or "a" new service. This is 3 a fundamental transformation, and we're going to have to 4 go through about two years' worth of tough medicine, $\overline{5}$ meaning that we're going to make some investments to $\epsilon$ take costs out, we're going to make some investments to 7 grow our revenue base, and we're going to be making R investments to fundamentally enable us to grow 9 shareholder value over the next decade, not over the $10$ $11$ next quarter, or year, or two.

$12$ So first on the front end is that we're changing how 13 we interface with customers. As we now start measuring our customer satisfaction, the results are starting to 14 15 show effects of some of what we're doing. We're about 16 to also launch, and we're in the process now of filling jobs and doing some of the things that we've had work 17 18 underway, of implementing what we call market-based management, which basically means that we're seqmenting 19 20 the business, and segmenting more than just consumer, SME, enterprise which is what everybody tends to do. $21$ Underneath that, in the case of consumer, we have about 22 23 seven segments and about 120 to 130 microsegments that 24 we will be able to market to when we get all of our 25 resystemisation done, and when we've finished some of

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the work that we're going to be doing in terms of our network capabilities, which will be important in terms of differentiation, because I have a fundamental belief in terms of managing business, and I've served on the boards of world-class companies, and it's all the same.

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The point of differentiation that you ultimately $\epsilon$ have is not necessarily the technology. It's about your 7 go-to-market system, and it's about what points of 8 differentiation you really can deliver, and to me, in 9 $10$ this business, because we're a services-based business, it's about knowing your customers better than anybody $11$ $12$ else and then executing on what you know about your 13 customers and what their needs are.

14 So we have implemented, and are, I should say, 15 implementing, a market-based management system. As 16 I said before, we're investing in terms of new 17 applications and services. If you were there in 18 Australia during the Comm Games, you saw at the beginning of what I call the one click, one touch, one screen, 19 one button environment for our customers, where with one 20 of our devices here you can see -- you can fill in the $21$ name on the front of the device, and this one is 22 23 a Samsung device, but if we had a camera here that you 24 could zoom in on, you could see that there are two words here: one says "Big" and one says "Pond". Now we have 25

integrated essentially our broadband services and capabilities and made access one-button simple.

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So when you think about how we compete versus brand 3 X, Y or Z in Australia, this is going to be dramatically 4 different. I can show you here that right here in 5 Hong Kong I can get to my BigPond site, probably within $\epsilon$ about 15 to 20 seconds, using a 3G phone, using 7 essentially our CSL network as a roaming network. You 8 can see right here, those of you that are close enough, 9 that I've got the BigPond site right here. $10$

Does that start changing the game? Does that start $11$ $12$ making my use of your broadband services, Telstra's, 13 much easier, much different and in a differentiated way?

14 What we were doing during the Commonwealth Games is 15 that we were showing live broadcasts of Channel Nine, 16 showing the Games, realtime. So we were running a series of ads in Australia basically during the Games 17 18 saying you could be out in the park but pretend that you're sitting in the stands watching the game. 19

20 Now, most of you are familiar with mobile TV, but this is not about just mobile TV. It is about $21$ an integrated service that was fed through our BigPond 22 23 application, so that if you were at home at your PC you could watch, and if you're on the go with your device, 24 25 you get the same feed, but with the other pieces of

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information that might be relevant, when you think about stats and other things, when you want to not only view what's going on, but get other information that's associated.

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That's part of the integrated experience that we're 5 investing in, in terms of the business, to start 6 changing the customer experience, where it's again 7 one touch, one click, one button simple, because the 8 lesson I have learned in business is that if you make it 9 simple, people use. $10$

We all know the stories about the books, you know, $11$ $12$ the training manuals, the training sessions, all that 13 sort of thing. If you've got to be trained, I have 14 a rule in our company that says if it takes longer than 15 30 seconds for me to either intuitively figure it out or 16 for you to explain, I probably won't use it.

I can teach you in five seconds or less how to get 17 18 onto your BigPond site on your mobile device, and it's reading two words and pushing one button. That's a big 19 20 deal, and we're going to do that with many other services as we go forward. $21$

That also gets to Sensis. If you get onto our 22 23 BigPond site or on our mobile devices, you will see 24 Sensis prioritised. So now you want information, you 25 want information about a business, you want to get to

a restaurant, you want to get wherever you want to go? It's all now one touch, one click simple in terms of Telstra.

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So now you think about how we compete for 4 advertising dollars with Google, with Yahoo!, with $\overline{5}$ whoever: those of you who have used their services, you 6 have multiple clicks, multiple screens, multiple rolls. 7 Now, you can get it on most devices. So the point is 8 not whether it's on the device. The point is whether 9 it's one click, one touch, one page simple, and that's $10$ kind of the core essence of the vision that I have for $11$ $12$ this company going forward, as we think about new 13 products, new services, new capabilities, applications, 14 et cetera.

