Annual General Meeting
Shareholder information and video content of the Annual General Meeting (AGM) from current and previous years.
The AGM of Telstra Corporation Limited was held virtually (online) on Tuesday 12 October 2021.
- 2021 AGM webcast
- 2021 AGM presentations (PDF, 2.2MB)
- 2021 AGM - Questions asked by shareholders at the AGM (PDF, 107KB)
- 2021 AGM - Responses to frequently asked questions by shareholders (PDF, 64KB)
- 2021 Telstra Annual Report (PDF, 7.5MB)
- 2021 Notice of Meeting (PDF, 551KB)
- 2021 Telstra Virtual AGM User Guide (PDF, 1.7MB)
The 2020 AGM of Telstra Corporation Limited was held virtually (online) on Tuesday 13 October 2020.
- 2020 AGM webcast
- 2020 AGM Results (PDF, 124KB)
- 2020 AGM presentations (PDF, 1.7MB)
- 2020 AGM approved Telstra Constitution (PDF, 576KB)
- 2020 AGM - Responses to frequently asked questions by shareholders (PDF, 140KB)
- 2020 Telstra Annual Report (PDF, 6.4MB)
- 2020 Letter to Shareholders (PDF, 111KB)
- 2020 Notice of Meeting (PDF, 1.4MB)
- 2020 Telstra Virtual AGM User Guide (PDF, 1.1MB)
- 2020 AGM - Frequently asked questions about our virtual AGM (PDF, 83KB)
The 2019 AGM of Telstra Corporation Limited was held on Tuesday 15 October 2019 from 9:30am AEDT at the Melbourne Convention and Exhibition Centre, 1 Convention Centre Place, South Wharf VIC.
2019 AGM recording
Video content description
Recording of the 2019 AGM held on Tuesday 15 October 2019 at the Melbourne Convention and Exhibition Centre.
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(UPBEAT MUSIC PLAYS)
CAROLYN BRIGGS:
Good morning. Good morning, everybody, and welcome to this beautiful part of the city down near the this beautiful centre for the AGM for Telstra. So my name is Carolyn Briggs and I'm the Eldest spokesperson of the Boon Wurrung, which is the language Yaluk-ut Weelam, which means the people of the river. So I'm here to welcome you all. So I've introduced myself, so I know who you are, and I've got to pay my respects to the Telstra board that are out here this morning and also pay my respects to you. I also pay my respects to my Elders and to my Ancestors and to our futures, our younger generation who are coming through. So, and the language afforded to me, it's (SPEAKS AN INDIGENOUS LANGUAGE) That means welcome to our beautiful home, the land (COUGHS) the lands of the two great bays. (UNKNOWN) being Port Phillip Bay and Marin being Western Port Bay. But it's also about this beautiful river that runs flows past us, which is known as the Yarra. But to our people, it was known as the Birrarung.
And it's also when we put ga on the end of it, it's Birrarung-ga, meaning the country of the river. So you're a part of the country of the river. You're getting in a little bit of a history lesson in language. So as a descendant of the First Peoples of Melbourne, we welcome you and the word (SPEAKS INDIGENOUS LANGUAGE) means come with a purpose. The land that we now stand is the traditional country of the (UNKNOWN) clan of the Boon Wurrung language group. The Boon Wurrung people were part of a much larger nation, or confederacy, known as the eastern colon. Colon means mankind. The Boon Wurrung and the eastern colon have a unique history and culture, and we are pleased to be able to celebrate that history and heritage with you today. Just that word (SPEAKS INDIGENOUS LANGUAGE), come, ask the common. What is your intention for coming? It is to be a part of this AGM the 2019. Traditionally, the Boon Wurrung and the other clans of the (UNKNOWN) nation would meet just like you to celebrate, to trade.
These celebrations were held each month to celebrate the coming of the new full moon. The descendants of the Boon Wurrung in the eastern colon have continued to take an active and progressive approach to the leadership and protection of our values. This is one of this one, this is one more way that we can acknowledge and celebrate our shared indigenous history and heritage. In traditional society of the eastern colon, we were committed to the maintenance of our society by valuing the importance of learning, showing respect, celebrating life and honouring the sacred ground. This importance of learning was a transmission of knowledge and understanding that ensured our culture survived. This commitment to learning has been a part of every generation since time began. And that's one of the reasons why we are still strong today. We believe that you must respect the past in order to understand its futures. And according and these are the things that have maintained our guiding principles for our life ways.
Showing respect. In our traditions, visitors are always welcome. But but they are required to show respects to the (UNKNOWN) the laws of the land. This is the same way we show respect to each other's diversities, cultures, religious or spiritual beliefs today, and we are here to celebrate the 2019 Telstra AGM. This is also a celebration of life. The arrival of new children, the coming of the six seasons, the visiting of the neighbouring clans was very much an important part of our traditional life. We talk about respecting sacred ground. We should all acknowledge the sacred ground on which we stand, and Melbourne is a host to many people from many different nations, and we still call upon them to respect sacred ground by understanding its history and heritage of the first people of the eastern colon. And today is my hope that we can all take pride in our shared history and celebrate the strength of this great country of ours. And according to our traditions, our lands will always be protected by our creator, Bunjil who travels as an eagle and (UNKNOWN) who protects our waterways travels as a crow.
Bunjil, asked of First Peoples to ask all visitors to make a number of commitments, one not to harm the (UNKNOWN) lands, not to harm our knees, our waterways and particularly not harm Bunjil's children. And if you accept these laws or these dumb bars, this is about allowing you to travel through our many landscapes in safety. And this is one way we do this by your commitment is through the exchange of a small bow dipped in the water of the land. So once again, (SPEAKS INDIGENOUS LANGUAGE). I wish you well in your endeavors with the new AGM for this year. So let's celebrate, (SPEAKS INDIGENOUS LANGUAGE) and the celebration. I want you to all say (SPEAKS INDIGENOUS LANGUAGE). You can do a bit louder. You know, because you're articulating 2,000 generations of say the word come. What's your purpose for coming? Thank you. (SPEAKS INDIGENOUS LANGUAGE). I wish you well. (VIDEO PLAYS)
SPEAKER:
It's always been about people about bringing us closer together, connecting us and the communities where a part of. Making sure each and every one of us gets to experience the best technology on the best network. Because in the right hands, we know our network has the power to change things, to help us take care of each other, get back on our feet, build up the next generation and connect our businesses with the rest of the world. No matter who you are or where you live, with the power of connection, everyone can live better, more fulfilling lives. Everyone can thrive. (VIDEO ENDS)
JOHN MULLEN:
Great. Good morning, ladies and gentlemen. My name is John Mullen, and it's my pleasure to welcome you this morning to Telstra's 2019 Annual General Meeting. All of the directors are here, including your Chief Executive Officer Andy Penn, and I join them in offering you a very warm welcome this morning. Thank you also to Auntie Carolyn for the earlier welcome to country. Today's meeting is being webcast, so welcome also to those shareholders joining us online. And with a quorum present, I would like to formally declare today's meeting open. The notice of meeting was distributed earlier and that's about the business and the resolutions to be considered today. So I propose to take that notice as read. There are a number of items of business on the agenda today, all of which are shown on the screen behind me. Items three to five-set out resolutions to be voted on today. Item six is a conditional item and any vote cast on it will be of no effect unless we receive what is known as a second strike on the remuneration report.
To assist with the efficient conduct of the meeting, I declare the resolutions on items three to six now properly before the meeting. Voting on items three, four and five and if required, item six will be conducted by poll and that poll is now open. If for any reason any shareholder wants to leave the meeting early, you can still vote by completing your voting card and placing it in one of the ballot boxes near the exits. I'd like to now formally introduce the colleagues with me here today. With me on stage or Andy Penn our Chief Executive Officer,, Sue Laver a company secretary. Vicki Brady, chief financial officer and my fellow members of the board. And can I particularly welcome new director Eelco Blok, who has been nominated by the Board for election at today's meeting. I would also like to introduce Andrew Price from our auditors, (UNKNOWN). I can see him I see over there. Andrew's available. if shareholders have any questions about the audit or the audit process. So let me now turn to Telstra's activities and performance during the 2019 financial year.
This year has been one of the most important years in Telstra's history. And why did I say that? I say that because 2019 was the year when we commenced a T22 strategy to transform Telstra for the future. A year in which we completed our nearly $3 billion strategic investment program that was needed to create the types of networks we will need in the future and to completely digitize our business. And a year in which, as an industry, you pass the halfway mark in the migration to the NBN. I don't want to appear overly dramatic, but it is our belief that the T22 transformation that Telstra is undertaking today is the most radical and ambitious being undertaken by any telecommunications company in the world today, and we have made significant progress already. And Telstra today is a very different, much simpler and more customer-focused organisation than we were just a year ago. (UNKNOWN) will give you more detail shortly. But let me just try and give you a few examples. Firstly, we have produced more than 1800 consumer and small business plans to just 20 in-market plans.
We've done away with locking contracts on all new consumer and small business, fixed and mobile plans. We've eliminated excess data charges in Australia on all our new mobile plans. And since 2016, the number of calls coming into our contact centres has fallen by more than 15 million per year, and our goal is to reduce them by another 16million by 2022, all driven by a better customer experience. That will be a reduction of over two-thirds of the calls coming into Telstra, or 31 million calls in total. And the number of trucks that we needed to dispatch to repair faults with 900,000 fewer than last year. And we've achieved around 1.2 billion of annual cost reduction since FY16, with a further target of another 630 million this year. We are on track to achieve our target of an annual $2.5 billion reduction in underlying fixed costs by fiscal year 22. Now, in this regard, we announced around 6000 direct employee row reductions this year, and that, of course, is a source of great concern at every employee as a person with a family with hopes and aspirations.
And we must never forget the human dimension in these decisions. However, shareholders should be aware that one of the biggest drivers of this is the transfer of Telstra's fixed line business back to government ownership. So while we've lost 6,000 employees NBN now employees, 6,400 employees and many thousands of contractors in addition. So overall employment has actually risen in the industry. And clearly, it's simply not possible to maintain all those employees, and the part of the business that they worked in has been transferred to another entity. Now, our industry is changing in an extraordinary pace, and it will never be the same again. And if we don't adapt, we will fail. No business is too big to fail today if it doesn't reinvent itself on a continual basis. So you're witnessing the greatest transformation that Telstra has ever undertaken way beyond anything that we have tried to do before. A couple of years ago, Andy Penn said that Telstra was becoming a technology company. It was a predictable coterie of critics who said that Telstra was aspiring to be another Google or Facebook, which of course, was not at all what he meant.
But Andy was absolutely right. Like other telcos, the world over Telstra has come from a world of monopoly or semi monopoly telephone operations, originally just connecting person to person with voice communication. But that world has gone forever, and our industry today is exploding into a world of cloud computing, machine learning, artificial intelligence, internet of Things, autonomous vehicles, big data, drones, satellite technologies and many, many more. This is the new technological world, and the old world is not coming back. And while we may not like it, the days of Telstra's high legacy margins and 100% dividend payout ratio are not coming back, either. So let me now turn to Telstra's performance during the year. Firstly, our results were in line with guidance and with market expectations. We delivered what we said we would deliver. However, as expected and previously flagged, our results also reflected current market realities, including the impact of the NBN and intense competition.
We reported total revenue of 27.8 billion, EBITDA of 8 billion and net profit after tax of $2.1 billion. A major reason for the decline in the profit compared to last year was the impact of the NBN, which represented some 600 million of negative recurring EBITDA headwind during the year. Combined with a total interim dividend paid in February 2019, shareholders will receive a total dividend of 16 cents per share fully franked for FY19, which will be returning $1.9 billion to shareholders. Now, what is particularly significant about our results this year, however, is that they indicate an inflection point for the business. The clearest view of the future financial performance of our business is one that excludes the NBN headwind. And in this respect, we expect fiscal year 20 to be a pivotal year for us financially as momentum in our underlying business is expected to deliver up to $500 million of growth, excluding those NBN headwinds. This is a significant improvement on the decline of around 400 million in fiscal year 19.
2019 was also the year in which we again demonstrated clear network leadership. We were the first operator in Australia and in fact amongst the first in the world to launch 5G, the next generation of mobile telecommunications technology. 5G is enabling extraordinary new developments and opportunities and new fields such as those that I mentioned, Internet of Things, machine learning, artificial intelligence and so on. We continue to expand on network, and Telstra's mobile coverage footprint now stretches out to more than two and a half million square kilometres, vastly more than any other mobile network in Australia. And our coverage extends to 99.5% of the Australian population. We are really proud of this, and our commitment remains to work cooperatively with governments and with other stakeholders to continue to do our absolute best to bridge the gap between metro and rural areas better than anyone else. And in this regard, just how important actually is Telstra to Australia and to Australians?
Well, we now provide over 23 million customer services, including more than 18 million domestic mobile retail customer services, 3.7 million retail bundles and standalone fixed data services and 1.4 million standalone voice services. We estimate that up to 95% of Australians use Telstra in some way on a regular basis, even if they don't realise it. An example If you are on a competitors network and you do a Google search, your request likely goes from your phone via a Telstra submarine cable to Google in the US and back again. If you use an ATM or you pay for something by EFTPOS or you book a taxi or an airline ticket, chances are your bank or other organisation will be using Telstra to provide the service. 65 million voice calls are made every day on our fixed and mobile networks and more than 33 petabytes of data received and sent. Submarine cables linking us to the outside world are long enough to encircle the planet 10 times. We offer voice, data and video of a mobile fixed NBN, wide band, narrowband and other networks from machine to machine transmission.
Now, this complex array of technologies works exceptionally well and is exceptionally reliable. Yet with this scale of customer interaction, only one small part of this complex system needs to go wrong, and that can equate to thousands and thousands of unsatisfactory experiences for customers. As chairman, I receive a lot of complaints and I respond to every one of them because that is my job and they disappoint me every time. When I analyse those complaints, they often relate to the systems that we're using, legacy systems that are difficult to navigate, systems that are now being removed or improved as part of T22. Despite the best of intentions, there's always human error where maybe a customer's billing is wrong. Maybe the technician didn't come the time promised. Maybe the NBN connection doesn't work, and NBN blames Telstra, and Telstra blames the NBN and so on. As I mentioned before, we receive about half a million calls per week, mostly to address relatively minor but frustrating issues.
