TELSTRA GROUP LIMITED — Investor Presentation 2011

Sep 11, 2011

==> picture [126 x 34] intentionally omitted <==

12 September 2011

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

TELSTRA RETAIL SHAREHOLDER INFORMATION MEETING

In accordance with the Listing Rules, I attach the presentation to be made by the CEO and CFO at the Telstra Retail Shareholder Information meetings being held between 12 and 19 September, for release to the market. Details of the meetings were provided to shareholders in the Telstra Annual Review, lodged with the ASX on 11 August, 2011.

I also attach a document which is to be provided to attendees at those meetings.

Yours faithfully,

==> picture [180 x 73] intentionally omitted <==

Carmel Mulhern

Company Secretary

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

==> picture [560 x 101] intentionally omitted <==

==> picture [147 x 91] intentionally omitted <==

TELSTRA RETAIL SHAREHOLDER INFORMATION MEETING

==> picture [145 x 91] intentionally omitted <==

Chief Executive Officer, David Thodey Chief Financial Officer, John Stanhope 12-19 September 2011

==> picture [560 x 131] intentionally omitted <==

DISCLAIMER

==> picture [26 x 29] intentionally omitted <==

This presentation summarises certain information included in Telstra’s Explanatory Memorandum for the resolution under Item 2 at the Telstra Annual General Meeting on 18 October 2011: Telstra’s participation in the rollout of the National Broadband Network.

This should be read with that Explanatory Memorandum and the Notice of Meeting and should not be relied on for the purposes of shareholders considering that resolution.

This presentation includes certain forward-looking statements that are based on information and assumptions known to date and are subject to various risks and uncertainties, assumptions and other factors that could cause the actual results or performance to be materially 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.

All amounts are in Australian Dollars unless otherwise stated.

2

1

==> picture [560 x 101] intentionally omitted <==

==> picture [560 x 311] intentionally omitted <==

----- Start of picture text -----

COMPANY PERFORMANCE
----- End of picture text -----

FINANCIAL RESULTS IN 2011

==> picture [26 x 29] intentionally omitted <==

	FINANCIAL RESULTS IN 2011	FINANCIAL RESULTS IN 2011	FINANCIAL RESULTS IN 2011
	$ Billions FY10 FY11	FY11 Growth 2H11 Growth Results vs Guidance
	Sales Revenue 24.8 25.0 EBITDA 10.8 10.2 Profit After Tax 3.9 3.2	0.7% 1.8% -6.4% 0.7% -16.8% 0.3%   
	Free Cash Flow 6 2 5 5 . . Ordinary Dividends 28c 28c	12 0% n/a  - . - -
	4

4

2

==> picture [560 x 403] intentionally omitted <==

----- Start of picture text -----

OUR STRATEGIC PRIORITIES ARE WORKING
1.IMPROVE CUSTOMER SATISFACTION
2.RETAIN AND GROW CUSTOMERS
3.SIMPLIFY THE BUSINESS
4.BUILD NEW GROWTH BUSINESSES
5
----- End of picture text -----

CUSTOMER SATISFACTION IS IMPROVING BUT MORE TO DO

==> picture [26 x 29] intentionally omitted <==

SERVICE, PRICE, PRODUCT AND BRAND MORE THAN 280 CALLS TO KEY SERVICE & NEW AND SUPPORT NUMBERS FROM A REFURBISHED TELSTRA SERVICE IN TELSTRA STORES AUSTRALIA NOW FREE >$1 MILLION IN CALL CENTRES DONATIONS FOR OPEN 24 HOURS DISASTER A DAY, SEVEN RELIEF DAYS A WEEK TELSTRA TECHNICIAN DEDICATED CONNECTED APPOINTMENTS HOME MOVE SENIORS AVAILABLE ON TEAM WORKSHOPS WEEKENDS 6

3

7

A STRONG YEAR FOR CUSTOMER GROWTH

==> picture [26 x 30] intentionally omitted <==

	Customer	FY10	FY11	TOTAL
	net adds (‘000)			CUSTOMERS
	Bundles	309	659	1,043
	Mobile broadband	616	914	2,576
	Total mobile customers	371	1,661	12,223
	Retail fixed broadband	-19	158	2,413
	Fixed Telephony lines	-358	-290	8,370

