Annual Report 2016
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Strategy and performance

Build new growth businesses

Strategy and performance

Build new growth businesses

We are investing in long term growth
Bringing to life what it means to be a world class technology company

We are leveraging our core strengths in networks, connectivity and commitment to customer advocacy to capture opportunities in Asia and in emerging areas like eHealth, software and digital media.

The rapid adoption of digital technology and online services is creating a range of new business opportunities, including supporting the connectivity boom that is underway in key markets in Asia and developing innovative new products through the Telstra Software Group, Telstra Health® and Telstra VenturesTM. To realise these opportunities we are assembling innovative technology, capability and talent from around the world to deliver transformative services for our customers.

These business opportunities create a new dynamic for Telstra in terms of earnings and investment returns, which is important given the impact the nbnTM network will have on our mix of earnings as the rollout progresses. We expect to see the composition of our earnings change as we provide more managed services to enterprise customers, which tend to be lower margin, and we continue to develop early stage new businesses in areas like health and software.

We are investing in long term growth

Asia

Asia is one of the key elements of Telstra’s growth strategy. We are leveraging our longstanding presence and strong network in the region to expand our enterprise services business and to pursue longer term growth opportunities.

With the successful integration of the Pacnet business we acquired in 2015, Telstra now operates the largest submarine cable network in the Asia Pacific Region, representing around 30 per cent of total active intra-Asia capacity, and the largest integrated data centre footprint in the region.

Building on this unique set of assets we are offering market leading network applications and services, such as cloud and unified communications, and deepening our presence in the high growth markets of Indonesia, through our joint venture telkomtelstra, and China, through our joint venture, Telstra PBS.

Telstra is also pursuing new opportunities in Asia, through Telstra Health, Telstra Software Group and Telstra Ventures. In FY16, this included signing a Memorandum of Understanding with the Shanghai Institute of Medical Quality to make Telstra Health’s hospital data tools available in China and expanding our connections to the ventures community in South East Asia through an investment in Monk’s Hill Ventures.

During the year we sold 47.4 per cent of the total issued shares in Chinese online business Autohome for US$1.6 billion to Ping An Insurance Group, realising significant value for Telstra shareholders after a period of rapid growth since we invested in 2008. We retain a 6.5 per cent interest in Autohome.

Pacnet

In 2015 Telstra acquired Pacnet Limited, a provider of connectivity, managed services and data centre services to carriers, multinational corporations and governments in the Asia-Pacific region. In FY16, we achieved our integration milestones by exceeding our planned cost synergies, combining our teams in more than 10 locations and creating one service experience. Industry analyst Gartner now recognises the combined business as “visionary”, and rates Telstra number one for high capacity and low latency networks in Asia.

telkomtelstra

It was a significant year for telkomtelstra, with the business becoming fully operational and the first suite of products and services being offered in the market. telkomtelstra signed on a significant number of customers and moved into new, state-of-the-art facilities in Jakarta housing an immersive Customer Experience Centre, which is the only one of its kind in Indonesia.

We are investing in long term growth (cont.)

Network Applications & Services (NAS)

During the year we continued to execute our NAS strategy of combining organic and inorganic growth to support our key solutions and offerings in Australia and internationally.

We acquired Kloud, a company that provides professional and managed services to enterprises across Australia and the Asia-Pacific region. Kloud also supplies solutions for productivity, identity, security, application development, and cloud infrastructure for enterprise cloud applications. This has enhanced our consulting-led capabilities by expanding our professional and managed services, complementing previous acquisitions such as NSC, O2 Networks and Bridge Point.

Telstra Ventures

Telstra Ventures, our corporate venture capital arm, continued to invest in high growth technology companies that Telstra can leverage to develop new products and services for our customers.

In FY16, Ventures completed 11 new investments: Boomtown, Cloopen, Compare88, Instart Logic, Monk’s Hill Ventures, NGINX, Qiniu, Singular, Snapchat, Uhana, and vArmour. This included our first two Ventures investments in China in Cloopen and Qiniu, and leading US-based companies like Instart Logic, NGINX and vArmour, that we can collaborate with to create services for enterprise customers.

