TELSTRA GROUP LIMITED — Investor Presentation 2016

Sep 18, 2016

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19 September 2016

The Manager

Market 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 Meetings

In accordance with the Listing Rules, I attach the presentation to be made at the Telstra Retail Shareholder Information meetings, for release to the market. The meetings are being held at the following locations:

Location Melbourne (and Adelaide & Perth venues via webcast) Sydney (and Canberra venue via webcast) Brisbane

Date

19 September 2016 20 September 2016 21 September 2016

• A recording will be available for viewing after the event at www.telstra.com.au/aboutus/investors/key dates/shareholdermeetings.

Yours faithfully

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Damien Coleman Company Secretary

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

Telstra retail shareholder information meeting 2016

Andrew Penn, Chief Executive Officer

Warwick Bray, Chief Financial Officer

Disclaimer

• These presentations should not be construed as, and are not intended to (nor do they) constitute, an offer or invitation by or on behalf of Telstra, its subsidiaries, or any other person to subscribe for, purchase or otherwise deal in any shares, debt instrument or other securities, nor are they intended to be used for the purpose of or in connection with offers or invitations to subscribe for, purchase or otherwise deal in any shares, debt instruments or other securities. In particular, no indications of interest in respect of either the off-market buy-back or the subsequent on-market buy-back described in this presentation in this presentation are being sought and such buy-backs are not, and will not, be made directly or indirectly in or into the United States (including any of its states, territories and possessions). Certain shareholders will not be eligible to participate, directly or indirectly, in the buy-backs described in this presentation, including: (i) any person who is located or resident in the United States; (ii) any U.S. person (as defined in Regulation S under the U.S. Securities Act of 1933, as amended); (iii) any agent, fiduciary or other intermediary acting on a nondiscretionary basis for a principal giving instructions from within the United States or (iv) any person who has a registered address in Canada. American Depositary Receipts representing shares of Telstra will not be subject to the buy-backs described in this presentation. These presentations are not intended to (nor do they) constitute an offer or invitation by or on behalf of Telstra, its subsidiaries, or any other person to subscribe for, purchase or otherwise deal in any debt instrument or other securities, nor are they intended to be used for the purpose of or in connection with offers or invitations to subscribe for, purchase or otherwise deal in any debt instruments or other securities.

• 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.

• nbn™, nbn co and other nbn™ logos and brands are trade marks of nbn co limited and used under licence.

• ® ™ Registered trademark and trademark of Telstra Corporation Limited (ACN 051 775 556) and its subsidiaries. Other trademarks are the property of their respective owners.

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1

Andrew Penn, Chief Executive Officer

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Full Year 2016 Highlights
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Reported, continuing and discontinued basis Added 560,000 retail Retail fixed
mobile customer broadband customer
Net profit after tax services growth of 235,000
$5.8 billion, +35.9%
nbn GES income grew by 11.5%
Retail fixed bundle connections including 55.5% growth from
growth of 322,000 grew by GES International
289,000 to
500,000 $1.5 billion to be returned to
$1.8 billion profit on the
shareholders via capital
sale of Autohome shares EPS of 47.4
management
cents, +37.4%
(31.6 cents,
Final dividend of
-5.7% on a Strategic NPS 4 points lower
15.5 cents per share
continuing basis)
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2

We are committed to strengthening our network leadership

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Network interruptions Speed Recovery
• Network interruptions impacted customers in 2H16 Average speed of a 4G Mobile network recovery
• Undertaken extensive end to end review of core networks customers device has time 8x faster compared
improved by 25% to February 2016
involving international experts to help pinpoint sources of
potential risk and reduce the likelihood of future outages
Network resilience program Coverage
$250 million investment announced in FY16 including: Largest mobile coverage reaching 99.3% of the
population and extending over 2.4 million sq. km
• Mobiles: $50 million to improve recovery time and improve
monitoring
• Core: $100 million to improve resilience and reliability
• Broadband: $100 million to increase ADSL
capacity to meet customer demand
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Warwick Bray, Chief Financial Officer