==> picture [560 x 272] intentionally omitted <==

----- Start of picture text -----

NATIONAL BROADBAND NETWORK
----- End of picture text -----

4

==> picture [560 x 403] intentionally omitted <==

----- Start of picture text -----

NBN DECISION FRAMEWORK
The Directors unanimously
recommend shareholders
CO-OPERATE vote in favour of Telstra’s
participation in the roll out
of the NBN.
GOVERNMENT
NBN POLICY
DO NOT
CO-OPERATE
9
----- End of picture text -----

==> picture [560 x 273] intentionally omitted <==

----- Start of picture text -----

A BETTER FINANCIAL OUTCOME FOR SHAREHOLDERS
APPROXIMATE VALUE OF THE TRANSACTION
$2.0bn $11.0bn
$5.0bn
$4.0bn
Disconnection Infrastructure Commonwealth Post-tax NPV
Payments and Access Agreements & of the Proposed
sale of lead-in Payments policy Transaction at June
conduits commitments 2010
----- End of picture text -----

==> picture [9 x 5] intentionally omitted <==

----- Start of picture text -----

10
----- End of picture text -----

5

INDEPENDENT EXPERT’S OPINION

==> picture [26 x 30] intentionally omitted <==

“In Grant Samuel’s opinion, the Proposal is in the best interests of Telstra and its shareholders”

The Independent Expert has concluded that:

• the value of Telstra if the Proposed Transaction proceeds is approximately $4.7 billion greater than under the best available alternative; and

• • th e va ue l diff eren ti a rema ns su l i b s t an ti a even un l d er a wide range of alternative assumptions Note: This assessment is post tax net present value at June 2011.

11

KEY SHAREHOLDER PROTECTIONS

==> picture [26 x 29] intentionally omitted <==

LONG TERM CONTRACTUAL COMMITMENTS FOR CERTAIN INFRASTRUCTURE

A ROLLOUT TERMINATION PAYMENT OF UP TO $500M GOVERNMENT PACKAGE OUR NATURAL HEDGE FROM EARNINGS FROM EXISTING NETWORKS

12

6

SUSTAINABLE FREE CASHFLOW GENERATION IN THE MEDIUM TERM

==> picture [26 x 30] intentionally omitted <==

==> picture [560 x 583] intentionally omitted <==

----- Start of picture text -----

Illustrative Free Cashflow trend of Telstra fixed line business and
Proposed Transaction []
Other payments under
Commonwealth Agreements
Incremental cashflow for
TUSMA Services
Infrastructure Access
Payments
Disconnection Payments
Fixed Line business
FY11 FY15
Assumes NBN rollout proceeds as set out in NBN corporate plan
13
STRONG MOMENTUM IN THE
BUSINESS
DIRECTORS UNANIMOUSLY
RECOMMEND NBN PARTICIPATION
Free Cashflow
----- End of picture text -----

7

==> picture [111 x 202] intentionally omitted <==

TElSTra’S parTICIpaTION IN THE NaTIONal BrOadBaNd NETWOrk

IT’S HOW WE CONNECT

==> picture [31 x 33] intentionally omitted <==

This document summarises certain information included in Telstra’s Explanatory Memorandum for the resolution under Item 2 at the Telstra Annual General Meeting on 18 October 2011: Telstra’s participation in the rollout of the National Broadband Network.

This should be read with that Explanatory Memorandum and the Notice of Meeting and should not be relied on for the purposes of shareholders considering that resolution. The Explanatory Memorandum and Notice of Meeting have been disclosed to the ASX and will be sent to all registered shareholders.

Telstra’s shareholders are being asked to vote on Telstra’s participation in the rollout of the National Broadband Network at the company’s AGM on 18 October 2011.

• Telstra’s Directors unanimously recommend shareholders vote IN FAVOUR of the resolution

• The Independent Expert, Grant Samuel, has concluded the Proposed Transaction is in the best interests of Telstra and its Shareholders

The Directors have determined that participating in the NBN rollout would be the best course of action for Telstra as it will deliver an overall result that is materially superior to any other option realistically available to Telstra, given current Government policy.

There are three key components of the agreements with NBN Co and the Commonwealth:

• A better overall financial outcome, contributing to sustainable free cashflow generation in the medium term;

• A more stable regulatory environment; and

• Greater strategic flexibility, enabling Telstra to maintain a strong focus on identified key areas of growth.

• Telstra’s commitment to disconnect progressively copper services and HFC broadband services as the NBN is rolled out;

• Telstra’s provision to NBN Co of long-term access to large volumes of infrastructure; and

• A range of Government measures.