15 We are investing, as we speak, in terms of those 16 capabilities, to grow revenues into the future, but it's also about the power of integration, so that whether it 17 18 be Foxtel, Sensis, BigPond, any of our core brands that we have within our business, it's all going to be simple 19 20 for a customer.

Now, obviously part of the discipline that we are $21$ also bringing to Telstra is about investing where we can 22 23 make money. That's what we're telling regulators, that's what we're telling the Government, that's what 24 25 we're telling our investors, and that's what we're

telling our customers. We're going to invest our $\mathbf 1$ resources, our capital, where we can in fact make money, $\overline{2}$ and we are not investing in those services, those 3 capabilities, that will not create value for our 4 5 shareholders. That will be a strong discipline as we continue to manage this business going forward. 6

So in terms of strategic outcomes, then, you know, 7 there's a lot of work underway. If you went into 8 Telstra today and you know people that work there, they 9 $10$ will tell you, they've never seen anything like this, the speed at which we're moving. We announced $11$ $12$ a decision on November 14th -- we had a board meeting, 13 around our wireless 3G HSDPA 850 network. On 14 November 15th we announced it to the market, and during 15 the Christmas holidays we went to our vendor, which was 16 Ericsson, and said, "You're going to have to keep some of your factories open", during what they would normally 17 18 view as a shutdown period during the month of January, because we said we want our infrastructure hitting our 19 20 docks in February, because in February we're going to start installing the hundreds of pieces of 21 infrastructure that we've got to put in place to turn up 22 23 a network by the end of this year. Ericsson is doing that, we are doing that, and we're on schedule with what 24 25 we're planning to do.

Now, we've already commenced also the cost reduction $\mathbf 1$ initiatives. We're taking out the easy things first, $\overline{2}$ which is what any company would do and any CEO would do. 3 We announced it at first-half results, we've taken out 4 approximately 1,000 full-time equivalents in terms of $\overline{5}$ the business, but there's more that we're doing and $\epsilon$ we'll talk about those when we announce full-year 7 results. R

In terms of market-based management, I've talked 9 $10$ about that. In terms of next-generation vendors, we $11$ have negotiated the contracts. The cost points at which $12$ we have negotiated these contracts are terrific. They 13 are very aggressive. I can also say that we are making 14 sure that everybody that's playing with us is going to 15 have some element of their benefit and their payments at 16 risk, because I am a performance-based person and I want results, not only from us but also those that we do 17 18 business with.

As we go on, then, I also want to share one other 19 20 piece of news in terms of our business today, and that is that today we will be announcing the completion of $21$ the CSL/New World merger, and obviously here in 22 23 Hong Kong that's very important. We made a big 24 investment at Telstra a few years back in terms of CSL, 25 and we're at a point now where we're looking to create

more value, given some of the market adjustments and value adjustments that have occurred over the last couple of years.

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This merger with New World does create value, but it 4 most importantly gets us some advantages that I think 5 are important, as we think about the Hong Kong market. 6

No. 1 is I think consolidation is important. This 7 is an important step I think in terms of maybe a series 8 of activities that the market will have. We will be the 9 No. 1 operator in the Hong Kong mobile market. I mean, $10$ I stand here today, I've had not much to do with CSL in $11$ $12$ terms of its history. It is the No. 1 player. Those of 13 you who live here, you know it. If you're a user of it, 14 you know it, and if you're not a user of it, you 15 probably even better know it, using the networks of 16 those who we compete with.

In terms of the benefits, at least 400 million of $17$ 18 cost savings to the merged entity. The merged entity will enjoy obviously the strength of the brand that we 19 20 have with CSL as the umbrella company. But we will be very focused, as we have been, in terms of the $21$ segmentation of the market and the strong segmentation 22 23 that we've had in terms of the business.

24 In terms of the gain or loss on disposal of the CSL 25 stake and CSL carrying value, again, all these numbers

have been shared, and I would just say that this is part of the kind of criteria that we're using in terms of the things that we're going to do or not do in terms of the business.

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The final point I would just make is that Hong Kong 5 is an important market. I think this merger and the $\epsilon$ market position that we have as the market leader 7 creates more options and more alternatives for us, as we R think about strategic plays within the region here in 9 Asia Pac. $10$

I'll move on and talk just a bit about regulation. $11$ $12$ I think it's important, because when I think about 13 a business like Telstra, clearly your revenue 14 capabilities and your innovation capabilities around 15 revenues are important, and your cost structure is 16 important, and we're dealing with both of those. The third thing is about how you think about your culture $17$ 18 and other elements within your business. Finally, when you think about this notion of requlation, it also 19 20 affects your ability to generate revenue growth, it affects your ability in terms of your cost structure, 21 what you do and what you don't do, and it also affects 22 23 your ability, sometimes, to innovate.