And despite the substantial reduction we have achieved in these complaints and calls, we still have a long way to go and I feel this frustration keenly, as do my fellow directors and Telstra's employees, especially as they work so hard every day to improve things. This then is why Telstra's T22 strategy to radically simplify and streamline the business and digitise our interactions with customers the greatest extent possible is so critically important. Now let me make a few comments about the NBN. The creation of the NBN 10 years ago has had a seminal effect on our industry and on Australia. And it's always easier to comment with the benefit of hindsight, I know, but it is my view that over the last 10 years, private-sector competition between strong players such as Telstra, Optus, TPG and others was always going to build 100 megabit broadband access and speed to the majority of the population in Australia and an ongoing competitive landscape and at no cost whatsoever to the taxpayer.
Governments could then have decided how much subsidy they were willing to provide the industry to extend this coverage to regional and rural areas where private sector economics were unattractive. This would all have been at a fraction of the tele cost of today's NBN. Instead, however, in the end, in the NBN, we have created a state-owned monopoly that's going to cost the country more than $50 billion. This said, however, we got here, and Telstra too must be a part of the blame for this due to its recalcitrance in helping government at the time. But whether we like it or not, the NBN is here to stay. And today it is in Telstra's interest, it's an industry's interests and the country's interest to do all we can to make the NBN successful. And Telstra is unequivocally trying to play its part in achieving this.
SPEAKER:
However, that decision 10 years ago has left a number of substantive challenges for the industry and Australia to solve. In the 12 years since the NBN project was announced and the 10 years old since the NBN itself was formed, Australia's mobile industry has consistently ranked amongst the best in the world. In August this year, the Speed Test Global Index rated Australia as having the second fastest mobile networks in the world after South Korea. However, in the same test, Australia's fixed broadband industry ranked 58th fastest in the world behind countries like Moldova, Belarus, Panama and Andorra. Financially, the impact on all fixed broadband providers has been significant, despite some compensation paid to those operators whose fixed line businesses have been nationalised. In Telstra's case we estimate that we have now absorbed around 50% of the economic headwind that the NBN creates for us, or about $1.7 billion on an annualised basis, with more than 60% of Australia's homes now connected.
Telstra has in part being compensated by the government for this, of course, the majority of which is being returned to shareholders. But after the end of the NBN rollout, Telstra will be worse off by more than $3 billion per year into the future. The impact on the bottom line, and therefore EPS from which we pay dividends is even greater and up to 50% reduction net profit after tax, resulting in an inevitable flow through to dividends and share price. There are few precedents in corporate Australia for a challenge of this magnitude and there's no magic solution to make up for the loss of up to half of the company's net profit. But we are not sitting on our hands. Our T22 program is a radical and ambitious initiative to fundamentally restructure Telstra to enable us to respond rapidly to this changing environment and to continue to lead the Australian telco market. Then there have been claims by some that the payments NBN makes to Telstra for infrastructure access are the reason why NBN's wholesale prices are so high.
In fact, as the industry well knows, exactly the opposite is true. These payments to Telstra have actually helped keep the cost of the NBN down. By the NBN's own admission, without access to Telstra's very extensive network of exchanges, fibre, ducts, pits and pipes, the NBN would have had to build all this infrastructure from scratch at a much higher cost and over a much longer period. Then another tropical matter which is becoming problematic is the question of the NBN's starting to sell directly to enterprise customers. Now, the original mandate for the NBN was that the NBN would be wholesale provider only and would not favour or discriminate between retail service providers or RSPs. It certainly wasn't envisaged that NBN Co would negotiate contracts directly with customers and encourage them to seek special deals from certain RSPs. That, however, is what we are seeing today. Instead of remaining a wholesaler, the NBN is now going outside this mandate and is targeting our customers directly.
As one of our competitors clearly noted recently, the reasons why the industry objected to this are three. Firstly, reciprocity. It seems inequitable that the NBN can now move outside its mandate and sell directly to our customers. But RSPs in the industry have to stay within their mandate and cannot sell to the NBN's own protected market in return due to regulations which prevent retail providers investing in fixed line infrastructure to provide consumer services. Secondly, the original intent of the NBN was to bring high speed internet a competitive pricing to those without such access. It seems a waste of collective resources to be delaying investment in the consumer rollout to people yet to be connected and instead be focusing investment and the enterprise market where the NBN is duplicating existing high speed fibre for no service or speed advantage. And thirdly, the NBN's government ownership gives it a very significant cost of capital advantage over the private sector, which is being used to its competitive advantage.
Now, we understand that maximising the financial return of the NBN is important, however, for the NBN to be allowed to move outside its mandate and to achieve this, but reciprocal competition from RSPs remains restricted seems inequitable. There's very little doubt in my mind that were the NBN open to competition, wholesale broadband prices in Australia would fall materially. Now, let me be clear, we are not recommending that the nation's policy settings be changed, but we are saying that if the policy settings are not to change, then both sides should respect their original mandates. And lastly, may I try to make another important comment on affordability, affordability of the project itself and affordability of retail broadband services. You would have seen that Telstra, along with much of the rest of the industry, has been recommending that the NBN reduces wholesale broadband prices. This has been criticised by some as being self-serving, and while of course this would benefit Telstra, it would also benefit all the rest of the industry and all of the actual uses of broadband since without a drop in wholesale pricing, the inevitable outcome will be higher retail prices.
Dismissing the industry's suggestion as whingeing may make good media headlines, but this avoids Australia facing into the real ends issue here for both the industry and for the country. When Telstra was a regulated wholesale provider to the industry, Telstra charged on average about $20 per user per month. The NBN is now charging some $44 per month on average, and the NBN states its ambition is to get that up to $49 by fiscal year 23. As a very broad generalisation, a retail service providers average internal cost is in some 12 to $18 on top, plus approximately another six to eight for the (UNKNOWN) cost to connect. So, this gives an all in cost for an RSP to resell the NBN of over $70 per month. Market prices to the consumer, however, are averaging below $70 per month, excluding GST. Now, clearly, losing money is unsustainable for all 180 odd RSPs out there, and this is why we have already seen some companies starting to withdraw from reselling the NBN. In addition, these economics are leaving many companies to invest in 5G fixed wireless and other technological solutions to allow them to offer competitive broadband without using the NBN at all, which just makes the situation even worse.
Ironically, it's actually beckoning in the interests of those competitors that are embracing these new technologies that NBN's prices remain high, so the alternative technologies become more attractive. And bottom line of this is that Australia already has some of the highest wholesale broadband pricing in the world. And if this trend continues, over time most resellers of the NBN will withdraw, or they will go broke. The downside of this, in turn, will be fewer service providers and, ultimately, higher broadband prices to the consumer. Alternatively, a reduction in the wholesale price of the NBN would mean that reselling the NBN would be profitable for all RSPs, resulting in a dynamic and competitive broadband industry and retail prices would be kept materially lower. Now, Telstra will compete either way, but surely a reduction in the wholesale price, a competitive market and lower prices for consumers has to be a better outcome than a high priced oligopoly, both for the industry and for Australia.
To this end, we welcome the announcement yesterday by the ACCC that it's launching an inquiry into NBN pricing from an affordability perspective. Now, let me just close this out by saying, by stressing, here that I'm in no way criticising the leadership of the NBN. To the contrary, they are capable and professional people with whom we have a constructive and engaged relationship and whom we respect. These challenges are not of their making either, as they too have to work with the cards they have been dealt and they are doing their very best in difficult circumstances. But this is not just an NBN or a Telstra problem, it is a problem for the whole of Australia to resolve, government, industry and the NBN together. So, turning now to the changes this year in Telstra's leadership. Andy will talk about his management team shortly, but we continue to completely reshape our board to put in place the right balance of experience, including global telecommunications experience, technical expertise and fresh thinking.
I may be biased, but with a couple of new appointments still to come, I think that we're building one of the strongest boards in Australia and a board fit for purpose to help steer Telstra through these unprecedented times. You will hear shortly from the director standing for election, but can I again firstly welcome Eelco Blok. Eelco brings more than 30 years experience at the Netherlands leading landline and mobile telecommunications company, KPN, and he is an outstanding addition to our board. Then directors will be aware that two current directors, Craig Dunn and Nora Scheinkestel, are also eligible for re-election. Both are highly valued and respected members of our board, and both have made huge contributions to Telstra. Let me start with Craig Dunn. Craig is an outstanding director who joined our board in 2016. He is the current chairman of the Audit and Risk Committee and a member of the Nomination Committee. In my view, Craig is one of the best public company directors in the country.
We are aware that there has been commentary around Craig's association with the AMP, where he was CEO more than six years ago. However, it is important to note that at no time whatsoever has Craig ever been accused of anything improper himself. All I can say as chair is that Craig is an extremely valuable director with exceptional skills in the areas of finance, risk and general board supervision, and the board supports his re-election 100%. Were he not to be re-elected, it would be a great loss to Telstra, and I therefore ask you too vote in favour of his re-election. Let me then also comment briefly on the other director standing for re-election today, Nora Scheinkestel. Nora is a member of the board's Audit and Risk Committee, Nomination Committee and Remuneration Committee, and previously she was chairman of the Audit and Risk Committee from 2012 to 2019. If successful, this will be Nora's fourth three year term. In accordance with our board tenure principles where a non-executive director is approaching the end of their third three year term, a more formal review of their continuing directorship takes place, including considering length of service when making an assessment of the director's independence.
Nora is simply an outstanding director and brings considerable skill, wisdom and experience to our board. And in particular, Nora has a deep corporate memory, including being involved in the NBN transaction from the very beginning. With a number of directors only being recently appointed, this continuity of key corporate knowledge is critically important to us. So, when the board considered Nora's tenure, independence and contribution, it had no hesitation in unanimously recommending she remain a member of the Telstra board. I hope that you too will support her re-election. This brings me then to the issue of executive remuneration and items four, five and potentially six on today's agenda. Shareholders will recall that last year significant concerns were raised around the remuneration report by proxy advisers and others, meaning that a substantial number of shareholders did not approve the report. This gave us what is termed a first strike, and this is deeply disappointing both to me and to my board colleagues.
We were disappointed because the Telstra board takes this responsibility incredibly seriously. We spent a huge amount of time really trying to get the balance right between protecting shareholders interests and not overpaying executives, while at the same time motivating, incentivising and retaining the best management talent that we can. This is particularly the case where, as in our situation, market dynamics, including ones outside management's control, have been challenging and shareholder returns have not always been able to be at the level that we would have hoped for. But the fact is is Telstra is a $42 billion market cap company with around 30,000 employees, 1.3 million shareholders, and we operate a leading edge of telecommunications markets here in Australia and around the world. We are operating in times of great challenge and volatility, and the future of the company depends on our implementing one of the world's largest and most complex transformation strategies within a tight timeframe.
And in that environment first class leadership could not be more critical, and attracting, retaining and motivating high calibre executives depends on a number of things. One of course of which is remuneration. Overseas and Australian executives will simply not leave well-paid jobs elsewhere to join Telstra unless we have a competitive remuneration strategy. This year, Telstra's remuneration committee and the rest of the board again spent a significant amount of time trying to get the structure right. We consulted extensively, we listened, we worked, and we reworked our executive compensation scheme to try to find the best balance. The plan for a FY20, therefore, includes a number of material changes to try to better align with the creation of sustainable long term shareholder value. We have reduced maximum potential remuneration. We've increased the equity versus cash ratio. We have extended vesting for restricted shares. We've expanded the clawback provisions on our equity terms and a number of other measures.
And we strongly believe that these changes strike the right balance between protecting shareholder interests, not overpaying executives, but at the same time motivating, incentivising and retaining talented leaders. And we really, really hope that shareholders will agree. I'm on the record as saying that some executive remuneration in Australia and especially overseas, has been too high in the past, and there's no doubt that this has damaged the reputation of big business around the world. However, executive remuneration in Telstra has been progressively trending down. I absolutely do not think that this is the case in Telstra today. Indeed, I would like to particularly stress how important it is to reward and motivate management in difficult times, even more so perhaps than in good times. It's a natural reaction for shareholders who have seen their shares reduced in value to be disappointed and to question whether executives are feeling the same pain as well. However, the share price cannot be the only metric by which we evaluate management performance.
External factors can mean that you can have a reduction in the share price despite outstanding management performance, just as you can have increased share price despite mediocre management performance. If in the end the only criterion is the share price itself, then why even bother with the complicated remuneration structures that we have? Simply pay the executive a fixed amount and do away with a whole industry that has grown up around remuneration, including proxy advisers and company remuneration committees that spend an inordinate amount of time trying to get remuneration right. But if you want to pay on performance, then you have to look at a lot more than just the share price to judge good or poor management performance and really understand the drivers inside the business. For Telstra the reality is that external factors, including the impact of the NBN headwinds I mentioned earlier, are very substantial drivers of our company's performance, and this would have been far worse if management had not done such an excellent job in this environment.
We genuinely believe that Telstra's management has performed excellently this year, and we are fortunate that the last 12 months has also seen Telstra's share price rise materially and outperform the market. This has led to a well-earned increase in compensation for the team and for our chief executive, Andy Penn. His actual pay increased by 34% this year, but the context for this is really important to understand. The remuneration that Andy has received actually fell by almost 50% over the previous two years because Telstra was under pressure from a number of external factors over which Andy had little control, including the impact of the NBN headwinds that I mentioned earlier. So, even with a rise this year, therefore, the total remuneration that he received is still more than 20% below where he was three years ago. And ultimately, because Andy received such a significant portion of his total remuneration in the form of shares, we are comfortable that his remuneration is directly tied to Telstra's share price performance, and it mirrors shareholders own experience.
For all of that, however, executive remuneration continues to challenge the board, and we continue to search for solutions that satisfy everybody. In the end, all we can do is to diligently and transparently set targets for management that we think are ambitious and will deliver lasting value to shareholders despite the market environment. And we believe that that is what we have done this year. But we must also never forget that incentive schemes are designed to be an incentive, not a disincentive. Chairs and directors may come and go, but in the end, the single greatest contributor to shareholder value in the business is a talented and motivated management team. When I was younger, almost every executive aspired to be the CEO of a big, public company. Today, there's a real risk that the media scrutiny, the populist criticism and governance challenges, are starting to lead talented executives to look for alternative career paths, such as private equity as an example, where they can build their careers out of the spotlight.
