TELSTRA GROUP LIMITED — Interim / Quarterly Report 2012

Feb 8, 2012

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9 February 2012

The Manager

Company Announcements Office Australian Securities Exchange 4[th] Floor, 20 Bridge Street SYDNEY NSW 2000

Office of the Company Secretary

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

General Enquiries 08 8308 1721 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Financial Results for the Half Year ended 31 December 2011 – analyst briefing presentation

In accordance with the Listing Rules, I attach a copy of a presentation to be made today, for release to the market.

This Announcement has been released simultaneously to the New Zealand Stock Exchange.

Yours faithfully

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Damien Coleman Company Secretary

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

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• TELSTRA HALF YEAR RESULTS ANNOUNCEMENT 2012

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ANNOUNCEMENT 2012
DAVID THODEY, CHIEF EXECUTIVE OFFICER
DISCLAIMER
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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• 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.

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TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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• ® ™ Registered trademark and trademark of Telstra Corporation Ltd. Other trademarks are the property of their respective owners.

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WE ARE DELIVERING
MOMENTUM CONTINUES
FISCAL 2012 GUIDANCE CONFIRMED
OUR STRATEGY IS WORKING
1. IMPROVE CUSTOMER SATISFACTION
2. RETAIN AND GROW CUSTOMER NUMBERS
3. SIMPLIFY THE BUSINESS
4. BUILD NEW GROWTH BUSINESSES
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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-
TELSTRA HALF YEAR RESULTS
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• TELSTRA HALF YEAR RESULTS ANNOUNCEMENT 2012 MARK HALL, ACTING CHIEF FINANCIAL OFFICER

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FINANCIAL RESULTS

	FINANCIAL RESULTS	FINANCIAL RESULTS	FINANCIAL RESULTS	FINANCIAL RESULTS	FINANCIAL RESULTS	FINANCIAL RESULTS	FINANCIAL RESULTS
		$ Billions	1H11	1H12	% Growth (reported basis)	% Growth (guidance basis*)
		Total Revenue	12.3	12.4	1.1	1.2
		EBITDA	4.6	4.8	3.7	4.5
		EBIT	2.4	2.6	7.9
		Attributable NPAT	1.2	1.5	22.9
		Accrued Capex	1.5	1.7	18.2
	TELSTRA TEMPLATE 4X3 BLUE BETA	TELPPTV4	Free Cash Flow	2.0	1.8	-11.1
		Ordinary DPS (cents)	14	14	-

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SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES

	SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES	SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES	SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES	SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES	SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES	SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES	SALES REVENUE BY PRODUCT – MIX CHANGE CONTINUES
	+$46m -$14m $12,405m +$94m +$430m +19.4% +5.8%
	Hardware ACCELERATED GROWTH FOR MOBILES, FBB RETAIL AND NAS $430M MOBILE GROWTH OFFSET DECLINES FROM PSTN AND SENSIS $12,263m -$247m -$167m -9.0% -24.0% +1.2% Services +10.0% +15.7% Total Mobile +10.9%
	TELSTRA TEMPLATE 4X3 BLUE BETA	TELPPTV4 1H11 PSTN Sensis FBB Retail Other 1H12 NAS Mobiles Other includes IP & Data (+$10m), ISDN (-$27m), Other FBB incl. wholesale (-$35m), Other fixed (-$30m), Offshore content & online content (-$10m), CSLNW (+$12m), TelstraClear (-$10m), Other offshore services incl. Reach (+$64m), Pay TV (+$16m), Other advertising revenue (-$35m) and Other (+$31m).
		ANOTHER STRONG HALF FOR CUSTOMER GROWTH Retail customer net adds (‘000s) 1H11 2H11 1H12 Closing Customer Numbers Postpaid handheld 301 334 338 6,400
		Retail customer net adds (‘000s)	1H11	2H11	1H12	Closing Customer Numbers
		Postpaid handheld	301	334	338	6,400
		Prepaid handheld (Unique users)	116 (54)	-14 (-22)	98 (67)	3,291 (1,988)
		MBB	472	340	436	2,746
		M2M	38	81	86	744
		Total Mobile SIOs	927	741	958	13,181
	TELSTRA TEMPLATE 4X3 BLUE BETA	TELPPTV4 Fixed Bundles 420 239 206 1,249 PSTN Retail -109 -140 -124 7,034 FBB Retail 139 84 106 2,519 Excludes the removal of 65k non-revenue generating services from the base	Fixed Bundles	420	239	206	1,249
		PSTN Retail	-109	-140	-124	7,034
		FBB Retail	139	84*	106	2,519