In the case of Australia, we've had a battle --24 25 I won't underscore or understate the nature of the

battle -- and this battle is very similar to the battles $\mathbf 1$ that we used to have in the States back in the mid-'90s $\overline{2}$ to late '90s, depending on the part of the US. There 3 was a philosophy in the US that said one company invests 4 and everybody should share off of it and share at very $\overline{5}$ low cost, so that you can have a lot of competition. $\epsilon$

Well, I think you saw the outcomes of that. There 7 were lots of losses, lots of investments, and the 8 primary investors, which were the Baby Bells, stopped 9 investing. The US -- we used to be the market leader -- $10$ all of a sudden fell in the rankings in terms of $11$ $12$ broadband deployments and all kinds of things. And so 13 finally the policymakers in the US learned that that 14 kind of direction was not a sound direction.

15 Now, if you look at the WEF report that came out 16 this week, you'll find that the US is back on top in terms of innovation, technology use, et cetera, $17$ 18 et cetera, under the criteria that they use, whereas the US in prior years had been much lower in the rankings. 19 20 It's all coming together because there's an environment where investment makes sense, people are investing, $21$ there is consolidation occurring, and the economics get 22 23 sounder as you go forward.

Well, in the case of Australia, the direction has 24 25 been just the opposite. The direction has been about

creating more regulation, more sharing, less incentive $\mathbf 1$ to invest, and I've come in basically and said that that $\overline{2}$ makes no sense; from a shareholder standpoint it makes 3 no sense, as you think about delta investments, and 4 "delta" meaning the delta sign. 5

So we've had a lot of debate, we've had a lot of $\epsilon$ discussion. It's centred around unbundled local loop 7 and how you price it. Do you average, do you 8 de-average, and if you average or de-average, at what 9 price do you set, based on what kind of costing $10$ methodology? $11$

$12$ Having been through these arguments before or, as 13 I like to say, having seen this movie before, the 14 answers are clear to me, and the outcomes should be 15 clear to most, because now, if you look in Europe, in 16 you look in the States, if you look in many places, you'll see that everybody's coming to similar kinds of $17$ 18 conclusions.

But we're still waiting for decisions on unbundled 19 20 local loop; we're looking for some decisions in terms of rationality for incremental investments, where if our 21 shareholders risk capital then they should get the 22 23 benefits from it, not our competitors' shareholders. That is a principle that we will hold true to, and this 24 25 view is not only Sol's view but it's the view of the

full board of Telstra.

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Then the third issue and area of discussion has been $\overline{2}$ around operational separation, where there is a view 3 around how much separation there should be. Clearly, in 4 my view, the amount of separation that we have in place 5 today -- if you drop in an order from Telstra on the 6 wholesale side, if you drop in an order from any one of 7 our competitors, they all flow through the same systems, 8 the systems are blind to it, and the outcomes, the 9 intervals, are all the same. Anybody can audit it, $10$ anybody can monitor it. That's basically the argument $11$ $12$ that we've made, and we've actually shown people. So 13 there's a difference in rhetoric versus facts. So we're 14 making sure that there's an understanding of all of 15 that.

16 So what's the importance of that? The importance of that is that it could affect some of what we've talked $17$ 18 about in terms of our strategic plan. If we get a negative unbundled local loop decision, as what might 19 be recommended by the regulatory body, we will not build 20 fibre to the node. We will not build fibre to the node. 21 There's been some people that would say, "Well, gee, 22 23 it's just Telstra gaming, it's posturing and it's negotiating." Let me be clear. There once was 24 25 a President in the US that said, "Read my lips." We

will not build fibre to the node, because the economics $\mathbf 1$ $\overline{2}$ make no sense.

So that's the second half of "Read my lips": 3 because the economics do not make sense to our 4 shareholders. It's not an emotional thing, it's not $\overline{5}$ an ego thing, it's not a tactical thing; it's 6 a financial thing. If anything, we've just got to be 7 clear about that. 8

Does that mean that Telstra is in trouble? Does 9 $10$ that mean that our financials go to hell? Does that mean, you know, whatever, whatever? The answer is no, $11$ $12$ because there's multiple dimensions to this business. $13$ One is about revenue growth: will we innovate, will we 14 create new services, will we do all that? And do we 15 need fibre to the node to do that? Do we need fibre to 16 the node to do what I just showed you? The answer is $17$ no.

18 On the costs side, are we going to take out a lot of costs in terms of this business? The answer is yes. 19

20 Then the third dimension is just under what conditions we will have to compete on a regulatory 21 sense. I would just say to all of you that I have 22 23 contingencies. We have plans, and what I call Plan A, Plan B or Plan C, we're ready to go. All we need is 24 a regulatory decision by the Government and we will 25

move.