So, there's no doubt transparency and accountability are, of course, good things, but we need to be very careful that the pendulum does not swing too far and we lose top talent, as this ultimately will only be to the detriment of shareholders. Andy is a strong leader and has assembled a very talented and high performing management team to steer Telstra through these unprecedented times. Rewarding Andy and his team appropriately for their efforts is critical and in this regard I cannot apologise for continuing to do what we believe is the right thing for the company and the right thing for shareholders in the long term. So, let me close then by touching on Telstra's role in society more broadly. In the past year, the Australian corporate landscape has undergone a seismic readjustment, particularly in the wake of the recent banking royal commission. Customers, regulators, investors and the community at large have very publicly reminded large organisations of the value that they place on companies being transparent, ethical and accountable in everything they do.
An important part of that is how companies conduct themselves and the contribution that they make to the communities of which they are part. That is a good thing, and Telstra can be very proud of its record in this respect, especially regarding the important role we continue to play in connecting and supporting communities, including in regional and remote areas and in serving the needs of our customers in vulnerable circumstances. As digital technologies play an increasingly central role in our world, there remains a significant gap between those who are connected and those who are not. And to bridge that gap, this year we helped around one million customers living in vulnerable circumstances to stay connected, including providing assistance for people on low incomes impacted by domestic or family violence or living with a disability. We also reached more than 30,000 people through our digital capability programs and created more than $110 million of value through our social investment programs.
Through the Telstra Foundation we also support digital learning experiences in schools, public libraries and remote indigenous communities. No other telecommunications company in Australia and, in fact, few other businesses full stop, can match Telstra for its involvement in and positive impact on the communities in which we operate. This year, we also achieved 40% reduction in our carbon emissions intensity, and we collected 15.5 tonnes of mobile phones from our customers for recycling. It is an ongoing source of enormous organisational pride for all of us. So, to sum up then, 2019 was an incredibly important year for Telstra, a year in which we met guidance and market expectations. Where we maintained or grew market share in key areas and where we built significant early momentum behind our ambitious T22 strategy. The NBN is what it is and we have to work with us, but in the end, The end of the nbn rollout is actually insight. After which, looking at Telstra's performance and progress will become much clearer again.
T22 is positioning us for success at a time when telecommunications networks are amongst the most important pieces of infrastructure in the world. A time when the demand for connectivity has never been greater. And to succeed in this new world, we need to find ways to translate demand into revenue and profit to completely reinvent Telstra as a new, digitally-enabled business, able not just to compete but to win. And that is exactly what we are doing. We're still closer to the start of T22 than the finish, but we are confident that we're moving at speed and creating sustained value for our customers, our shareholders, and our employees. You can be confident that you have shares and not just the best telco in Australia, but one that is respected around the world, and we're all working extremely hard to make the company even better still. Finally, and before I invite Andy to address you, let me sincerely thank you our shareholders for your patience and your support during the year. Let me also thank our customers for their ongoing support, as without them, there would be no Telstra.
And lastly, but by no means least, let me also thank every Telstra staff member. The board greatly appreciates all that you do, and I believe so too do our shareholders. Thank you for listening. And now let me introduce our Chief Executive Officer, Andy Penn, and invite him to address the meeting. Thank you. (APPLAUSE)
ANDY PENN:
Well, thank you very much, chairman, and good morning, everybody, thank you all for joining us here today, particularly including those who have joined us online. We do very much value this opportunity to meet with shareholders and to keep you across the many incredible opportunities that face your company in the future. We also welcome, of course, the opportunity to hear your comments and your feedback, and to address any of the questions that you may have. In my presentation this morning, I'd like to cover four things. Firstly, and building on the chairman's comments earlier, I will provide an overview why this year has become such a pivotal year for your company. Secondly, I will comment further on the progress we are making in transforming your company through a T22 strategy. Thirdly, I want to explain why telecommunication networks will have such a significant influence on the success of our economy and our nation over the next decade and why 5G is absolutely central to this. And finally, I will confirm our guidance for the 2020 financial year.
The chairman has already taken you through our financial results for the year, but I wanted to share why I believe 2019 was such a pivotal year. Notwithstanding the intense competitive environment and the challenging structural dynamics of the industry, including the nbn. 2019, was the year in which we believe we have started to see the turning point in the fortunes of the company from the changes that we are making. 2019 was the year in which we completed the Strategic Investment Program, which we announced in 2016. Whilst we will obviously continue to make investments, we are now doing so on a business as usual basis. 2019 is the year in which, as you heard from the chairman, we passed the halfway mark on the nbn. And 2019, was also the year in which we again demonstrated a clear telecommunications network leadership by being the first operator in Australia and among the first globally to launch 5G, the next generation of mobile telecommunications technology. 5G is clearly going to be important for Telstra's growth in the future, but it's also going to be important for Australia's future, and I will explain why that is the case in a moment.
Finally, 2019 was also the year in which we commenced the T22 strategy to radically simplify our products and services, improve the digital experience for our customers, establish Telstra InfraCo as a separate business unit, simplify how we work, reduce their cost base, and improve our portfolio management. In short, then 2019 was a year in which we made very significant progress in our program to make Telstra's challenges of today and to put us in the best possible position for the future. Telstra today is already a very different, much simpler company, a more focused customer organisation than we were a year ago. Importantly, though, we are well-positioned for the era into which we are about to head the 2020's. Let me now comment, therefore, on the progress this year on the many initiatives under T22. T22 is built fundamentally around four pillars and two critical enablers, building the networks for the future and digitising our business. We have made a very strong start, so let me cover some of the highlights.
Firstly, under pillar one to radically simplify our product offerings, eliminate customer pain points, and create all-digital experiences. We have completely overhauled and simplified our product range, reducing more than 1,800 consumer and small business plans to just 20, creating simpler, more flexible ways for customers to choose the best value connectivity set devices for them. During the year, Telstra became the first telco in Australia to introduce no lock-in plans across both fixed and mobile. We also launched our build-your-own mobile plans to give our customers freedom and flexibility and removed excess data charges on all-new mobile plans. As the chairman said earlier, one of the most pleasing measures of the progress we have made was a 22% reduction in the number of calls coming into our call centres from our consumer and small business customers during the year. We've also significantly improved our online experience, including refreshing the Telstra 24 by seven app and our digital experience now accounts for more than 53% of all service transactions, including account management, prepaid product, and billing-related inquiries.
As well as flexibility, simplicity, and choice, our customers also though want to be rewarded and recognized for their loyalty towards Telstra. And in response to this, this year, we launched Telstra Plus, a program offering customers the opportunity to earn rewards, discounts on new technology, as well as bonus entertainment, and much more. Our support for our small business customers was also improved this year, with no locking contracts, and excess data charges removed on new mobile and tablet plans, as well as more dedicated support services. This includes account management for all small business customers for a new 24-7 tech support service where we have trained 1,000s of dedicated small business specialists. Last month, we also launched Telstra Purple Australia's largest Australian owned technology services business. Telstra Purple brings together Telstra's enterprise business technology service capabilities. It consists of 1,500 certified experts in network, security, cloud collaboration, mobility, software, data analytics, and design.
Turning then to pillar two, the creation of Telstra InfraCo. Telstra InfraCo now controls assets with a book value of more than $11 billion and it is responsible for key network assets to Telstra, including data centres and exchanges, most of our fibre network, the residual copper and HFC networks not transferred to the nbn, the international subsea cables that the chairman mentioned poles, ducts, and pipes. Let me take a moment, though, to remind shareholders the rationale for setting up Telstra InfraCo, which is threefold. Firstly, we're conscious that the investment community increasingly considers infrastructure assets differently from operating businesses. Therefore, InfraCo provides a greater degree of transparency for our shareholders on the very significant infrastructure assets that we own. Secondly, by housing our infrastructure assets in a separate standalone business unit. This creates and facilitates stronger management focus on maximising the value of these assets. And thirdly, to create optionality for the future, particularly for when the nbn might be privatised, given that this is the stated policy of both sides of government.
And encouragingly, we are making good progress on all of these objectives. The third pillar of T22 is on simplifying our structure and ways of working. A critical part of transforming Telstra for the future is changing how we work to allow our people to collaborate more easily so that they can deliver better, faster outcomes for our customers. The chairman has described earlier the changes that we are making in our workforce and in particular, the numbers of people that are impacted. And that is why we are continuing to make sure that we support those people through up to $50 million transition program, which provides a range of services for those that are moving into new roles. The full strategic pillar is delivering an industry-leading cost reduction program and portfolio management. We accelerated our cost program in the second half of 2019 and into 2020, and we remain on track to reach our target of reducing our annualized fixed costs by 2.5 billion by 2022. The other aspect of pillar four is focused on actively managing our portfolio to monetize up to $2 billion in assets.
In this regard, throughout the year, we restructured Telstra Ventures, we exited Ooyala, and more recently we sold the Edison Exchange in Brisbane's CBD, as well as entering into an agreement to sell three international data centres. We also recently announced the establishment and part sale of an unlisted property trust to own 37 of Telstra's exchanges, including existing properties. As part of this transaction, Charter Hall-led consortium has acquired a 49% stake in the new trust for $700 million. This reflects a capitalization rate of 4.4% and values the entire property trust at more than 1.4 billion. So, combined the recent changes to Telstra ventures, the sale of the Edison Exchange and the other transactions that I have mentioned bring the total value of assets monetized as part of T22 to around a billion dollars. T22 is built on the foundation provided by our strategic investment program that we announced in 2016. We have now completed this program having invested $2.6 billion digitizing the business and building the networks of the future.
But let me be clear, without these investments, the initiatives that we are undertaking within our T22 program would just not have been possible. The digitization aspect of the program has seen our customer management, our provisioning, our billing HR, and many other of our computer systems upgraded, digitised, and taken to the cloud as key enablers of the many customer experience improvements that we are delivering. As an example, the announced enhanced functionality on our Salesforce customer management system has helped increase our sales pipeline over the past year. We also introduced Telstra Connect as a single digital channel for business-to-business-customer interactions. Bringing together more than 50 active portals that we previously had. Ongoing investment in our network has also been very important and a foundation for our T22 program. This is about building the networks for the future, including launching 5G this year. I will talk more about 5G in a moment, but in addition to 5G, we also added more than 250 new mobile sites and upgraded a further 1,200 including extending our 4G coverage even further.
As the chairman have mentioned, we now have mobile coverage to 2.5 million square kilometres of Australia's landmass. At least 1 million square kilometres than any other mobile network operator in Australia. Service reliability and resilience also (UNKNOWN) critical factors for our mobile customers and a key network differentiator for Telstra. Since 2016, customer impact hours from outages have been reduced 76% as a consequence of the ongoing improvements that we have been making. We also continue to lead the market in key speed benchmarks. Independent third party recognition for the speed and quality of our network this year included winning the P3 and systemic network surveys for Australia's best mobile network and the Netflix Speed Index for the last 18 months in a row. Perhaps the most significant network achievement this year, however, was launching 5G. Telstra is a global leader in 5G and was the first to introduce it here. The rollout is ongoing and is currently focused on CBD locations and selected regional centres, where more than 4 billion people work, live or visit every single day.
We have already enabled more than 350 sites and base stations around the country in ten cities. We will increase this to more than 800 by the end of the calendar year, and we expect 5G coverage to increase almost fivefold over the next 12 months. As a further 35 Australian cities and major towns are connected. 10s of 1,000s of customers are already enjoying 5G today. In fact, our customers that currently have a 5G device are spending around 26% of their time and 61% of their data on 5G and their 5G devices can let them experience twice the speed of 4G. Ultimately, we expect 5G to deliver speeds up to ten times faster than 4G. 5G is a critically important telecommunications technology, therefore. However, the real point about 5G is that it is arriving at the same time as other key technologies are converging and maturing cloud computing, artificial intelligence or machine learning, edge computing, software-defined networks to mention, but a few because as we move into the 2020s, it's the combination of these technologies that is going to propel the world forward in automation and robotics, autonomous cars and trucks, augmented virtual reality tools, robotic surgery, the economic and productivity gains will be extraordinary.
The changes to our society will be transformational. And the common feature of this technology innovation is that it all depends on high capacity, fast, and reliable telecommunication networks. And that is why it is so important to get the policy settings for telecommunications in Australia, right. It's not just about Telstra. This is for the future success of our nation. In this regard, we believe there are six key principles and policy areas where focus is needed right now to ensure Australians can take advantage of the economic and social opportunities that this rapidly evolving technology environment create. Firstly, Australia needs a policy and regulatory framework that is pro-investment. High-quality telecommunications networks require an incredible amount of capital investment. Telstra spent $4 billion alone just in the last 12 months on capital expenditure. The industry in total has spent more than 12 billion a year over the last three years, and the investment is crucial. There is no point with application developers and software engineers or service providers investing in great products and services.
If the network providers do not have the capacity or the incentive to invest in the communication platforms to support them. We, therefore, urge policymakers and regulators whilst asking legitimate questions, such as whether customers are getting a good deal and a low price. Please do so through the lens of the amount of capital the telecommunication companies need to invest. Most telcos returns on invested capital already below their cost of capital unless the economics, therefore in the industry are allowed to improve. The consequence will be lower investment in the future, which will lead to poor quality networks similar to that which you see in many international markets. Competition is intense in our industry, in both fixed and mobile. The last few years in particular has seen increasing data allowances to customers and other inclusions, as well as falling prices. Competition is good for industry, and it is good for customers, but it would be wrong to conclude that there is insufficient competition in Australia today.
A second objective is the need to ensure the social and economic benefits of the nbn are realised. Australia needs the nbn to be successful, as you heard from the chairman, but as he explained, there are areas where without change our fixed-line networks in Australia are going to continue to fall behind when compared internationally. This will clearly have a negative impact on Australia's competitive standing. Yes, we need the nbn to be successful, but not at the expense of the rest of the industry failing. That has to change. The third objective is that we must have a regulatory and policy framework that has the same rules and for the same service, regardless of the origins of the industry or the provider. Technology is evolving very quickly, and regulation is struggling to keep pace. As a consequence, some of the policy settings in place today are no longer fit for purpose. For example, many companies such as Telstra hold telecommunication carrier or broadcast licences. These licences impose very significant obligations on us and liabilities, if we do not meet these obligations, there are serious consequences.
At the same time, many of the services that we provide are increasingly mirrored by companies who sit outside of this regulatory framework, including those that operate over the internet rather than traditional channels. These service providers do not have the same universal services obligations. They do not provide the same customer protections as telecommunication companies. I'm not criticizing them for that. I'm simply making the point that it is an unlevel playing field when it comes to regulation and this is bad for competition and bad for customers. My fourth point is on the critical issue of security, cyber breaches and security incidents are definitely on the rise. Our 2019, cybersecurity report shows that 65% of Australian businesses were interrupted one way or another by a cyber breach over the last 12 months. Meeting this challenge needs tight engagement between government who control national security policy and the private sector, where much of the technical innovation in cyber to security takes place.