We said in June 2010, when we announced the Financial Heads of Agreement, the approximate $11 billion consideration across these elements was critical to ensuring the Board could support a deal and when we signed Definitive Agreements in June this year that remained the case.

Compared to other alternatives the Proposed Transaction should provide Telstra with:

INdEpENdENT EXpErT’S OpINION

The Independent Expert has concluded that the Proposed Transaction is in the best interests of Telstra and Telstra Shareholders. The Independent Expert’s analysis shows that:

• The value of Telstra if the Proposed Transaction proceeds is approximately $4.7 billion* greater than under the best available alternative; and

• The value differential remains substantial even under a wide range of alternative assumptions (for example, as to the timing of the rollout of the NBN Fibre Network).

*post-tax net present value as at June 2011

Telstra Corporation Ltd (ABN 33 051 775 556)

12 September 2011

TElSTra’S parTICIpaTION IN THE NBN

BaCkgrOuNd

mOrE INfOrmaTION

The Directors’ consideration of Telstra’s participation in the rollout of the NBN was triggered by two major Government policy initiatives:

• The April 2009 decision to build and operate the NBN to provide fibre connections for high speed broadband services to 90% of Australian homes and businesses (subsequently increased to 93% of homes and businesses); and

• The November 2010 passage of legislation requiring Telstra to choose between voluntary structural separation or mandatory functional separation in relation to our fixed line business.

The Government’s policy initiatives will result in a net loss of value of Telstra overall, irrespective of whether Telstra participates in the rollout of the NBN.

Telstra undertook a rigorous analysis of the options realistically available to it to ensure the best outcome for Telstra and its shareholders in these circumstances. This includes considering options that did not involve Telstra participating in the rollout of the NBN.

dETaIlS Of vOTE

Telstra’s 2011 Annual General Meeting is scheduled to be held at 10.00am (Sydney time) on Tuesday, 18 October 2011 at the Sydney Convention and Exhibition Centre, Hall No. 1, Darling Drive, Darling Harbour, Sydney, and will be broadcast live to venues in Melbourne and Brisbane.

The Explanatory Memorandum and Notice of Meeting have been disclosed to the ASX and will be sent to all registered shareholders. It is also available from Telstra’s Investor Relations website www.telstra.com/investor , via email to investor.relations@team.telstra.com , or by writing to Telstra Investor Relations Department, 242 Exhibition Street, Melbourne, VIC 3000.

WHaT IS THE ‘prOpOSEd TraNSaCTION’?

The Proposed Transaction involves the implementation of the Definitive Agreements by Telstra (subject to the Conditions Precedent being satisfied or waived).

The Proposed Transaction and associated Government policy commitments are expected to deliver approximately $11 billion in post-tax net present value (NPV) as at June 2010, subject to a range of dependencies and assumptions. It will not be in the form of an upfront payment, but is the present value of consideration and benefits to be received over many years. This value does not include broader benefits which Telstra may gain from the Definitive Agreements and which are hard to quantify.

==> picture [377 x 10] intentionally omitted <==

----- Start of picture text -----

apprOXImaTE pOST-TaX NET prESENT valuE Of THE prOpOSEd TraNSaCTION [1]
----- End of picture text -----

==> picture [398 x 254] intentionally omitted <==

----- Start of picture text -----

$1.0bn $11.0bn
$0.3bn
$0.7bn
$5.0bn
$4.0bn
Disconnection Infrastructure TUSMA Housing estate Other [3] Post-tax
Payments and Access Services fibre provision NPB of the
sale of Lead-in Payments responsibilities Proposed
Conduits [2] Transaction
Value from the NBN Co Value from Commonwealth Agreements
Agreements and other policy commitments
----- End of picture text -----

Note 1: The values are discounted to the time of signing of the Financial Heads of Agreement in June 2010 to facilitate direct comparison with terms agreed at that time.

Note 2: While the sale of Lead-in Conduits is covered in the Infrastructure Services Agreement, it is included in the Disconnection Payments component of the table since it relates to assets or services Telstra will not control once the NBN is built.

Note 3: ‘Other’ includes contractural commitments by the Commonwealth towards funding for retraining and redeployment of Telstra staff, and migration of certain customers and services onto the NBN Fibre Network, as well as costs Telstra will avoid due to the public education campaign undertaken by NBN Co.