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So, in summary, Telstra's transformation is going to $\overline{2}$ be important. It's going to be fast-paced. But it's 3 going to take a couple of years before we start seeing 4 the fruits, the big fruits, of the labour in terms of 5 the networks, in terms of the resystemisation of the $\epsilon$ business, and obviously as we start rolling out some of 7 the innovative new products, new services and new 8 revenue streams, because they will enable on one side 9 new revenues, as we think about billing, subscription, $10$ $11$ whatever, per use; but they will also enable us to start $12$ disintermediating how consumers or businesses spend on 13 other services today.

14 That's an important point because I think a lot of 15 people say, well, there's not a lot more spending out 16 there and there's not a lot more ARPU out there because there are some price pressures on some of the existing $17$ 18 services. The answer is, that is partially true, but at the same time there are a lot of things we don't 19 20 generate any of the revenues on today that we will start 21 generating revenues on.

You've seen on BigPond, we have BigPond movies now, 22 23 we have music downloads, we have the largest amount of downloads in Australia in terms of music downloads of 24 25 anybody, and Apple has been in the market, others have

been in the market.

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If you look at Sensis and you look at transaction $\overline{2}$ revenues, you look at search revenues, if you look at 3 the growth in our online business, which is over 4 50 per cent growth per year, and we have a pretty big 5 base already, there's a lot of new revenue sources that $\epsilon$ we have within the business. 7

Obviously, as we think about Foxtel, there's 8 opportunities with that in terms of some of the things 9 that we're working now as a board at Foxtel to $10$ accelerate growth. So think about CSL and this $11$ $12$ transaction with New World -- there's a lot of things 13 that we've got underway that have nothing to do with the 14 regulator but have everything to do with managing $15$ a world-class business.

16 So, in terms of our targets, you can see them up on the chart; you've seen them before on November 15th; you $17$ 18 have seen us reiterate them back when we announced our first-half results -- pretty clear. 19

20 So I will stop at this point and open it up for questions, because I think that may be the more relevant 21 use of time at this stage. 22

MODERATOR: Okay. We're coming towards the end but we've 23 probably got time for one or two questions from the 24 25 audience, if people feel free.

Q. Thanks, Sol. You've made a lot of mention about the $\mathbf 1$ requlatory environment obviously in Australia. One $\overline{2}$ thing obviously that has been happening over the last 3 couple of weeks has been a variety of mixed messages on 4 what's happening with regulation in Australia, a lot of 5 talk about a compromise being reached with the regulator $\epsilon$ and also the Government. 7

What's your interpretation of the regulatory R environment? In particular, do you see rationality 9 returning between Telstra, the regulator and the $10$ Government? $11$

$12$ MR TRUJILLO: That's a multi-billion-dollar question.

$13$ I guess I'm always hopeful that rationality ultimately 14 will prevail. We are having constructive conversations $15$ with the ACCC, literally as we speak.

16 Beyond that, I shouldn't comment much more, because until you reach agreements on anything, as far as I'm $17$ 18 concerned there are no agreements. But I think that the dialoque -- this morning, Minister Minchin came out and 19 20 talked about how important he thought T3 was, and the 21 fact that he wanted to see it happen and how he was going to go about doing it. I think that hopefully over 22 23 the next few days or week or two or whatever you will see less rhetoric and more real conversation occurring. 24 25 But at the end of the day we will work that side, we

will work it hard, because we want to be as positive and constructive as we can be in finding the right solutions for Australia for the long term.

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$\overline{2}$

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However, I won't take that to the bank, I won't bet 4 on it, because we have our operating plans that I will 5 bet on, in terms of how we will create value for our $\epsilon$ shareholders. If this happens, it's an enhancement. 7 Otherwise, we've got other plans that will help us 8 create the value that we think we need. 9

Q. On that point that you highlighted, obviously the focus $10$ $11$ then is on the actual underlying fundamentals of the $12$ business. I mean, to date, are you ahead of target on 13 the operating statistics side, obviously looking at the 14 cost-out, and you highlighted a couple of points in the 15 slides, but are you comfortable where you sit -- are you 16 110 per cent ahead? I mean, how far ahead are you of your internal targets at the moment? $17$ 18 MR TRUJILLO: For disclosure reasons, I won't answer it the way you've asked the question, but will say I'm 19 comfortable with where we're at. As we said at our 20 mid-year results, we're on plan, and I don't see 21 anything at this stage that will take us off plan in 22 23 terms of where we want to go, because our plans are 24 extremely aggressive in terms of the amount of cost 25 take-out, in terms of how we think about revenue growth.

$\mathbf 1$ I'm holding our team to it and they're delivering so $far.$ $\overline{2}$