The importance of ongoing engagement on critical topics such as regulation and encryption, data retention, the operation of networks, interception grow more important by the day. In fact, more important by the hour. My fifth point is that policy and regulatory framework for telecommunications needs to be pro-innovation. As a nation, our future has to be built on innovation. It is the key to diversifying and strengthening our economy. The key to driving the creation of new globally connected industries. The key to developing a strong services based export sector. And the key to produce to boosting productivity and driving new employment. Telstra is part of this. We're currently in the process of recruiting more than 1,500 new roles into the companies in new areas such as software engineering, data analytics, and data science, and cybersecurity. However, the pool for which we are recruiting domestically is too small. Last year, Australia's tertiary system produced about 1,200 software engineers.
Telstra is seeking to recruit 1,500. India produced 44,000. We must therefore continue to support and increase the emphasis on science, technology, engineering, and mathematics subjects through every layer of education, training and retraining sectors in our curriculum and in our classrooms. We must also systematically review our regulations in every industry and every sector, in everything from R and D, immigration visas, dialling up the incentives, and dialling down the red tape. My final point is that we must have a framework that is pro customer and in particular in pro in inclusion. Too many Australians and particularly regional low-income Australians are simply missing out on the opportunities of the digital age. Policy must continue to recognise these divides and contribute to a future where a focus on affordability, accessibility, a digital ability programs, work to build inclusion, particularly for vulnerable and low-income customers, those that are most in need.
ANDY:
As a society and as an economy, as businesses and as individuals, we have become incredibly dependent on our telecommunications networks. That is why telecommunications is fast becoming and arguably already is the single most important infrastructure in every company, in every community, in every state, and in every country in the world. It is also why Telstra remains absolutely committed to ensuring that business is future fit with the best network. Shareholders would be aware that just last week we announced that we will switch off our 3G technology in June 2024. As we grow and upgrade our mobile network, we have reached a point where we must say goodbye to the older network technology, just as we did in 2016, when we switched off 2G to give 4G a boost. We're now at the point where we need to look at switching off 3G to give that spectrum to 5G. Before finishing up. I would like to reconfirm our guidance for the 2020 financial year. The guidance, which can be seen on the screen behind me, was updated last month following the release of NBN's 2020 corporate plan.
That plan indicated a 25% reduction in the total number of premises forecast to be connected during 2020, from two million to 1.5 million. A change, obviously, of that magnitude does materially impact Telstra's guidance on total income, underlying embittered, and the amount included in the NBN headwind, as well as their net one-off NBN receipts. Less the NBN net cost to connect. This change also led Telstra to update a 2020 cost reduction target from 660 million to 630 million. The changes to forecast activations also affect and defer SSI receipts from NBN from 2020 into the future. This, of course, will also be partly offset by the natural hedge, including benefits from lower NBN costs to connect lower network payments to NBN and retained wholesale EBITDA. I want to reinforce, however, that the only change to this NBN rollout and their corporate plan has changed our guidance for 2020. I would also like to highlight that the updated plan does not alter our view provided to the market in August, that our underlying EBITDA when we exclude the NBN headwind is expected to grow by up to $500 million in 2020.
This is a significant improvement on the decline of around 400 billion in 2019 and goes to the point that the chairman has said why this is such an important year and such a point of an inflection point for the company. So, let me summarise before I hand it back to the chairman. 2019 was a year in which we met our guide and built important momentum behind our 02:22 strategy. As expected, and as previously flagged, our results currently reflect the current market realities, including the impact of the NBN and intense competition. Whilst these factors will continue to influence the year ahead, we are now approximately halfway through the negative headwind from the NBN and we expect the hard work from our teams to translate to momentum in the underlying business. That progress was the result of the combined efforts of many people, including many dedicated employees. Every day they are focused on serving our customers and helping to return value to our shareholders. And on your behalf, I want to sincerely thank them for their efforts and their commitment.
I'd also like to thank the Telstra management team, many of which are here today for their dedication, hard work, and willingness to step up to the very significant challenges this year. I'm incredibly proud to work with such a talented and committed group of professionals. We are sitting at an incredibly exciting inflection point in technology, in telecommunications, and for Telstra. We are only a few months away from the dawn of the 2020s. We're already at the dawn of 5G and we have entered a period of rapid technology innovation, which will provide significant opportunities for your company in the future. T22 is about positioning in this world as a simpler, more digitally enabled business with the best network, the right economic model, a strong balance sheet that skills and capabilities, cultures, and ways of working that we need to succeed. Thank you. And let me hand it back to the chairman.
SPEAKER:
Great. Thank you very much, Andy. So, turning now to the film business of the meeting. The atmosphere of business for today's meeting is set out on the screen. I will shortly introduce and invite questions on all of these items. But before I do, I'll outline the question and voting procedures for today's meeting. When you registered this morning, you will have been given a card. Yellow cards are for shareholders who may speak and vote, blue cards for shareholders who may speak but not vote. You will need your card to ask a question or re-enter the meeting. I will introduce each item and then invite questions from the floor. There are several microphones located in the room, as you can see with the numbers there. If you'd like to ask a question, please move to the reserved seating area behind one of the microphones. Please share your card to the microphone attendant and give your name. As a courtesy to all shareholders. Please also state your affiliation if you are not here today in your personal capacity.
The microphone attendant will invite you to the microphone when your turn comes. As always, in the interests of all shareholders, please try to ask only one question at a time, and keep your questions and comments in no more than two minutes to allow as many shareholders as possible to speak, and for me to remember what you asked, and also, please, ask questions which are relevant to shareholders as a whole. If you have individual, customer, or shareholder issues, that's fine, but please speak with one of the customer service staff here who can help you. They are located in the room here and in the customer service area outside wearing Telstra shirts. If we can't answer your question fully here today, then we will aim to provide you with a response after the meeting. As I mentioned at the start of the meeting, voting on items three to five and six, if required is being conducted by poll. For shareholders who are able to vote at today's meeting. You can lodge your vote by completing the voting boxes on your yellow card.
If you have questions about voting at any time today, please speak with one of our staff in the room here or in the shareholder registration area outside who will be happy to assist you. We have received proxies from nearly 22000 shareholders and direct votes from approximately another 13,200 shareholders. The votes recorded for and against each item will be shown on the slide behind me at the conclusion of a discussion of that item. The four numbers displayed for items three to five and against four items six, if required, will include proxies received and available to be voted by the chairman of the meeting. Miss Emma Jones of Link Market Services Ltd, Telstra Share Registrar will act as returning officer in relation to the poll. The results of the poll on items three to five and six if a second strike is received on the remuneration report will be available later today on the ASX and on our website. Lastly, a light lunch will be served at approximately 12 noon. However, if the meeting is still underway at that time, we will not be able to adjourn the meeting for lunch.
So, I turn now to Item two on today's agenda, which is to discuss the company's financial statements and reports for the year ended 30th June 2019. This item provides shareholders with the opportunity to ask questions about and comment on 2019 financial statements and reports, as well as the business operations and management of Telstra. You may also ask questions of our auditor shareholders. I now invite you to move to the microphone to ask any questions you have about our 2019 results or any general questions you have about the company. We're ready to go. Number three?
EMMA JONNES:
Chairman, I would like to introduce Sue Shields from the Australian Shareholders Association.
SUE SHIELDS:
Good morning, my name is Sue Shields, and the volunteer company Monitor with the Australian Shareholders Association. Today, I hold proxies from over 2000 shareholders for approximately 27 million securities, which puts the RSA in your top 10 shareholdings. The ordinary dividend this year represents a 59% payout ratio on underlying earnings, while the Australian Shareholders Association appreciates that in determining the dividend, the board took into account the objectives of maintaining financial strength and flexibility. It's well short of one of the principles of Telstra's capital management framework, namely a payout ratio of 70 to 90%. What assurances can you give us concerning future payout ratios?
SPEAKER:
Great. Thank you. Thank you very much. Good question. I can't give you a firm assurance to your question. The policy on capital management is well laid out, and it seeks to achieve a combination of both balance sheet strength while returning as much as possible to shareholders at the same time. We are very conscious that this year my ordinary pay that 59 on the special, I think about 63%, overall payout this year was around 88%. It's inevitable. Well, that's our framework. But there will be fluctuations from time to time. This was a particularly unusual year with a lot of redundancy costs and restructuring going on. Next year will be a cleaner year and we hope, going forward as well. So, we're very confident that over time, we will absolutely adhere to those two measures we have given being served in the minds of ordinary and approximately 75% of the special. So, you can be assured of that. Thank you. Another one?
EMMA JONNES:
Chairman, I would like to introduce Shane Murphy from Sydney, New South Wales, to speak.
SHANE MURPHY:
Thank you, John Andy, And shareholders. I stood here as a national president of the CIA. You were not here, but in Sydney, 12 months ago or around that time at the last AGM. And since then, we've continually seen customer frustrations, lower payments to shareholders, and whilst we've seen a slight increase in the share price. We're seeing a significant increase in offerings in pay or remuneration to the CEO. At the same time as that, offering of some 33 to% 34% remuneration increase is being offered, workers are still struggling to get an enterprise agreement with the company. Whilst we have made some significant inroads over the past negotiation meetings, we are still without an agreement for working people. They are being offered or paid pay rises below inflation. And yet today we still have the CEO being offered some 34% increase in overall remuneration. That clearly causes us as representatives of working people in this nation, in this company, concerns. There's a clear disconnect between what current workers who form a big part of the success of this company are being offered compared to those at the executive level or the CEO.
Thank you.
SPEAKER:
Thank you, Shane. I, of course, 100% understand where you're coming from, but let me try and make a couple of points in response to that. Firstly, I did mention in my earlier comments it's Andy's total remuneration rose by 34%, but that is firstly a fixed and variable amount. The fixed remuneration of the CEO at Telstra has been falling for 10 years and is now lower than it was 10 years ago, and his variable remuneration goes up and down with results. And yes, it went up 34% this year. But let's not forget, it went down 50% in the last two years, so he is still 20% below where he was two years or three years ago. So, no one is expecting your members to take a 50% reduction in their compensation and remember they have a fix, but they also have a variable pace, which you didn't mention. So, there is an SGI component there for employees as well. That said, look, there's no easy answer to your concern other than saying that the amount being offered today, which I think is 1.5%, is actually more than inflation.
Inflation, to my knowledge, is a little bit lower than that, and I have every confidence that the management team will find an acceptable resolution for both you and the company. Thank you.
EMMA JONNES:
Chairman, I'd like to introduce Kyle Robertson, from Northern Victoria.
KYLE ROBERTSON:
Mr. Chairman. My question is about the risk with 5G. Given that Swiss Re-lists 5G and its top five risks for 2019. Can you confirm that Telstra has no public liability insurance for any injury caused by 5G and therefore assumes full direct liability for all claims? Why does the board deem it appropriate to expose shareholders to such extreme liability by deploying 5G technology before the safety of technology has been positively established through comprehensive independent testing instead of through extrapolation, assumption, and experimentation on the public and further infringement of the Nuremberg code prohibits experimentation on human subjects without consent. It says consent is absolutely essential. I want to make it clear I do not consent.
SPEAKER:
OK, thank you. The whole industry, including Telstra, has spent an inordinate amount of time and money on researching any potential health impacts of all ages, not just 5G. So, have governments, so have a wide number of international studies. I can assure you, we are acutely aware of our responsibilities in those areas. But there is absolutely not one shred of evidence that 5G or for that matter, 4G has any harmful effect on humans. And I realized for those that believe, like anti-vaccination or even the flat Earth society, it is very hard to change people's opinion. (CROSSTALK) Just let me just finish. If ever there is any indication whatsoever that we and the industry are wrong, you can be 100% sure that we will not only accept the liability, but we will be all over it. But as of today, there is absolutely no evidence.
KYLE ROBERTSON:
May I just refer you to Professor Martin Paul from the University of Washington? I met the professor there, who, in an open letter to ARPANSA, stated 187 bodies of evidence about human exposure and health risk?
SPEAKER:
Well, the same thing about vaccination and flat earth. I'm sorry. We can only go with the science that is proven by a majority collective view, and there is no such science today.
KYLE ROBERTSON:
I'll also state, for the record, that I am electrically sensitive, so I really don't care what your studies may or may not prove because I feel it.
SPEAKER:
I can see you are a very sensitive person, and so am I to this issue. We will do the right thing, I can assure you.
KYLE ROBERTSON:
Thank you. And before (INAUDIBLE)
EMMA JONNES:
Chairman, I'd like to introduce John Ellery from Warragul Victoria to ask his question.
JOHN ELLERY:
Yes, good morning members of the board. Just to introduce myself, John Ellery. I'm a senior union official with the communications union. Previously, I spent, from 1975, 19 years working in Telstra's leading research area, so I'm not unaware of the circumstances of new technology and all that sort of stuff. I've spent the last 25 years watching a really great company go downhill. And quite frankly, you people on the board really need to ask one simple question of yourself. And that is, where are you taking this company? This company now employs less than 25,000 staff.
SPEAKER:
Originally, it probably employed about 100,000 Australians. So all those Australians that used to work for a once-great icon in Australia. Most of them don't work for that company anymore, and it's an absolute disgrace. The intention with T22 is to have 9,500 job cuts, not the reported 8,000. It's 9,500 job cuts. That will leave less than 20,000 staff once this program of Mr Penn is completed. You, you the board, have corporate responsibility given you have been set up by the Australian taxpayer. That's where Telstra came from, a company owned by taxpayers who clearly expected jobs in Australia for Australians. That arrangement allowed many thousand Australians to be employed and pay their taxes and do all sorts of things that every average everyday Australian as a worker did. You have 20,000 staff members who are seeking security in their job. With Telstra not with some constructed arrangement that you're pursuing at the moment. Which is to appear to throw most of those people across to wholly-owned subsidiaries.