We are investing in long term growth (cont.)

Telstra Health

Telstra Health strengthened its position as one of Australia’s leading providers of eHealth services in FY16 by continuing to focus on the use of technology to improve healthcare outcomes for patients and providers.

Since 2013, we have invested more than $235 million to acquire, invest or partner with 18 health-related companies, including acquiring hospital resource optimisation designer Health IQ and software product ComCare in FY16, which will help us to transform and improve the efficiency of the healthcare sector.

These capabilities enable Telstra to offer technology services designed to reduce inefficiency, improve productivity and increase quality of health care. For example, an independent evaluation by the Northern Territory Government highlighted that the National Telehealth Connection Service run by Telstra Health contributed to their ability to grow the use of telehealth by more than 700 per cent over a 14 month period, with an estimated reduction in travel costs of $1.1 million.

New services launched in FY16 include Telstra ReadyCare®, a 24/7 telemedicine service that connects Australians to an experienced GP by phone or video and is now used by consumers, business and government.

Telstra Health was also selected by the Commonwealth Department of Health to deliver the National Cancer Screening Register under a five year contract. Telstra will build and operate the Register that will help manage bowel and cervical cancer screening programs for more than 11 million Australians by integrating existing databases and improving access for patients and practitioners to medical records.

Bringing to life what it means to be a world class technology company

Telstra is building innovative growth businesses in new markets and industries, as well as driving innovation within our existing business, to help meet our ambition of becoming a world class technology company.

We define innovation as new ideas, new products or new services that overcome a problem or do something in a better, simpler way for our customers. There are four parts to our innovation approach – incubation, collaboration, new methods and, most importantly, people.

We are working on innovations that create opportunities and new possibilities for the things that matter, such as keeping people healthy, safe and creating a more liveable world.

Telstra Software Group

Software remains a key focus area as we drive growth through new businesses and digital ecosystems. Telstra Software Group aims to create long-term global growth in markets adjacent to Telstra’s core business.

Software Businesses

The Ooyala family of Over The Top (OTT) premium video platform capabilities has grown, as the acquisitions of Videoplaza and Nativ have been successfully integrated into the company. The Ooyala impairment we recognised in the year, reflects the changing dynamics in the intelligent video market and the business performance.

Ooyala remains a young and exciting company with leading offerings in intelligent video which continue to evolve and scale. This growing portfolio of products services Ooyala’s 500 worldwide customers, including broadcasters, media companies and high profile enterprises. Ooyala collectively serves 220 million unique viewers with 3.5 billion events every day, and was recently announced as the Media Solutions Partner for Facebook Live+++.

muru-D startup accelerator

Telstra’s startup accelerator muru-D operates out of Sydney and Singapore with a partner program also successfully trialed in Brisbane this year.

Since October 2013, muru-D has funded 44 startups and established a network of more than 390 active mentors, supporting 110 entrepreneurs who have collectively generated $4.2 million in revenue and raised $8.9 million in capital. This year we announced partnerships with leading accelerators, 500 Startups in Silicon Valley, The Junction in Tel Aviv, and HAX and Chin accelerator in Shanghai, significantly expanding muru-D’s global reach and network.

We opened a dedicated Innovation Lab – Gurrowa

In August 2015, we opened our Gurrowa Innovation Lab in Melbourne, an open innovation environment where Telstra, our enterprise customers, partners, incubators, vendors, and research institutes can connect and collaborate on cutting-edge technology.

We captured new ideas through our hackathons

Telstra hosted two hackathons at Gurrowa during the year, on the subjects of IT and Data Science, bringing together inventors, innovators and entrepreneurs from Australia and around the world. Participants created technology innovations in the health, bio-science and fit-technology space, and developed innovative and creative insights, visualisations and predictions based on a given dataset. In November 2015, we hosted our own Internet of Things Challenge hackathon in partnership with City of Melbourne, where participants spent a week creating a connected “thing” to improve life in the city.

 
 
Telstra partnered with NAB to create a new digital marketplace for the more than two million Australian small businesses. ‘Proquo*’ will help grow small businesses, offering an online platform to network, share skills and trade with each other.

Telstra 2015 AR