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Group results – Income Statement

FY151	FY151	FY16	GROWTH (reported basis)	GROWTH (guidance basis2)
Sales revenue	$25.4b	$25.8b	1.9%	4.7%
Total Income3	$26.1b	$27.1b	3.6%	6.3%
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)	$10.5b	$10.5b	-0.6%	2.6%
Net profit after tax (NPAT) from continuing operations	$4.1b	$3.8b	-6.9%
Basic earnings per share from continuing operations (cents)	33.5	31.6	-5.7%
Profit from discontinued operations1	$0.2b	$2.0b	n/m
NPAT from continuing and discontinued operations	$4.3b	$5.8b	35.9%
Basic earnings per share(cents)	34.5	47.4	37.4%
1. FY15 reclassified to reflect Autohome being a discontinued operation. FY16 profit from discontinued ope 2. This guidance assumed wholesale product price stability from the beginning of the financial year and no sale of businesses, mergers and acquisitions and purchase of spectrum. Capex to sales guidance exclud 3.Total income excludes finance income.

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Group results – financial measures

FY15	FY15	FY16	GROWTH (reported basis)	FY16 (guidance basis1)
Capex2	$3.6b	$4.0b	12.7%
Free cashflow	$2.6b	$5.9b	126.3%	$4.8b
Ordinary dividends per share from continuingoperations(cents)	30.5	31.0	1.6%
Ratios
Capex to sales2	13.9%	15.2%	+1.3pp	15.2%
Payout ratio3	91%	98%	+7pp
Gearing	48.3%	43.9%	-4.4pp

• 1.This guidance assumed wholesale product price stability from the beginning of the financial year and no impairments to investments, and excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. Capex to sales guidance excluded externally funded capex.

• 2.Capex is defined as additions to property, equipment and intangible assets including capital lease additions, excluding expenditure on spectrum, measured on an accrued basis. Capex excludes externally funded spend.

3.Payout ratio from continuing operations. FY16 payout ratio excluding impairment 93%. Payout ratio from continuing and discontinued operations FY16 65% (FY15 88%).

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Product income performance

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+$96m $27,050m
+$461m
+$566m -$35m +72.2%
+3.6%
$26,112m -$424m -2.3% +146.3% Reported
$143m -$94m +$13m -$50m +$262m
+64.4%
+1.3% -1.3% +3.5% -1.7% +11.3%
FY15 MTAS & Mobile Fixed [2] Recurring Data & NAS Global Other Net one- New FY16
Reported FAD [1] NBN DA IP connectivity [3] core [4] off NBN business [5] Reported
DA
income
1.MTAS and FAD income impacts across Mobile $356m, Fixed $64m and Data & IP $4m as per guidance schedule.
2.Fixed domestic includes TUSOPA income FY16 $187m (FY15 $122m).
3.Global connectivity includes GES international results across fixed, data & IP, NAS and mobile.
4.Other core includes distribution from Foxtel, media and other miscellaneous income.
5.New business includes Telstra Health, Telstra Software Group and Telstra Ventures.
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Capital and portfolio management

• Shareholder returns Dividend FY16 ordinary dividend of 31.0c (+1.6%) $1.5b Capital Management Program $1.25b off-market buy-back Tender discount range of 6% to 14% to the market price[1] Important dates: • 30 September 2016: Closing date for tenders[2] • 3 October 2016: Buy-back date For Australian tax purposes, the off-market buy-back price will have two components: • Capital component of $1.78 per share • Fully franked dividend component equal to the difference between the buyback price and the capital component

• $0.25b on-market buy-back Expected to commence following completion of off-market buy-back

• 1. Market price means the weighted average price of Telstra’s ordinary shares on the ASX as Telstra may determine in its discretion over the five trading days up to and including the date the Tender Period closes, calculated to four decimal places, as determined by Telstra.
• 1. Neither the off-market buy-back nor the subsequent on-market buy-back will be made directly or indirectly in or into the United States. Page 10