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DOMESTIC PERFORMANCE IMPROVING
Sales Revenue Sales Revenue Sales Revenue
CUSTOMER SALES AND SERVICE: SALES REVENUE +3.6%
ENTERPRISE &
CONSUMER & COUNTRYWIDE BUSINESS
GOVERNMENT
Mobile services rev. +14.4% Mobile services rev. +4.3% Mobile services rev. +13.5%
Customer satisfaction +6.7% NAS revenue +38.8% NAS revenue +12.6%
PRODUCTIVITY BENEFITS REINVESTED IN STRATEGIC
INITIATIVES
+$126m -$77m
-$52m
+$233m -$78m
-$456m
+$157m
$7,829m +$69m
$7,751m
-1.0%
Bond rate
impact on
DVCs Price Business Growth provisionslabour Impairments SouFun Redundancy Productivity Benefits
1H12
1H11
OPEX
OPEX
Growth Other Productivity
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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1% DECLINE IN REPORTED OPEX
LABOUR +5.6% (+$111m) Adjusted labour expense +1.0%
DVCs +0.4% (+$13m) Increase to support customer growth
OTHER -7.5% (-$202m) Productivity savings and lower impairment
adjusted for bond rate impacts on employee provisions, contractor conversions & redundancy
LABOUR PRODUCTIVITY SAVINGS PARTLY OFFSET BY RATE
INCREASES AND INVESTMENT IN GROWTH
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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LABOUR PRODUCTIVITY SAVINGS PARTLY OFFSET BY RATE
INCREASES AND INVESTMENT IN GROWTH
LABOUR AND LABOUR SUBSTITUTION EXPENSE DOWN 1%
$2.35B $2.35B
$2.32B
1H11 2H11 1H12
Analysis excludes Redundancy and Recruitment expenses and 1H12 bond rate impact on employee provisions
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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PRODUCT PROFITABILITY*

		EBITDA Margin	FY09	FY10	FY11	1H11	2H11	1H12
		Mobiles	34%	35%	32%	29%	35%	34%
		Fixed BB	35%	40%	33%	33%	33%**	37%
		PSTN	59%	60%	59%	59%	59%	60%
		IP & Data	57%	62%	61%	61%	61%	59%
		Sensis	52%	58%	56%	41%	65%	25%***
		Telstra Group	43.2%	43.7%	40.6%	37.3%	43.8%	38.3%

• Product EBITDA margins are for selected portfolios which are reflective of Telstra’s domestic business. These EBITDA margins are based on management estimates and are calculated in accordance with AASB 8 and reconcile with segment information. ** The movement in Fixed BB margins has resulted from a retrospective change to the treatment of customer rebates from non product specific revenue to product revenue. *** Adjusted for the timing of the Perth Yellow Pages book the margin would be 30%.

DRIVERS OF IMPROVING MOBILE PROFITABILITY

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STEADY POSTPAID HANDHELD
LOWER CHURN LOWER SUBSIDY, MORE MRO
ARPUS
$66.38 Volume mix
16.8%
$63.76
Subsidy
13.2% MRO $0
MRO other
SIM Only
Prepaid
2H10 1H11 2H11 1H12 2H10 1H11 2H11 1H12 1H11 1H12
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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CASH FLOW AND CAPEX ARE CLOSELY MANAGED

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FREE CASHFLOW ACCRUED CAPEX
$6.2b
$5.5b
$4.4b $4.6b
$3.5b $3.4b
1H09 1H10 1H11 1H12 1H09 1H10 1H11 1H12
$1.9b $2.6b $2.0b $1.8b $2.1b $1.6b $1.5b $1.7b
FY09 FY10 FY11 1H12 FY09 FY10 FY11 1H12
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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	STRONG FINANCIAL SETTINGS Interest 1H11 1H12 Change (%) Net Borrowing Costs1 $531m $511m -3.8% Other $40m -$115m -
		Interest	1H11	1H12	Change (%)
		Net Borrowing Costs1	$531m	$511m	-3.8%
		Other	$40m	-$115m	-
		N Fi	1
		et nance Costs	$57m	$396m	-30.6%
		Avg. Borrowing Costs	6.94%	6.95%	+0.01pp
		Net Debt	$13,595m (30 June 11)	$14,098m	+3.7%
		Financial Parameters	Comfort Zones4	Actual (incl. IFRS)	Actual (adj. for IFRS & other)3
	TELSTRA TEMPLATE 4X3 BLUE BETA	TELPPTV4 Debt 1Net 2Inter 3Actu 4 Deb	Debt Servicing	1.5 – 1.9x	1.48	1.53
		Gearing	50% to 70%	54.9%	56.5%
		Interest Cover2	>7x	9.3	9.3