That's what we're learning out of our enterprise agreement negotiations. That your master plan is to probably get the bigger, wider Telstra down to about 5,000 staff. Now that is outrageous. People who are moved or potentially moved across to subsidiaries are in a very precarious position. And we call on you to stop that madness. You've also got 20,000 staff, as Shane mentioned before, who are being offered a paltry ludicrous pay rise at the very same time that Mr Penn is seeking a 34% pay rise. Again, we say absolutely outrageous, ludicrous and you should stop this nonsense. You have an extremely contentious enterprise agreement proposal that is really all about trying to force staff to take long service leave, for instance, at the behest of the manager, not at the individual. People who have been a long-serving staff of yours are now being pushed into taking long service leave when the boss wants them to. Again pull back on these ludicrous plans that you have, you claim it's cost-cutting we say it's ludicrous.
So I repeat, what is your master plan for these 20,000 current staff? Or is it only to have 5,000 Telstra staff and then have the rest of them moved over to subsidiaries? Or just plain sacked or moved or their jobs moved offshore? You've been pretty good at that. You got a lot of calls in the staff offshore in Manila. You got a lot of technical staff not even working for Telstra, doing Telstra work that was done in Australia by high-level technical people over in Pune, in India. So you've really got a real question about you. About what are your moral guidance, what is your moral guidance? About, you know, where are jobs being produced in Australia? 20,000 of your current staff really wanna know where their future lies. I'll leave it at that. Thank you, board.
AUDIENCE:
(APPLAUSE)
CHAIRMAN:
OK, thank you. I did try to address some of this in my earlier comments. Of course, we take it very seriously. We do not like, we feel the human impact of losing staff. But your suggestion that because Telstra once employed 100,000 people, somehow we're doing badly when we no longer employ that. I think if the measure of a company's success was how many staff it was employed, not sure that the shareholders in this meeting would be very happy with us. The reality is our world is changing. I've been through the impact of the NBN. Half of those 6,000 which is ultimately gonna be 8 or 9,000. Those people are losing their jobs 'cause we're losing half of the business that we used to operate. Are you really suggesting that we keep those people just sitting in an office somewhere while the work is being done in another part of the industry? Unfortunately, we're not alone. Every industry is going through. If you're going to David Jones and go in the lift, there isn't somebody who got Jingjing which floors you press a button.
No, that is happening across every industry, and ours is probably at the leading edge of it. Your 5,000 staff thing, is the first I've heard of that. I'm not aware of anybody on the board I can see management nodding. We've never heard of the 5,000, so I'm not sure where you've invented that from. Where are we going? Well, we're just trying to explain we're going through the biggest transformation this company has ever been through. The T22 program is extensive. It's to make sure that Telstra survives and wins in this environment where everyone is going through the same thing. You look at every big Ttelco, they have exactly the same thing. They're laying off staff. They're restructuring, they're embracing technology. Sadly, that is the reality of life. And one more thing on Andy's pay. I really have to say I struggle that for some reason the business community is singled out. You know, if somebody devotes their life to sports and on a Friday night, they then instead of going out with their mates, they go training and they give up their holidays and weekends.
They get to top of their sport, they get rewarded for it, and no one seems to begrudge that. And so same with music. The online gaming industry young kids can earn $5 million now by playing Fortnite. And even influencers you can earn millions of dollars just by wearing a nice jacket and standing in front of a landmark. And yet, when a business executive devotes a huge portion of their life, they work long, long hours, weekends. They miss family events when they get to the top of their profession. Somehow, it is morally wrong that they get rewarded for it in an international global market. I think that is wrong. Thank you.
AUDIENCE:
(APPLAUSE)
CHAIRMAN:
Number three.
SPEAKER:
Chairman, I would like to introduce Scott Hunter from Melbourne, please.
SCOTT HUNTER:
Good morning. I've got a few brief comments to make. In 1983, there were 26,000 public phone boxes. There's now 13,000. These are public assets originally paid for by the taxpayer need to be kept and maintained, and therefore emergency calls are often needed. The new design has no privacy to make a call. It used to be a booth with a bench to put one's bag and documents on. The new ones don't. They're designed by someone who doesn't use them. 50 cents for a call if you use a $2 coin, you don't get change. Every other device in this country, ticket machines, drink machines give change. Why don't phone boxes? The Telstra pricing of some services is wrong and unfair. The cheapest home phone plan is $42 a month, with each call to a mobile phone charged at $1 a minute. Mobile plans can be got for $30 a month, which is $1 a day, with unlimited calls to mobile phones. One is too cheap, the others too dear. There are a lot of pranks attempted scam robbery nuisance calls that need to be blocked, traced and stopped permanently.
Particularly once fraudulently claiming to be Telstra staff. The technology is available to do this. The aim of these scammers is to steal information to rob everyone they contact. This could bankrupt potentially everyone in Australia. Don't wait for the government to ask you to stop these calls. Telstra should show leadership and do it themselves. Is there a Telstra museum? If so, where is it? If not, why not? It could display PMG Telecom and Telstra history in artefacts, phones, phone books, phone boxes and phone cards. There's a secondary market for these items and souvenirs. Telstra should be middle manning the price. When someone comes out to connect up the NBN and the contractors are used through incompetence, cut off the Telstra service to a house and you have to ring up and get Telstra to come out and repair it at Telstra's expense, and you're left without a phone for three days. Does Telstra pass on the cost of this back to the NBN or do they just pay it themselves? If they pay it themselves, why?
And when you sack 4,000 middle-level management staff that leaves staff at the bottom unmanaged. Is this wise? What happens to the sacked staff? And it's not just the person sacked, but the position forever. Can't you retrain them as the IT staff you need?
AUDIENCE:
(APPLAUSE)
CHAIRMAN:
Well, thank thanks for sticking to the two questions. Yeah, that's one two three four five six seven eight, that's nine. But I'll do my best. I'll do my best. So on the phone boxes, I have to say I'm not intimately acquainted with why it doesn't give change. But I'm sure Andy if you got do you wanna say anything about that?
ANDREW PENN:
Well, I'd happily say so. We actually have 15 and a half thousand public phone boxes at the moment. They're under the universal services obligation with the government, so we work with them regarding the design and the placement of them. But ultimately, you know, our aspiration is actually to make them free. So it does not make sense to go through and systematically upgrade the technology to provide change we'll make them essentially free over time.
CHAIRMAN:
Great. The next one was on mobile charges. Look, this is a very dynamic industry. Mobile plans have to be competitive with the rest of the industry. We make no secret of the fact that we're more expensive than most operators because we believe we have the best network and the best service. But that said, we have to be competitive or people wouldn't use us. On the scams, that is a very difficult one. And it's easy for you to say we should just wave a magic wand and fix scam calls. We can and do block numbers where we know that scams are originating. But the technology is out there is to rotate through millions of different numbers. A call comes from a different number every time. We and the rest of the industry we're working with, ACMA are working with ACCC on trying to find ways of identifying the sources of these scam calls and trying to build technologies to beat them. But it's a constant race as the scammers and the criminals, like in many areas of society, are always innovating and one step ahead.
All I can say really is the individual has to try to use their own wisdom, and if you don't trust it, just hang up. If it's really important, it'll come back. If it isn't just hang up. And there is actually a Telstra brochure which can be found on the website and saying, Is it really Telstra calling? That will give you some guidance through that. But sadly our society does have criminals in it and we don't have a solution to fixing every single one of those criminal attempts. Is there a Telstra museum? Yes, there is, and it is in Hawthorn, it is actually well worth a visit. Some fantastic history in there. Regarding the NBN I can't really generalize. It depends when a fault is fixed, whether the fault was the fault of the NBN or it was the fault of Telstra or some other matter. But I can assure you, we don't give NBN a free ride there. You asked what had happened to the 4,000 middle management staff? Obviously, I don't know the individual outcomes. But I do know that Telstra's invested $50 million in trying to help people retrain outside the company.
And within the company, we have an extensive retraining program, which I think we'll see 1,500 people or something or more actually move into other jobs. That I think was the end of your nine questions. I hope I've answered those. Thank you. Number four.
AUDIENCE:
(APPLAUSE)
SPEAKER:
Chairman, I would like to introduce Vince Misquera (UNKNOWN) from Sunshine Victoria.
VINCE MISQUERA:
Good morning, John. I have a two-part question. My first question is directed to the CEO, Andy. I'm a former employee of Telstra. Andy when your predecessor, David Thodey was in charge we had an active Telstra alumni program. Under your leadership, it has gone quiet. My second part is second question is when I was going to university many years ago, a professor of economics said to me that the salary of the lowest-paid employee and the highest-paid employee should never be more than 10 times that. So that we don't have a situation where we have CEOs becoming too rich. Would you look at having some sort of a ratio for Telstra? Thank you.
AUDIENCE:
(APPLAUSE)
CHAIRMAN:
Let me answer the second bit, and then maybe Andy you have a go at the first bit. So on the multiple. Yeah, that is something that we are very conscious of. If we look around the world, Australia and Telstra actually performs pretty well and obviously still not to the satisfaction of everybody. The multiple in the United States is 287 times, multiple in the UK is 200 times. In Telstra, it's about 60, but depending on because so much of Andy's pay is variable and goes up and down. If you've got no variable pay, it would be 20. So on a fixed comparison, it's only 20. But obviously, that goes up with whether it's been a good year or a bad year. So we are as Australia amongst the lowest, and Telstra sits pretty well within that within Australia as well. Do you wanna have a go at the first question, Andy?
ANDREW PENN:
Yeah, sure. Look well, obviously. Telstra has a very rich and significant Alumni being such a large organisation. And at different points in the past, we've had various different alumni programs. We obviously take feedback in terms of how they received it and how people want to engage with the organisation. You know, we've mentioned the Telstra museum that's something that a number of our alumni get involved in. Telstra exchange, which is something that we use in terms of our broader communication. As well as Telstra Super, which obviously is an important part of the post-employment support of employees. The formal alumni program was not getting is a significant support that we would have aspired for it to have. I'm very happy to continue to get feedback from former Telstra employees and I'm personally like to speak to them from time to time and get their feedback as well 'cause it's something that we'll continue to look at.
CHAIRMAN:
Thanks, Andy. Number four.
SPEAKER:
Chairman, I would like to introduce Peter Star from Sydney, New South Wales.
PETER STAR:
Morning, John. How are you?
CHAIRMAN:
Good, Peter. Welcome, as always.
PETER STAR:
Yes if I'd been here last year, maybe we wouldn't have got the strike. I apologize for that. For those who don't know, I've been a long term shareholder for more than 12 years. I also represent a number of other shareholders and (UNKNOWN) superannuation pension funds. John, it's always a hard thing remuneration across the board, and I go to a number of meetings. But from where I stand and I heard what Sue had to say. I feel that you look at the mum and dad shareholders look at the share price. And I know it's easy to gloss over and say, Oh, well, it doesn't matter because, you know, back in February 2015, we were at $61 but we've had NBN and all the rest and we got $11 million. And I know Nora's been there and I've been there when all that negotiations and everything we went through. It's a hard thing for mum and dad shareholders sometimes to say, well, you know. Friday, our shares closed at 357. Yesterday we closed the 350 because of some announcement, you know. We just getting tossed around and we feel it, especially for the people who are holding and continue to hold and indeed even reinvest.
So I just think that as far as what we're gonna pay Andy from the shareholders I represent and myself personally. I don't have a great problem with it, but I just think we just need to be aware of the alignment as far as where the shares and the price sits. Because that's what affects mum and dad shareholders. And this company is made up of a lot of mum and dad shareholders. John, your predecessor, Miss Livingston, was probably wish that she was back here instead of being dragged through the mess at CommBank and the Royal Commission and the tears that's brought her. But you're here. So it is the mum and dad shareholders are very important to this organisation and to this company. So I'll have some other things to say on other questions. But and again, the second one just for you, John. Andy, I don't know if Michael Eklund is here. Is he here, Andy?
CHAIRMAN:
Depends on what you're gonna ask.
PETER STAR:
Don't worry.
CHAIRMAN:
Yes, he is. He's here.
PETER STAR:
I hope he got the message from his staff.
CHAIRMAN:
Did he get the message? He did.
PETER STAR:
Now he knows me, he'll be able to talk to me. Thanks, John.
CHAIRMAN:
Thank you. Look, Peter, of course, we are acutely aware of the impact that the share price has on mums and dads, on superannuation funds and the like. We have, I think, pretty well. The highest retail shareholder base of any major corporate in Australia of around 50%. Which is all of the people in this room today and many, many, many more. We have 1.3 million shareholders, the vast majority of whom are private individuals. So we absolutely understand that we are all shareholders too. Every one of us sitting on up here is a shareholder, so we experience it too. The reality is, however, we only have a limited degree of control over what happens to the share prices. And big business is no different to a little business. You know if you're in a small business, if you've got two news agencies and they're both making a profit and you sell one newsagent, you'll only have one news agency left. Are you gonna employ all the same number of staff? Are you going to earn the same? No, no, you're not.
And that's what's happening to Telstra. The NBN is taking away about half of up to half of our net profit, which from which dividends are paid and obviously impacts the share price. So that's the fact we can't do anything about it. But other than that, we then have to not just sit on my hands, but we have to try to rebuild Telstra as actively as we can so that we can increase dividends again one day and see our share price rise. And that's what's the T22 program is all about. And there are many thousands of people working extremely long hours trying to deliver the sort of result that you ask for from mums and dads shareholders. So we will never forget it. We can't unfortunately wave a magic wand. But we will never forget our responsibility.
PETER STAR:
Thanks, John.
CHAIRMAN:
OK. Number one.
SPEAKER:
Chairman, I'd like to introduce Ian Blair from Carlton Victoria to ask his question.
IAN BLAIR:
Thank you very much for this opportunity. Firstly, I'd like to congratulate the board for having a good presentation, and I hope that it's available on the net rather than just having it as a printed document. (CROSSTALK) Secondly, I in over a 10 year period, worked for five years with Telstra, so I'm a strong Telstra fan.
SPEAKER 1:
I've got one observation and one question. Firstly, I was there at the time of the NBN negotiations. And I was appalled that the board rolled over with Richard Alston and let the government turn around and take it away. Telstra was in a fantastic position to have rolled out the whole NBN, done it for half the cost, and yet got totally Turnbull and everyone else torn it apart. So, I think it's too late to plead. But in future, have a bit of backbone to stand up to the government. And to turn around, Telstra is a huge company. And with all the fathers and mothers and families, shareholders, you should be able to convince the government on proper policy. So, Gina Rinehart was prepared to get out on the mining industry, and the mining tax. Let's see the board on the back of a truck going around and convincing the government on good telecom policy because as you rightfully pointed out, the whole future digital disruption is going to dominate every industry. And we need to be on top of it. So, the question is, how about Telstra having a fantastic training program that's available to us shareholders, so that we can keep up with 5G, and what the next one is, but also train their staff that are coming away so that we don't have to get them in on 457 visa's thing.
