TELSTRA GROUP LIMITED — Investor Presentation 2017

Sep 17, 2017

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18 September 2017

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 8600 9800

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 scheduled to be held at the following times:

Location

Date and Local time

Sydney 18 September 2017 Wesley Conference Centre 2:00pm–4:00pm 220 Pitt Street Brisbane 19 September 2017 Hilton Hotel 10:30am–12:30pm 190 Elizabeth Street Adelaide 20 September 2017 Crowne Plaza 10:30am–12:30pm 16 Hindmarsh Square Perth 22 September 2017 Parmelia Hilton Hotel 10:30am–12:30pm

Parmelia Hilton Hotel 14 Mill Street

The Retail Shareholder Information Meeting to be held in Sydney on 18 September 2017 will be webcast live online from 2:00pm (Sydney time) at telstra.com.au/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 2017

Andrew Penn, Chief Executive Officer Warwick Bray, Chief Financial 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 “Our material risks” section of our Operating and Financial Review (OFR) which is set out in Telstra’s financial results for the year ended 30 June 2017 which was lodged with the ASX on 17 August 2017, and also included in our 2017 Annual Report which was released on 1 September 2017, and are available on Telstra’s Investor Centre website www.telstra.com/investor.

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 trademarks of nbn co limited and used under licence.

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The Spectrum device, and ™ are Trade marks of Telstra Corporation Limited and ® Registered trade mark of Telstra Corporation Limited. Other trademarks are the property of their respective owners.

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Andrew Penn, Chief Executive Officer

Full year 2017 results | Highlights

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On a reported
FY17 final dividend of 15.5c; $5.2bn returned to Strong customer growth across
basis, Total Income shareholders via dividends and share buy-backs key segments:
+4.3%; EBITDA
+2.0%. • Domestic retail mobile
Strategic Net Promoter Score (NPS) +6 points +218,000 including 169,000
On a guidance
basis [1] , Total over last 6 months (flat compared to June 2016); Episode NPS +2 points over last 6 months • postpaid handheldDomestic retail fixed broadband
Income +4.3%;
EBITDA +4.5%. (+3 points compared to June 2016) +132,000
• Retail bundles +224,000
Mobile service revenue growth +0.7% in second half, (88% of fixed data customer
EBITDA margin 43%, churn reduced base)
nbn™ market NAS income
4G network
share [2] of 52% growth of 30.6%
now reaching
with 676,000 with 3pp 99% of
new nbn improvement in
connections EBITDA margin population
We have delivered against our guidance and strategy in the context of a highly competitive and dynamic market
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1. This guidance assumed wholesale product price stability and no impairments to investments, and excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The guidance also assumed the nbn™
rollout was in accordance with the nbn Corporate Plan 2016. Capex to sales guidance excluded externally funded capex. Guidance excluded the Ooyala impairment in FY16 and restructuring costs in FY17.
2. Excluding satellite.
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Our vision is to become a world class technology company that empowers people to connect

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1. Traditional worlds of technology and computing 2. Demand is growing, but value is captured at the
are converging layer of applications and services
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We are making good progress

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Innovation Simplified business Building capability for the future
Initiatives aimed at lifting the level of Refocused our strategy on new growth Creating new customer-inspired culture
innovation and adjacencies closer to the core and capabilities
Networks Applications and services Repositioning the Telstra brand
Completed key items in major network Delivering world-leading digital To create better ways to empower
resiliency and redundancy program experiences for our customers everyone to thrive in a connected world
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Our markets are evolving rapidly

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Regulatory and
Competitive dynamics Digital disruption Migration to nbn™
macro economics
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Further commitment to increased productivity

On productivity, we will do more, and we will do it faster:

• We will bring forward the more than $1 billion net productivity target announced in November 2016 by one year, now delivering it by FY20

• We will increase our target by $500 million and deliver more than $1.5 billion net productivity by FY22

• We expect benefits will be achieved at a broadly consistent pace

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Capital allocation strategy review

In November 2016 we announced our intention to review our capital allocation strategy over a 6-12 month period

