Annual Report 2016
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Strategy and performance

Outlook

Strategy and performance

Outlook

Our business is fundamentally changing as a consequence of market developments, increased competition and technology innovations. The accelerating rate of technology innovation is playing an increasingly significant role in influencing our customers’ needs and the future shape and direction of our business.

We are also seeing demand for our services continue to grow which creates significant opportunity for us. In this environment, it is more important than ever that we do not stand still and that we are effective in pursuing our vision to become a world class technology company that empowers people to connect.

Over the next five years, the migration to the nbnTM network will impact our earnings. The forecast net effect of the nbnTM rollout, in transitioning costs and operational access costs will be a reduction of $2-3 billion in EBITDA per annum at the conclusion of the nbnTM build.

To offset the impacts of the nbnTM network, we remain focused on achieving our productivity ambitions and reengineering our business to deliver world class experiences, products and services for our customers.

Our earnings composition is shifting in line with the income mix of our products and, as our new businesses grow and make a larger contribution to revenue, our profit margins are changing. In the coming year our objective is to manage the dynamics of the nbnTM rollout and increased competition while accelerating our productivity program, leveraging our core strengths and driving value through our investments.

In the coming year our objective is to manage the dynamics of the nbnTM rollout and increased competition while accelerating our productivity program, leveraging our core strengths and driving value through our investments.

Our customers and our networks are our biggest assets, which is why we need to invest to set new standards and deliver seamless, excellent experiences for our customers, and to support our increased aspirations in a measured, prudent manner for shareholders.

The new wave of investment we have announced over the next three years will position us to deliver significant customer benefits and reinforce our market differentiation over the longer-term, as well as deliver business benefits such as capital efficiency, reduced operating costs and increased revenue.

Details of the investment program will be progressively confirmed during FY17 to FY19, and will continue to be aligned with Telstra’s capital management framework and targets for return on invested capital (ROIC). Telstra’s capex to sales ratio1 in each of the next three financial years will increase to approximately 18 per cent, the highest since 2008-09 as Telstra was building up its 3G network.

The network investment is about setting the pace for the network and company of the future, just as we have done in each of the previous network generations.

Our vision is to become a world class technology company that empowers people to connect. Our strategy to achieve this is unchanged and remains the right one to deliver for our customers and shareholders. We are determined to maintain our network superiority, to improve our service interactions and the value we offer our customers, to pursue growth opportunities and to create long-term shareholder value.

 
 

[1] This 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 capex to sales ratio also assumes the nbn™ rollout is in accordance with the nbn Corporate Plan 2016 and excludes externally funded capex.

Telstra 2015 AR