We've got the talent in Australia, let's train them and use them here. Thank you.
JOHN MULLEN:
Good. Well, firstly on the NBN, and backbone, et cetera. I think I made some comments earlier. They're clearly some strong views around these to what the NBN could have been or not been if things had been different. But they weren't, where we are. I mean, please don't forget that when you're negotiating with a government, it's not a normal commercial relationship, because they just pass a law to make you do what they want you to do, and that's quite hard to fight. However, today we are where we are. And yes, we absolutely try to have a backbone, as you put it, to robustly defend the interests of Telstra. But we're also mindful, as you heard from both Andy's comments to mine, that this currently, anyway the NBN and the broadband issue. That's a national issue, that's not a Telstra issue, or an NBN, or anybody else. It's a national issue that the whole industry and government needs to get together to resolve. And you can be sure that we will absolutely do our part in that. Then, I think you asked, how do you as shareholders ensure that the company is keeping up with technology and leading Telstra in all the changes that are going on?
I can honestly say there, I've been amazed in the time that I've been at Telstra that, Telstra really does punch above its weight as the expression goes on a global basis. So, we may be a big fish in the little pond here in Australia, when you go overseas, Telstra's very little fish in a very big pond. But I'm constantly amazed at the access that Telstra gets, the recognition that Telstra gets for the innovation that takes place under Andy and the team. And it's something a long tradition. A whole number of industry firsts have taken place here in Australia, the most recent one being 5G on the Gold Coast with Ericsson, which I think was the first. That was the first global demonstration of how Andy, personally sits, not just on the GSMA but he's on a quite number of industry bodies and forums where Telstra's voice is heard loud and clear. And I can absolutely say, Telstra is right up there at the cutting edge of change in our industry. And we as a board will continue to 100% support Andy and the team in making sure that Telstra stays there.
Something I think you can be justifiably proud of. Thank you. Number three.
SPEAKER 2:
Chairman, I would like to introduce Norman Wong, from Melbourne.
NORMAN WONG:
Thank you. Mr Chairman, members of the board, and shareholders. My question is, how active are your customer satisfaction surveys if they exist? Thank you.
JOHN MULLEN:
Thank you. So, trying to keep pace, obviously, with what the customer thinks, given the number of customers we have, 18 million or more, is always a challenge, and no measure is perfect. We measure two principle metrics, which is around the Net Promoter Score Methodology, which is a widely accepted methodology used in the marketplace around the world. We divide that into an episode. And by episode NPS we mean, when you've just had an interaction or an experience with Telstra, you've just been on the phone, or you've just bought something from the store, or whatever you've just that moment done, we ask you for your feedback on Telstra's performance and customer service, at that moment in time. That we feel represents the cutting edge of change and improvement that we're making in Telstra. Then, we also measure what is called Strategic NPS, which is a sort of general perception of Telstra, would you recommend Telstra to someone else, et cetera. That inevitably lags movement. If the company goes into decline or starts to really improve, it takes a while before the general perception changes will do eventually.
So, what happens in an episode will ultimately impact Strategic, but it takes time. So, we measure both in order to try to be on top of the now, but also the general impression that Telstra is creating. And you'll be glad to know that we are making good gains. Still nowhere near where we'd like to be, but we're making good gains and management are targeted at every year. Part of their variable compensation is based around achievement of improvement in those Net Promoter Scores. Thank you. Number three, again, I think, you know.
SPEAKER 2:
Chairman, I would like to introduce Hans Witteveen from Seymour Place.
HANS WITTEVEEN:
Thank you. Good morning, Mr Chairman.
JOHN MULLEN:
Morning.
HANS WITTEVEEN:
In the financial statement, the cost reduction program and reducing fixed costs. It always comes back to staff reductions, 8,000 people, whatever it is. My question is, how is this balanced against maintaining skill levels with it to keep the company going? I did take note of the CEO's comment that we're recruiting people for new skills. But at the same time, you also need to keep people to maintain the old levels until you're at the new platforms. You spoke fairly convincingly on the need to recognize the skills of the board. You spoke less convincingly on the remuneration of the actual staff. But the real question is when you let 8,000 people go, how are you dealing with maintaining the skills to keep the business going?
JOHN MULLEN:
Yeah. Look, that's obviously a critically important issue. It's also a complicated issue, 'cause of the people that leave. Some people are leaving because we just don't have that job anymore. Some people are leaving because technology has changed and that particular activity is now being replaced with another, and a whole variety of different reasons. But I do know that our HR team, you know, very ably led by Alex Badenoch, who is here, puts a huge amount of time and effort with the rest of the management team, on ensuring that the skills mix is right is fit for purpose. Sometimes you lose people you don't want to lose. Of course, it doesn't always go to plan. But by and large, we've been actually really reassured that if anything, the skill set of Telstra is improving. It's rising. It's not declining, as a lot of those older, more manual jobs are disappearing and they're being replaced by more high tech jobs. But it is something we absolutely have to focus on. The race is for talent just as much as it is for financial success.
And we have to make sure that we're up there and a leader, in that respect. Number one, please.
SPEAKER 3:
Chairman, I'd like to introduce Bill Davey from Victoria.
BILL DAVEY:
I'm Bill Davey, a shareholder. My question is, what percentage of revenue comes from broadband as against mobile services? And what's your estimate in, say, five years time, the split between the revenue streams?
JOHN MULLEN:
Sorry, what percentage comes from the segments and?
BILL DAVEY:
Percentage of revenue comes from broadband services as against mobile services?
JOHN MULLEN:
Well, correct me if I'm wrong, Andy. I think our fixed revenue is about 19 or 20% of our total revenue, and the data and IP revenue is about nine.
ANDREW PENN:
In mobile, would be close to about 40%.
JOHN MULLEN:
Mobile close to 38, 40%. Yeah. But mobile is a bigger contributor to margin, than the others.
BILL DAVEY:
And what's the estimate in, say, five years time? Is that more mobile against fixed broadband or?
JOHN MULLEN:
Well, we would hope to maintain a strong fixed base despite the whole of the, will change going on in the NBN. That's the one, obviously, where we have less certainty, probably. Mobile is clearly going to be an absolute critical success factor for any telecommunications company in the future. I mean, we have nearly 50% market share. It's our biggest profit generator, and we have by far the best network in Australia. So, we will be doubling down on our performance in that area. That said, obviously, fixed, we're now becoming just a reseller of the NBN, and we have to try and succeed in that world. And we've done actually quite well there in that as the transition took place from a direct relationship with the customer to the relationship through the NBN. There are a lot of predictions that Telstra will lose, share, et cetera. Well, we haven't. In fact, if anything, we've certainly held not growing market share and the old data and IP area, that's obviously an area of considerable flux.
I made some comments there about the NBN's activities in that area. That's an important part of a small but still very important part of our business. And we have to see that transition through it, whether it's to new wideband solutions provided by Telstra, or a resetting of the NBN.
BILL DAVEY:
Thank you.
JOHN MULLEN:
Thank you. Number four.
SPEAKER 4:
Chairman. I'd like to introduce Lee Kilton from Northern Rivers, New South Wales.
LEE KILTON:
Thank you, Mr Chairman. I am representing my self-managed super fund, and I have taken a 50% hit in my earnings from my investment in Telstra this year. So, I feel the pain of some of the staff who haven't had increases. I don't share the pain with the board, because you haven't had any decrease at all. But that's the way it is. Last year, we had a reduction in profit after tax of nearly 10% in the company. This year, we're down 40%. And that is the net profit after tax, which in fact is what affects most of our investment in the company. It seems to me that this meeting should have been held seven or eight years ago when we were given hope for the future by the new technologies, and the new systems that are being put in place. Last year at the AGM, you mentioned that the NBN was the main contributor to our woes, and we all pointed out to you that this wasn't something new you had known about the NBN for some time. Next year, you're saying that we're hitting even greater headwinds with the NBN.
So, I wonder whether 10% to the 40%, will go next year, and consequently what happens to our dividends in years ahead? The buck stops with the board and as I mentioned to you last year, there's no point in bemoaning the fact that we have an NBN rollout that we've known about for 10 years. You've been on the board for more than 10 years and the one or two other members of the board that have been there for significant periods of time. Surely at that stage when they introduced the NBN, you did some modelling as to what the effects of the rollout would be and how you would maintain value in the company when that started to take place. You know, you talked about the newsagent having two newsagents and selling one and not expecting it to be the same business afterwards. Well, what did your modelling say you should do with this company when shares were up around the $6.50 mark, when the CEO was appointed, and when you took over as chair? And we're now sitting at $3.50 in round terms. So, you know, we can say the share price is of little relevance because we can't control what the market says.
What the share price does is it is the collective intelligence of the investing public out there, both here and overseas, as to whether this is a company worth that sort of money to invest in. So, I get back to my point that the collective responsibility here rests with the board as to the direction and the quality of the company and what we are doing with the resources within the company. I asked a question at last year's AGM as to what you're doing with board renewal. Because I don't see any younger faces who've grown up with digital technology, sitting on the board or even recommended for board positions. I see a lot of people who are professional directors that sit on the board that haven't grown up with that space of technology that we are needing to take this company forward. So, can you please explain to me what you are doing with board renewal that reflects the future direction of the company, not the past history of the company? Thank you.
JOHN MULLEN:
Thank you. OK, let me have a go at the first bit. Yes, we did know 10 years ago that the government had an intention to create an NBN. We did not know what form that would take. We did not know how that would be structured. We did not know when it would actually finally happen. So, in all that meantime, we had to continue running Telstra because there was no NBN. So, to suggest that we should have suddenly made all those changes 10 years ago in anticipation of the NBN might have arrived, I think it's a little ludicrous. That said when the NBN did arrive, yes, we did make a whole lot of projections. And one thing, whether we're at fault or I don't know, we certainly read the whole industry estimate that reselling the NBN would be a profitable occupation. Now, we all had different views of how profitable we certainly had our modelling. That, unfortunately, has turned out for the whole industry to not be the case. So, absolutely is the board accountable, 100%, so is management. But it's very easy to say, well, you've lost half your net profit, we'll just go and replace it.
I had this conversation with shareholders all the time. So, what do you actually recommend that Telstra does, that it's not doing now with the G20 program anything else? And very easy to say, just find, 3 billion. But that is equivalent to finding another ASX 20 company. It's the equivalent of creating overnight another Qantas. So, I really think it's a little impractical to expect that a board or management team can wave a magic wand, and just achieve that. That said, we are on the hook 100%, and accountable for doing something about it, which is what we are doing. And the T22 program is one of the most ambitious in the world, if not the most ambitious. As I mentioned earlier, I found it quite interesting that in recent times we used to go overseas a lot to look at other major telcos and see what lessons we could learn, 'cause everyone is going through the same challenges, and they don't have any solutions either. We have gone overseas to look and see what we could learn. The T22 program is actually engendering traffic the other way, and we are starting to have a number of visits from very large international telcos who are coming to look at the T22 experience and the Telstra experience as being leading, in this respect.
So, have we got it alright? No. Are we able to fix everything and fill every gap? No, but I can assure you we are trying extremely hard and that has been recognised in the Global Telco World. Last but not least, your comment about board renewal. Let me say two things. One, I'm extremely proud of the board renewal that we have. We now have an extremely well-equipped board for the challenges of today. We have three leading technology senior executives from around the world who have been through this sort of thing in much bigger economies than ours. We're extremely lucky to have them. And then, we have some very diligent and talented local directors as well. We have two vacancies that we are about to fill. I had been hoping that I would be able to do it before this meeting in order to address exactly your question. Both of those will be filled before Christmas. And one of them you'll be delighted to know is an awful lot younger than all the rest of us on this board. And we look forward to introducing you to her next year.
Number one.
SPEAKER 3:
Chairman, I'd like to introduce Patrick Masrani from Sydney to come to the mike.
PATRICK MASRANI:
Chairman, board, shareholders, Minchin's been made of the Telstra alumni program this morning, it's a cause that the board's devotion could not be questioned on. Indeed, you've bolstered their ranks by nine and a half thousand. Those staff who haven't yet graduated to alumni status are increasingly concerned that their roles are going to be moved into subsidiaries, like corporate nesting dolls. Their terms and conditions undermined each step further removed from the company that's taken. What undertaking can you give to those staff that their conditions won't go backwards, that they won't be undercut through the creation of subsidiaries? Thank you.
JOHN MULLEN:
Yeah. I don't understand why there would be a fear that I mean, a company like Telstra, I don't know how many companies we've got in the group. We've got many 100s, and our employees and or assets are structured all across those. It really is. We are, however, one group. And whether an employee is in this part or that part doesn't make any difference to the terms and conditions. So, we have no intention of some sinister methodology of moving somebody from one company to another, in some way disadvantage them or give them less terms and conditions than they have today. We've no intent to do that.
PATRICK MASRANI:
Sorry. Chairman, just for clarity. So, to understand correctly, that you would not be in a position to give an undertaking that staff will not be transferred to subsidiaries, where they would receive less favourable conditions than that which they currently receive as Telstra employees?
JOHN MULLEN:
I can give you an undertaking. There is no intent to transfer somebody from Company A to Company B, just to reduce their terms and conditions. Absolutely. OK.
PATRICK MASRANI:
Noted.
JOHN MULLEN:
OK. Number three.
SPEAKER 2:
Chairman, I would like to introduce Dr Michael Chong, please, from Rosanna.
DR MICHAEL CHONG:
Mr Chairman, thank you for the opportunity to ask questions. I'm respecting myself, my wife, my family, I'm super fun and the children. We all got Telstra shares from the beginning. And first of all, we bought the share because it was a monopoly. I like Monopoly. Unfortunately, the government changed their mind. And then, they stripped their monopoly from Telstra. And it's very, very unfortunate. But now.
SPEAKER:
This NBN has been built gradually, but now they're not just wholesaler. They're also pinching the customer from the Telstra (INAUDIBLE) and other Optus. Like Coles, Woolies and (INAUDIBLE) they're pinching customer. Would that impact the profit of the retailers? Second thing is that if you, because it's very hard to earn money in this section. Can you ask Mr. (UNKNOWN) create a new business in the Telstra Corporation so they earn money to compensate for the loss of business in Telstra. Thank you.
JOHN MULLEN:
Was there any money to compensate the loss of...?