• We said we would take into account: • nbn™ receipts • balance sheet structure and settings

• longer term capex requirements post rollout of the nbn

• • investment decisions including M&A criteria • returns to shareholders including dividends, buy-backs and other forms of returns Since November 2016 we consulted with our shareholders and have now completed the capital allocation strategy review Overwhelming and consistent feedback from our shareholders highlighted the importance of retaining a strong balance sheet through the nbn transition period and against the backdrop of a competitive operating environment

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Capital allocation strategy review – outcomes

Revised capital management framework supports

• Maximising returns for shareholders

• Maintaining financial strength

• Retaining financial flexibility

New dividend policy

• Fully-franked ordinary dividend set at 70-90% of ‘underlying earnings’[1,2,3]

• Return in the order of 75% of future net one-off nbn™ receipts to shareholders over time via fullyfranked special dividends[2,3]

• FY18 total dividend expected at 22 cents per share including both ordinary and special[3]

• 1.Underlying earnings is defined as NPAT from continuing operations excluding net one-off nbn receipts (as defined in footnote 2).

• 2.“net one-off nbn receipts” is defined as net nbn one off Definitive Agreement receipts (consisting of PSAA, Infrastructure Ownership and Retraining) less nbn net cost to connect less tax.

• 3.Return subject to no unexpected material events, assumes nbn™ rollout is broadly in accordance with the nbn Corporate Plan 2017 and receipt of associated one-offs, and is subject to Board discretion having regard to financial and market conditions, business needs and maintenance of financial strength and flexibility consistent with Telstra’s capital management framework.

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Warwick Bray, Chief Financial Officer

Group results – Income Statement Income Statement FY16 FY17 GROWTH (reported basis) GROWTH (guidance basis1)	Group results – Income Statement Income Statement FY16 FY17 GROWTH (reported basis) GROWTH (guidance basis1)	Group results – Income Statement Income Statement FY16 FY17 GROWTH (reported basis) GROWTH (guidance basis1)	Group results – Income Statement Income Statement FY16 FY17 GROWTH (reported basis) GROWTH (guidance basis1)	Group results – Income Statement Income Statement FY16 FY17 GROWTH (reported basis) GROWTH (guidance basis1)
		FY17	GROWTH (reported basis)	GROWTH (guidance basis1)
Sales revenue2	$25.8b	$25.9b	0.3%	0.3%
Total income2	$27.1b	$28.2b	4.3%	4.3%
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)	$10.5b	$10.7b	2.0%	4.5%
Earnings Before Interest and Tax (EBIT)	$6.3b	$6.2b	-1.1%
NPAT from continuing operations	$3.8b	$3.9b	1.1%
Basic earnings per share (cents)3	31.6	32.5	2.8%
Profit from discontinued operations	$2.0b	-	n/m
NPAT from continuing and discontinued operations	$5.8b	$3.9b	-33.8%
DPS (cents)	31.0	31.0	-
Payout ratio3	98%	95%	-3pp

• 1.This guidance assumed wholesale product price stability and no impairments to investments, and excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The guidance also assumed the nbn™ rollout was in accordance with the nbn Corporate Plan 2016. Capex to sales guidance excluded externally funded capex. Guidance excluded the Ooyala impairment in FY16 and restructuring costs in FY17.

• 2.Sales revenue excludes other revenue. Total income excludes finance income.

• 3.Basic earnings per share and payout ratio from continuing operations. Basic earnings per share from continuing and discontinued operations FY17 32.5 cents (FY16 47.4 cents).