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5

Andrew Penn, Chief Executive Officer

The demand for connectivity services continues to grow

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+60% Average monthly data consumption [1]
Network usage
(CAGR)
2011 2015
Share of Australian ~ 9x
38
retail banking via mobile 24
(%) 2013 2015 ~ 6x
Time spent watching
online videos on mobile 4
1
(hours per month) 2011 2015
Jun Jun Jun Jun
Source: Bain & Company, Nielsen, Roy Morgan.People watching online 2011 2016 2011 2016
videos on mobile 222 438
(millions per month) 2011 2015 Mobiles Fixed Broadband
Source: Bain & Company, Nielsen, Telstra network data 1. Average Monthly Data Consumption is defined as the total amount of data across Telstra’s 3G/4G and fixed networks
divided by the total number of mobile and broadband users including Retail, GES and Telstra Wholesale customers.
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6

Lifting our investment to match our aspiration

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Up to $3 billion additional capital expenditure over the next three years, resulting in increased
capex to sales [1] of ~18%
• Networks – to deliver next generation networks
• Digitisation – to radically simplify our core and improve the ways we work
• Customer experience – to offer a seamless and simple customer experience across all interactions
Investments will deliver significant customer and financial benefits and drive market differentiation
Targeting returns in excess of our Return on Invested Capital and consistent with investment guidelines
for organic investments
Our capital management framework will continue to underpin all future capital allocation decisions
1.This assumes wholesale product price stability and excludes mergers and acquisitions and purchase of spectrum. The capex to sales ratio also assumes the nbn™ rollout is in accordance with
the nbn Corporate Plan 2016 and excludes externally funded capex.
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Capital Management Framework

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FISCAL DISCIPLINE
1 2 3
MAXIMISING MAINTAINING RETAIN
RETURNS FOR FINANCIAL FINANCIAL
SHAREHOLDERS STRENGTH FLEXIBILITY
1. Maintain balance sheet settings consistent with a single-A credit rating
2. Ensure dividend remains fully-franked and seek to increase it over time [1]
3. Target medium-term capex/sales ratio ~14% excluding spectrum payments
4. Over a full year we will not borrow to pay the dividend or fund capital returns
5. Maintain flexibility for portfolio management and to make strategic investments
Capex/sales ratio [2] will increase to ~18% in FY17, FY18 and FY19
Cumulative excess free cash: $4.4b as at 30 June 2016
1.Any dividend is subject to the Board’s normal semi annual approval process for dividend declaration and there being no unexpected material events.
2.This assumes wholesale product price stability and excludes mergers and acquisitions and purchase of spectrum. The capex to sales ratio also assumes the nbn™ rollout is
in accordance with the nbn Corporate Plan 2016 and excludes externally funded capex.
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OBJECTIVES
PRINCIPLES
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7

2017 guidance[1]

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FY16 FY17
Measure
BASELINE GUIDANCE
Total income $27.1b mid to high-single digit
EBITDA $10.7b low to mid-single digit
Capex to sales 15.2% ~18%
Free cashflow $4.8b $3.5b - $4.0b
1.This guidance assumes wholesale product price stability and no impairments to investments, and excludes any proceeds on the sale of businesses, mergers and acquisitions
and purchase of spectrum. The guidance also assumes the nbn™ rollout is in accordance with the nbn Corporate Plan 2016. Capex to sales guidance excludes externally
funded capex. Guidance excludes the Ooyala impairment in FY16 and restructuring costs in FY17 of $300m to $500m.
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Telstra in the community
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We helped more than one
million vulnerable
customers stay Provided $175M
connected. of value through
our social and
community
investment
60 [th] mobile base station
programs
activated under Mobile
Blackspots Program
Reached more than 59,000 people through
our digital literacy programs including Tech
Savvy Seniors.
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8

	Page 17 E investor.relations@team.telstra.com P 1800 880 679 M 242 Exhibition Street, Melbourne VIC 3000 W www.telstra.com/investor Contact us

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Q&A
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