SPEAKER:
I'm not sure. I mean, the reference was to the NBN entering into the enterprise market. I'm not sure.
JOHN MULLEN:
I'm not sure I got all of your questions so come back if I've left anything out, but we should keep the NBN in perspective. Yes, it's a big impact on our business, but we still have an extremely dynamic and successful business outside the NBN. And I don't want the whole focus just to be on the impact of the NBN. Our mobile business, it's 50% market share in the company. We are absolutely world leading. I gave you some of the statistics earlier, that's probably a rank number two in the world. That is the future of Telstra. So don't be too alarmed that because we're having battles in the fixed area with the NBN that it spells doom for the whole corporation. It doesn't. That said, we were asked about backbone. Yes, we are fighting our corner in that whole fixed area, because it is an important part of our business, a profitable part of our business. And the particular issue that I raised was the mandate of NBN not to go direct to our customers, but to sell wholesale through ourselves and other service providers.
That we believe, is critical, head to the structure and the order that governments have put into the fixed market, whether we like it or not, it's the way it is. But both sides need to respect their mandate. So we will be pressing government and NBN very hard to try to make sure that they honor their side of the bargain. Just like we are honoring our side of the bargain. Thank you. Number four.
SPEAKER:
Chairman, I would like to introduce Kevin Saunders from Melbourne, Victoria.
KEVIN SAUNDERS:
Thank you chairman. I'm a shareholder both directly and as a part of our superannuation fund. My question, you've clearly pointed out today, the impact of NBN on our business. And you refer to it, I think quite cleverly as owning two shops and now you only have one shop. My point is I would like to know, as we now have one shop, do we still require such a large board and senior management? And should our CEOs still be paid the same salary? Thank you.
JOHN MULLEN:
Well, I think that's just a reiteration of the subject we've been over a few times. I would again stress, boards are really important, but what is a lot more important is management teams. And the one thing that you as shareholders can guarantee will damage your interests, is if you don't have a top, talented management team to navigate through these difficult times. Managing a business in good times is an awful lot easier than managing business in difficult times. And it's absolutely critical that the board ensures that you as shareholders have an outstanding management team. Which I believe we do, but we have to support them and remunerate them accordingly or we won't have such a team. Number one, please.
SPEAKER:
Chairman, next up I've got an Emily Cross from Melbourne who would like to ask her question.
EMILY CROSS:
I apologize for my croaky voice. Gentlemen, first of all I usually get up on principle at AGMs because apart from the lady representing other shareholders, no other female has as yet taken to the (INAUDIBLE) microphone here. So, could you unravel this particular little story for me? As I look around the room, most of people have got hair my color. So I thank you for the platinum plan, but could you unravel this story for me? At the Carlton shop where I usually go for my appointments, in the last six months the first young person who used to take my problems has gone off to do a musical career. He was brilliant. Second one got moved to another store to be manager, good luck to them. Another one has gone off to USA somewhere to take up a position with some US IT company. So my question is, what efforts do you make to keep young people at these lower levels in stores in the company, and give them opportunities to become one of you?
JOHN MULLEN:
That's a very good question. Let me try and answer it with an anecdote. A friend of mine, I discovered by accident, actually has a son working at Telstra. Who is, I'd say he's probably 28 or something like that, a young person. And my friend said, "Would you meet with him and just have a chat? It would make his day." (INAUDIBLE) "I'd love to, of course, no problems." I went and had a coffee with him a little while ago in Sydney. He is an extremely bright young man involved in the digitization project. That's digitizing our company from top to bottom, working in agile teams. And I came away from that meeting so infused probably more, I think, than he was. He said that the digital transformation program going on in Telstra today is the most exciting in Australia. Everybody in his area wants to work in it. I actually know with another hat of being told the CIO, the chief... The head of IT in Toll, said to me that we can't recruit anybody in digitalization because all the engineers have gone to Telstra.
So we do actually have an extremely dynamic young middle core there that is building a Telstra of the future. And these people are all my children's age, they're not our age. Our job is the supervision of the entity overall, but the people who will be sitting here in years to come will be some of those really bright, driven, dynamic and motivated young people in Telstra. I can absolutely assure you, there are a lot of them. Thank you. Well, believe it or not, there are no more questions as yet. Shareholders, even better news, lunch and refreshments are now being served outside. So if I wait... No more questions? Great. OK. There are no more questions there. That's finished, that item. Now, our next item is item three, being director election and reelection. As I mentioned before, we have three candidates standing for election or reelection and their details were served in the notice of meeting. So, I would now like to invite the three candidates, Eelco, Craig and Nora to address the meeting, in that order.
EELCO BLOK:
Thank you, John. Good morning, ladies and gentlemen, my name is Eelco Blok. I'm very honored to have been nominated to join the board of Telstra. I've enjoyed the journey so far since I joined the board in the beginning of this year. I'm Dutch and have 35 of years of telecommunication experience, of which the last seven years from 2011 until 2018 as CEO of KPN, the Dutch former increment operator. In addition, I was on the board of directors at the industry association, the GSMA, and given my telecommunications experience and the transformation of KPN, I believe I'm well positioned to contribute to Telstra, particularly as the company transforms under the T22 strategy. I look forward to continue to add as much value as I can to this great company, its customers, its employees and its shareholders. Thank you. (APPLAUSE)
JOHN MULLEN:
Great.
CRAIG DUNN:
Well, thank you, John. And good morning, ladies and gentlemen, it's been a great honor to serve on the board as your representative, and I'm grateful for the opportunities to speak to you all today. Telstra of course occupies a very special place in the history of our great country and has always made a very significant contribution and an enduring one to the communities it serves, as I know it will continue to do so. But as John mentioned in his opening remarks this morning, no company's future can be guaranteed or its success can be guaranteed, particularly in a world of such constant and rapid change. And so it is critical that a business can respond and adapt quickly and decisively. That means sometimes making very difficult decisions to stay relevant and to keep providing value to its customers. It obviously needs to do that in a way that's responsible, but also in a way that adds value to the risk capital that you shareholders invest in the company. And as John and Andy has explained, T22 does just that.
And in an environment that we are facing as a company, it's important that the stewardship and effective governance of Telstra, the board level, is done very well. And it's also important that those that take on that responsibility are equally committed to the delivery of the T22 program as it works its way through the next couple of years. And I like the rest of my colleagues, I'm very committed to the roll out of T22. I believe I've made a demonstrable contribution to the board, and I believe I have the career experience to keep doing so. I've worked in the financial services sector for nearly 25 years. I've lived and worked overseas, both in Asia and in Europe. And during that period, I've learned some very valuable lessons, which I think are things that can be shared at Telstra, including during the period of the global financial crisis. And more recently, as with other directors, following the Royal Commission into Financial Services. And a key lesson that stands out for me from both those experiences is the importance of good corporate governance and effective board oversight in providing a clear compass for sound decision making for the benefit of shareholders and customers alike.
I've also made a significant contribution to the development of sound public policy settings in financial services. I've been on a number of important government inquiries. And I think, again, that's something that I can add to given the regulatory oversight in the telecommunication sector. And finally, in a large and complex organization like Telstra, I think it's critical that your board's make up include directors with strong financial backgrounds. And with that in mind, I was very honored to take on the role of chair of Telstra's audit and risk committee earlier this year. So with your support, I look forward to continuing to support you and working for this great company. Thank you. (APPLAUSE)
NORA SCHEINKESTEL:
Good morning ladies and gentlemen, I feel we are starting to sound like a bit of a broken record, but I can't emphasize enough how Telstra is at the forefront of the profound change that's happening in society today. And it is brought about by new technology, but also by fundamental change in the way where living, working, playing. And Telstra is helping our customers, both retail and business to adjust to these changes, which are affecting every aspect of their lives. But we too are feeling the impacts. And that is why we have embarked on this very important transformation program, T22, so that we can better serve our customers, but also be a fitter and stronger company, delivering good returns to our shareholders and providing meaningful roles for our employees. I've served nine years on the Telstra board. And normally I would've retired at this meeting, but the board has asked me to serve another term subject, of course, to your deciding, to reelect me today. That's because they believe that my experience in the nine years here at Telstra, but also in more than 25 years, serving on many other boards across pretty much every sector of our economy will be of help as we progress through this significant transformation.
I've been part of reshaping other companies facing intense competition in their markets, significant disruption and huge regulatory change. I've chaired many audit and risk committees of major listed Australian companies. And believe that that background will continue to help the Telstra management team and board manage the critical risks which are inherent in the important work we are undertaking. We've also had a lot of change. As the chairman mentioned, we've had change on our board of directors and obviously in our own management team as we prepare ourselves for the challenges that lie ahead. The board therefore also recognized that I could bring both continuity and some corporate history. Indeed, as I think it's been mentioned earlier today, I joined the board while the ink on the first NBN deal was still wet. So I've seen two of those now and we look forward to the next stage. Delivering on T22 and then setting the course for Telstra for the next phase ahead, I think is critical, not just for our company, but indeed for our country.
And I do believe that I can help the Telstra board and management team achieve those objectives. Thank you.
JOHN MULLEN:
Thanks Nora. Right. So now we turn to the formal part of the reelection. So item 3A on today's agenda, which is to consider the election of Eelco Blok. As you've heard Eelco joined the board in February, this year as a member of our nomination committee. And over this last year, we've been recruiting some very talented telecommunications professionals, which greatly add to the wealth of experience we have on the board. Eelco has added to that significant depth, given his recent experience and the similar challenges facing operators all around the world. And he brings great value to the board as we continue to execute on our critical T22 strategy. So the board other than Eelco himself of course recommends his election. I will now take any questions you may have regarding Eelco's election. Do we have any questions? Yes, yes.
SPEAKER:
Chairman and introducing Joanna Richardson from Yarraville.
JOANNA RICHARDSON:
Thank you everyone. I'm OK. I really like the idea of the retention of corporate memory and experience balanced with the renewal of the board. I'm also interested in diversity across boards, not just of gender and age, but background. I'm a bit curious as to why we've gone to Europe rather than our closer neighbors in Asia, which is a very broad idea, but just what was the thinking behind going to the Holland? Yeah.
JOHN MULLEN:
Yes, certainly. So I can assure you, it's not an easy thing finding directors of the talent and capability of some of my colleagues here. We undertook a global search across Asia, Europe, and the United States. It, it is important to us that we try and get a balance because the three regions are very different. The United States in particular is a very dynamic, highly competitive, low regulated environment. Europe is a much heavier regulated environment, a lot more like us, and Asia's probably more emerging and sort of in between the two. We interviewed a number of very capable candidates. And for this position, Eelco was the outstanding candidate. Head and shoulders above the others that we met with. It wasn't necessarily a specific target that we had to have someone from Europe. What we did have to have was somebody who really understands the deep technological change going on in our industry. It is a kind of enormous change as you've heard, but technically it's extremely complicated and I'm the first to admit that myself, when management are presenting a very complicated technological issue, I don't have the skills to necessarily drill down into every last part of that proposal.
And it's very important that we have a number of directors who do have that experience and are able to do that. And Eelco certainly fits that bill. He has deep technical knowledge about our industry, which is absolutely critical. And you don't want your whole board to be all in Tokyo industry. You want a balance as you said, a diversity of backgrounds, which is what we're working on doing. We are cognizant that the gender ratio has dropped due to losing two female directors. We're in the process of rectifying that so that we will get ourselves back up to a much better level by the time we meet next year. Thank you. OK. If there are no more questions, then we will now vote on this item. The proxy and direct voting position is being shown on the slide behind me. As indicated in the notes of meeting, I intend to vote all available proxies on this item in favor of your Eelco's elections. So please now complete your vote for item 3A. Good. Thank you. Congratulations, Rilke. I now turn to item 3B, which is to consider the reelection of Craig Dunn.
As you heard again, Craig has been an on executive director since 2016, a member of the nomination committee and also fulfills an important role as chairman of the audit and risk committee. As I mentioned earlier, he's an outstanding director. He's a highly regarded business leader with significant expertise and experience in financial services, financial technology, and providing strategic advice for government and major companies. The board, other than Craig of course recommends his reelection. And I will now take any questions you have in relation to his reelection. Do we have any questions?
SPEAKER:
Yes. Chairman reintroducing, Sue Shields of the Australian shareholders association.
SUE SHIELDS:
Could Mr. Dunn expand on how, on reflection, his experience at AMP and Westpac adds to his contribution at Telstra?
JOHN MULLEN:
Yeah. Thank you for that. I might ask Craig to respond directly. I think it'd be a lot more fitting than coming through me.
CRAIG DUNN:
Yeah. Thank you, John. And, and thank you for the question. So I'm sure like others who've had responsibilities in leading or governing in financial services, given recent events, they've reflected very deeply on their learnings. And I've certainly done that. I touched on briefly in that in my address to the meeting, but just to go into a bit further detail to answer your question, the sorts of things that I've reflected on go to increasing a focus on non-financial risks. Also to making sure that companies have good and different procedures in place for vulnerable customers who often face greater challenges than sort of the broader customer base. To make sure that we have very good root cause analysis that goes around our customer complaints so we can learn from customer complaints and improve (INAUDIBLE) for customers. And also, I'd say, just making sure that there are very clear accountabilities for management in the day-to-day responsibilities for the organization. And I'm seeking to apply all those learnings as a director on the board and also in my role as chair of the Audit and Risk Committee.
JOHN:
Thank you very much. I think we have another question on (INAUDIBLE).
SPEAKER:
Yes, chairman. I would like to introduce Lee Kelton from Northern Rivers, New South Wales.
LEE:
Chairman, my comments really follow on from what I said earlier on. I have difficulty with this and the following re-election candidate in that they're both being part of a board that hasn't delivered value for shareholders. And I believe in board renewal, and I believe this is an opportunity to have a board renewal. And I see absolutely no reason why we should be re-electing members to a board that hasn't performed.
JOHN:
OK, well, Mr. Kelton, you're obviously entitled to your opinion. One thing I can assure you is we are undergoing board renewal, significant board renewal. If you look along at the table, here are a lot of relatively new faces. And as I said, by the end of the year, we'll have another two new faces. So actually, the issue is more the other way of keeping corporate memory, which was why I was so strongly recommending. I hear you, sir. But I think that your board is actually in a good shape. I feel it's the strongest board since I've been at Telstra and many other boards I've been on. I think this is a very strong board indeed, representing your interests. Number four, again, I think.