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Product EBITDA performance

Product EBITDA performance	Product EBITDA performance	Product EBITDA performance	Product EBITDA performance	Product EBITDA performance	Product EBITDA performance
	EBITDA FY16		FY17	GROWTH	GROWTH
	Mobile	$4,384m	$4,319m	-$65m
	Fixed excl. nbn C2C1,2	$3,307m	$2,960m	-$347m
	Recurring nbn DA	$349m	$420m	$71m
	Data & IP	$1,752m	$1,586m	-$166m
	NAS	$142m	$301m	$159m
	Global connectivity	$265m	$275m	$10m
	Other core3	$201m	$207m	$6m
	Recurring core	$10,400m	$10,068m	-$332m
	Net one-off nbn DA less nbn net C2C2 New businesses4	$500m -$189m	$1,285m	$785m $31m
			-$158m
	Guidance basis	$10,711m	$11,195m	$484m
	Less guidance adjustments5	-$246m	-$516m	-$270m
	Reported basis	$10,465m	$10,679m	$214m
	1. Fixed excludes one-off nbn connection revenue FY17 $59m (FY16 $34m) and includes TUSOPA income FY 2. Fixed excludes nbn cost to connect (C2C) FY17 $418m (FY16 $218m). nbn C2C net of one-off connection r 3. Other core includes distribution from Foxtel, media, nbn commercial works (sale of assets) and other miscel 4. New businesses includes Telstra Health, Ooyala and Telstra Ventures. 5. Refer to FY17 Full year results and operations review - guidance versus reported results reconciliation. Guid

Updated Capital Management Framework

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FISCAL DISCIPLINE
1 2 3
MAXIMISING MAINTAINING RETAIN
RETURNS FOR FINANCIAL FINANCIAL
SHAREHOLDERS STRENGTH FLEXIBILITY
1. We remain committed to retain balance sheet settings consistent with an A band credit rating
2. Pay fully-franked ordinary dividend of 70-90% of underlying earnings [1,2]
3. Target capex/sales ratio of ~14% excluding spectrum from FY20 [4,5]
4. Maintain flexibility for portfolio management and to make strategic investments
Return in the order of 75% of net one-off nbn™receipts to shareholders over time via fully-franked special dividends [2,3]
Capex/sales ratio [4,5] of ~18% in FY18 and FY19
1. Underlying earnings is defined as NPAT from continuing operations excluding net one-off nbn receipts (as defined in footnote 2).
2. “net one-off nbn receipts” is defined as net nbn one off Definitive Agreement receipts (consisting of PSAA, Infrastructure Ownership and Retraining) less nbn net cost to connect less tax.
3. Return subject to no unexpected material events, assumes nbn™ rollout is broadly in accordance with the nbn Corporate Plan 2017 and receipt of associated one-offs, and is subject to Board discretion having regard
to financial and market conditions, business needs and maintenance of financial strength and flexibility consistent with Telstra’s capital management framework.
4. Capex excludes expenditure on spectrum, measured on an accrued basis. Capex excludes externally funded capex.
5. 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 broadly in accordance with the nbn Corporate Plan 2017. Page 14
OBJECTIVES
PRINCIPLES
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FY18 guidance1 Measure FY17 FY18 GUIDANCE	FY18 guidance1 Measure FY17 FY18 GUIDANCE	FY18 guidance1 Measure FY17 FY18 GUIDANCE
		FY18 GUIDANCE
Total income	$28.2b	$28.3b to $30.2b
EBITDA	$10.7b	$10.7b to $11.2b
Net one-off nbn DA receipts less nbn net C2C	$1.3b	$2.0b to $2.5b
Capex	$4.6b	$4.4b to $4.8b
Free cashflow	$4.3b	$4.4b to $4.9b

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 broadly in accordance with the nbn Corporate Plan 2017. Capex excludes externally funded capex.

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Jenny West, Director Telstra Country Wide

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Telstra in the community

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Over 35,000 seniors educated
through our Tech Savvy and Provided assistance packages
worth >$180,000 for customers
Digital Ambassadors programs,
affected by major natural disasters,
including >20,000 in NSW
including the floods in northern
NSW, floods and fire in western
NSW and the Carwoola NSW fire
Telstra Foundation committed
$6 million nationally to
community programs and
174 new sites under the Federal partnerships in FY17. In NSW
Government’s Mobile Blackspots this supported >550 Code Clubs
Program providing better and a cyber safety program in
coverage in regional Australia public libraries
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Q&A

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