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GUIDANCE REAFFIRMED 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 Cash Flow $4.5 - $5.0 billion Dividend 28 cps fully franked * 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 there being no unexpected material events - TELSTRA HALF YEAR RESULTS* ANNOUNCEMENT 2012 DAVID THODEY, CHIEF EXECUTIVE OFFICER

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OUR PRIORITIES REMAIN UNCHANGED AND WE ARE MAKING PROGRESS

1. IMPROVE CUSTOMER SATISFACTION

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1. RETAIN AND GROW CUSTOMER NUMBERS

2. SIMPLIFY THE BUSINESS 4.

3. BUILD NEW GROWTH BUSINESSES

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CUSTOMER GROWTH CONTINUES
CUSTOMER SERVICES DELIVERING VALUE
RECORD MOBILE ADDS RESILIENT FBB ARPU
958
927 10.8% 10.9%
$57.32
9.4% 741 $56.42
$58 40.
$56.54
1H11 2H11 1H12 1H09 1H10 1H11 1H12
Revenue growth Customer adds (‘000)
BUNDLES GROWTH STEMS IP ACCESS ON TRACK TO GENERATE
PSTN LINE LOSS $1BN OF REVENUE IN FY12
Bundled customers (‘000) 1 249, $514M
$498M
804
$472M
PSTN line loss (‘000) $441M
-148
-127 -136
-163
2H10 1H11 2H11 1H12 2H10 1H11 2H11 1H12
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CUSTOMER SATISFACTION IS IMPROVING

ACTIONS

• New consumer bill format

• IT billing enhancements to provide customers with more billing information

• Mobile Usage Alerts so customers can better manage their usage and avoid bill shock

• 24/7 customer support via social media

• Proactive outbound calls to home movers

• New IVR functionality reducing time spent on the phone

• • SMS sent to customers whose home phone impacted by an outage to advise when service restored

DELIVERABLES

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• 28% reduction in consumer call volumes

• 24% reduction in TIO complaints

• 6% improvement in internal customer satisfaction survey result

• Lower churn

WE CONTINUE TO SIMPLIFY THE BUSINESS CUSTOMER SERVICES DELIVERING VALUE

KEY AREAS OF FOCUS

KEY OUTCOMES

CUSTOMER EXPERIENCE PROCESS PRODUCTIVITY

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Reduction in contact centre volumes 

More transactions on-line 

Improved bad debts % sales revenue 

Labour productivity improvement 

Improved marketing efficiency 

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NAS BUSINESS CONTINUES TO GROW

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NAS REVENUE GROWTH
19.4% REVENUE GROWTH
19%
11% SALES ORDER PIPELINE >$1B
-3%
-14% SIGNIFICANT CONTRACT WINS
FY09 FY10 FY11 1H12
ASIAN ASSETS – CSL PERFORMING WELL
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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REACH: EXTEND OUR ASIA IP NETWORK
STRATEGIC PRIORITIES
AND NAS/CLOUD CAPABILITIES
CSLNW REVENUE +12%
MS&C – REACH INTEGRATION &
EXPANDED FOOTPRINT
ACTIVELY MANAGING CHINESE
ASSETS
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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DIGITAL MEDIA BUSINESS ESTABLISHED
PAY TV
IPTV
SME ADVERTISING
TELSTRA DIGITAL MEDIA
ONLINE BUSINESSES
ISP
ADVERTISING
SENSIS UPDATE
TELSTRA TEMPLATE 4X3 BLUE BETA | TELPPTV4
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KEY MARKET DEVELOPMENTS

• Progress in restructuring operations to adapt to challenges of the directories market THREE YEAR TRANSITION

• • Acceleration in decline of Yellow KEY PART OF DIGITAL MEDIA BU

• Acceleration in decline of Yellow print revenues

• Di g ital demand takin g lon g er to monetise

• HIGH TEENS REVENUE DECLINE AND ~30% EBITDA DECLINE EXPECTED FOR FY12

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SUSTAINABILITY AT TELSTRA

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SUMMARY OUR STRATEGY IS DELIVERING VALUE CUSTOMER SATISFACTION IS IMPROVING GUIDANCE IS UNCHANGED

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