SPEAKER:
Chairman, I would like to introduce Peter Starr from Sydney, New South Wales.
PETER STARR:
Thank you, John. Through you, John, to Mr. Dunn, the concerns I have on behalf of the shareholders that I'm here representing myself is you were at AMP and the fallout, as we know from the royal commission and what's happened there. I just can't see how you can not shoulder some responsibility for that, given that you were the CEO and now you're seeking re-election here for the board. And I have to tell you honestly that I can't vote for you.
JOHN:
Thank you, Peter.
PETER STARR:
Thank you, John.
JOHN:
I would just make two quick comments. Firstly, Craig left the board...Left the AMP more than six years ago. And secondly, there is absolutely no allegation whatsoever being raised of anything improper on his part. All I can say is this is a Telstra meeting and a Telstra board. Craig is an exceptionally useful, diligent, and professional director on the Telstra board, and we would be far, far worse not having him on the board. So I and all of my colleagues 100% support his re-election. We think he is a man of great integrity and he brings a lot. Any more questions? Fine in that case thank you very much. I also intend to vote all available proxies on this item in favor of Craig's re-election, so please complete your vote now for item 3B. Thank you, congratulation Craig. I turn now to item 3C on today's agenda, which is to consider the re-election of Nora Scheinkestel. Nora has been a member of your board since 2010. As you heard, she's a member of the nomination and remuneration committees.
She's also a member of the Audit and Risk Committee, which she chaired extremely ably for close to seven years until earlier this year. She's an outstanding director and has served as chairman and director on a range of companies across various industry sectors and in the public, private, and government area. She continues to make a very significant and valuable contribution to our board, and, as I mentioned earlier, provides continuity in light of the changes of the board in recent times, and the board, other than Nora, unanimously recommends her re-election. I will now take any questions you may have regarding Nora's election well, please. Peter.
PETER STARR:
Thank you, John. Hi, Norah, how are you? I'm very glad that you decided to stay another term. I think it's important. All the proxies in my own personal votes will be voting for you. I think you've done an outstanding job. You were there when we were negotiating the contracts. If Sol Trujillo hadn't have staffed it up, Telstra would have built NBN. That's the reality of it for those who don't know. But thank you, Nora.
NORA SCHEINKESTEL:
Thank you.
JOHN:
Praise indeed, Nora. Thank you. I think that's it. Any more questions? No. Good. Thank you all for your questions. We've now finalized the discussion and the proxy and direct voting position is being shown on the slide behind me. Similarly, as indicated in (INAUDIBLE), I intend to vote all available proxies on this item in favour of Norris re-election. Please now complete your vote for Item 3C. It looks like it got ahead of me. So it's great. Congratulations, Nora. Great. I now turn to Item four on today's agenda, which is to consider the grant of restricted shares and performance rights to RCA Andy Penn under the Telstra FY119 executive variable remuneration plan as outlined on the screen behind me. Details of the proposed grants are set out in the expansion attached to the notice of meeting. In summary, the number of restricted shares and performance rights to be granted to the CEO was based on the dollar value of the CEOs EVP outcome. The CEO's EVP outcome was in turn determined based on the performance of Telstra over the 2019 financial year as against specific measures set by the board for that year.
Each restricted share is a fully paid ordinary Telstra share. These shares are restricted (INAUDIBLE) and the CEO will not be able to sell any shares until after the 30th of June 2021. Each performance right entitles the CEO to one fully paid ordinary Telstra share, but the CEO will only be able to receive these shares of Telstra relative total shareholder return ranks at the 50th percentile or greater against an ASX 100 comparator group over a five year period ending in June 2023. The CEO cannot trade any performance rights granted to him. The board, other than Andy Penn himself, excuse me, considers the grants of restricted shares and performance rights to the CEO to be appropriate in all the circumstances, and recommends shareholders vote in favor of items 4A and 4B. And I will now take questions on these two items. Mark (INAUDIBLE).
SPEAKER:
Sorry, it's me again, Mr. Chairman. Can you just clarify these performance rights are being issued based on a value of $3.73 roughly, is it?
JOHN:
It's on a VWAP of five days or seven days, I think.
SPEAKER:
According to the booklet... So there's a dollar value applied to the...
JOHN:
Yeah, $3.7332.
SPEAKER:
...to the award, and that's divided by the share price of $3.73.
JOHN:
Precisely to give the number of grants. Yeah.
SPEAKER:
I know this may sound a bit harsh, but again, when the CEO was appointed, the share price was about $6.50 in round terms. I would be a lot more comfortable if he was assessed on this bonus that he will get on the share value when he took over as CEO. Not drawing a line under the last few disastrous years and saying, let's just issue him right at a reduced level. I mean, to me, he should be judged on his performance since taking out...since taking office, as opposed to some arbitrary figure, which, you know, most of us wouldn't have been happy getting a $3.70 for our shares when we paid $6.50 for them. So I would just ask that maybe we reconsider the number based on what the share price was when he started having an influence on the share price of the company.
JOHN:
Look, I hear you, but his incentive is not on a share price target, it is on a range of metrics that we believe are the right metrics to drive a successful future for Telstra. Every year we go through those, there are quite a number of metrics that make up the EVP, both financial and non-financial. And it's against the success of those that ultimately a grant is given the share prices then just an arithmetic exercise. To calculate...
SPEAKER:
Mr. Chairman that's not an arithmetic exercise. We can talk about gymnastics in the remuneration system, but he is being given a number of shares based on a value which is well below the value of the shares when he took office. So you can talk about the metrics and everything else. The bottom line is the number of shares being offered under this system are based on a much reduced value in the shares in the share value.
JOHN:
The number of shares are based on the share price at the time the scheme is put in place and at the time the targets are set and if Andy delivers on all of those and the rest that are on his team and all of those metrics, obviously we anticipate the share price will rise. It may, it may not, but we can only judge Andy on the things that he can control himself, which, by the way, is a standard market practice across all of the industry. Thank you. Peter again.
PETER STARR:
Thank you, John, just for the benefit of the other shareholders in the room. I just want to point out that I did races in an email to Mr. Payne, and he did respond. And I have to say, John, that our leanings are with the previous speaker, but I can see that you do work hard Andy I know that for a fact. So I will be voting for...But as I said, John's already acknowledged that you know, the mum and dad shareholders really look at that share price, you know, and I know it's a big thing for mum and dad shareholders, as John's acknowledged. And just one other thing, John, while I'm here. I was just asked to mention for those who remember David Thodey, I keep in regular contact with him. He did ask to say hello to all the mum and dad shareholders as well. Thank you, John.
JOHN:
OK, I don't want to be seen to be pushing back, but somebody very eloquently said earlier and it was lovely when we were a monopoly. Monopolies are great things if you have them. They are very bad things if you're everybody else. The world, the world has moved on. Telstra is not the monopoly provider anymore. The NBN is here to stay. It has transformed the landscape. Technology is developing left, right and center. There are new entrants. There's 5G. This is the real world and I understand the angst and concern of this new shareholder. But just to say I wanted to go back to where it was and be $6 and payout 100% of dividends. It's just not going to happen. We are in a dynamic, competitive world today and no amount of wishful thinking, looking back is going to help. We are where we are today. The responsibility of the board and the management is to try to move us forward from where we are today and deliver as much value to you as shareholders as we possibly can. And that's what we're trying to do.
Sadly, that will not please everybody and we can't turn the clock back. Thank you any more questions. Yes, number three.
SPEAKER:
Chairman, re-introducing Hans Witervane from Seymour Place. Thank you. Thank you again, Mr. Chairman. The previous speaker raised the question of the value of the shares and I believe that because today's dated the decision date, therefore the date of legal effect and the shares should be valued at whatever the market says today. You were fairly eloquent in terms of $6 (INAUDIBLE) which is what I fondly remember. But as you said, we can't go back. The value of the shares should be whatever the market says today, and I believe in legal terms today is when we decide and that's what the CEO should get.
JOHN:
Well, the shares are set at the price at the time the scheme is (INAUDIBLE) and you are being asked to vote on the issue of shares as at that point in time and the price that relates to that, it's not the share price as it is today itself. This was how long ago? Yeah. I mean, it's obviously this has been has to be worked out well in advance of an AGM and all the board has to approve the metrics, the incentives for the management for the forthcoming year. And these calculations are done at that time. And you as shareholders are then asked to ratify that, which you obviously have every right not to do so if you don't agree. OK. I think there are no more questions on that one. So the board...I'm sorry. We will therefore we finalized and we will therefore move to the voting in the proxy and direct voting position again should be being shown on the slide behind me. As indicated in last meeting I also intend to vote all available proxies in favor of the grants to the CEO. So please now fill in your voting cards for items, 4A and 4B.
Thank you very much. So I now turn to item five on today's agenda, which is to consider the adoption of the remuneration report for the year ending 30th of June 2019. In my opening address, the start of today's meeting, I tried to cover all the key aspects relating to remuneration at Telstra this year. I highlighted some of the key enhancements that we've made to the executive variable remuneration plan for the 2020 year to ensure it continues to best meet the overall objectives of our remuneration policy and delivery of T22 strategy, and aligns with creation of sustainable long term shareholder value. We've also, of course, had some quite considerable debate among shareholders here from the floor on this matter already. However, if there are any more questions, I will now take them on item five.
SPEAKER:
Chairman reintroducing Sue Shields. The Australian Shareholders Association supports the remuneration resolution, and we recognize that a comprehensive review and consultation has resulted in significant changes. Increase in investing period of the restricted shares from two to a four year period and the five-year relative total shareholder return on performance shares are high ground compatibility with ASA guidelines. And we thank you for including us in your consultation.
JOHN:
Well, thank you. Those are kind words, and we equally much appreciated the input we got from professional organizations such as yourselves and others. We did indeed engage very broadly, and we had some 44 meetings with major shareholder groups on this. And thank you for your kind words. Much appreciated. OK, I think...I'm sorry, number three.
SPEAKER:
Chairman re-introducing Scott Hunter from Melbourne place.
SCOTT HUNTER:
Yeah, before in justifying payments to Telstra stuff. You said something about sports, people that get paid more in game players and whatever. And these were just bowl kickers, bowl movers, button presses and Twitter influencers who take far more out of society than they're worth and what they put in that's irrelevant to what Telstra paid. But Telstra staff getting say for the CEO $6,000 a day and the 10 executives on Page 46 get over a million a year, which works out to a daily figure of $3,000 a day with the potential to double it. People would say that if they had a job like that, they're on a pretty good wicket. And the incentive to having a job like that and keeping it is to just keep it for one more day. And why do you need long-term incentives when you're rewarding them so well?
JOHN:
Well, thank you. I don't really know how to respond beyond what I've already responded many times to very similar questions. We absolutely recognize executive pay is a sensitive issue, but all we can do is to really diligently, do our very best to ensure that we get a balance between motivating and incentivizing the best management in the business and making sure that we represent shareholders interests at the same time. And I believe we do, we will never please everybody, of course, but I think we have found that balance as best we can.
SPEAKER:
Chairman, I'd like to...
JOHN:
Peter.
SPEAKER:
Chairman, I'd like to re-introduce Peter Starr from Sydney, New South Wales.
JOHN:
It would be easier if you come sit up here with me it will make it alot quicker.
PETER STARR:
Thank you John just quickly it's probably good, Andy, that you don't make too many more appearances on the 2GB Ray Hadley Show. I think run the company. But he did alright, sir.
JOHN:
I take that as a compliment, Peter, thank you. Great. No more questions. OK. That means we have now finalized the discussion on Item five, the proxy and direct voting position on this item, as well is being shown behind me. And as indicated in the last meeting, I intend to vote all available proxies in favor of Item five as well. Please now complete your vote for this item. Shareholders based on the proxy and direct voting. Sorry positions displayed on the screen for Item five and the number of votes that have been informed are represented on the floor today. It is clear that more than 75% of the votes cast or to be cast on Item five will be cast in favor of the remuneration report. This means that the company has not received a second strike and as a result, shareholders are not required to vote on Item six. The conditional spill resolution item six, therefore, will not be put to the meeting. Shareholders, that concludes our discussion of all items on today's agenda. If you haven't already done so, please do complete your voting now.
Every vote's important. Attendance are carrying ballot boxes throughout the room, and ballot boxes are also located near the exits. The poll will remain open for a further 15 minutes to enable shareholders to cast their votes, and the results of the poll on items three to five will be available later today and can be obtained by visiting ASX or our websites. All items of business having been considered, I can now declare the meeting closed, subject to finalization of the poll. Thank you to all of those of you who viewed the AGM online. Thank you also to our microphone attendance, audiovisual and other support making today go so smoothly. Lastly, thank you very much to all of you for your attendance today, and I now invite you to join us for lunch in the foyer outside. Thank you very much.
The 2018 AGM of Telstra Corporation Limited was held on Tuesday 16 October 2018 at the Hilton Sydney Hotel, Grand Ballroom, 488 George Street, Sydney NSW.
2018 AGM recording
Video content description
Recording of the 2018 AGM held on Tuesday 16 October 2018 at the Hilton Hotel in Sydney.
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RAY DAVISON:
Good morning, everyone. My name is Michael Ray Davison. I've been involved along this morning to invite you all to country. I'm here today on behalf of the Metropolitan Local Aboriginal Lands Council, the Lands Council's members being the custodians to the 10 groups of the Eora nation. Give me permission this morning come along and welcome you to the country. I'm here as well on behalf of the traditional people, my people, the Gadigal people who have been caring for this land for 1,000s of years. So, I was really available. Even if we're talking about the opportunity to get welcomed to the country, I'd like to express to the people I'm talking to the importance of it now regardless of whether I do welcome the country or give welcome to country once a year or 100 times a year, pardon me. Each and every time I've opportunity to get welcomed to the country, I look upon it as the first time. In those regards, I think there a sort of price that there has to be somebody hearing welcome to the country for the first time, or maybe hearing me for the first time.
So, I'd like to make it special in those regards. So, to each and every one of you, I love reminding people to take the opportunity each and every time they get welcomed to the country to just remind us that we have one mother and that's Mother Earth, and Mother Earth loves each and every one of us, and she loves us all equally. It doesn't matter who we are, where we come, we are from the same. We are all the same regardless of whether we've been here for 10,000 years, one year or a new child born today. If you're born on country then you belong to country. So, to all my fellow Australians here today, welcome to the country of the Eora. And to our visitors today on behalf of all people here today, welcome to the Eora as well. Welcome to country. You all know that welcome to country goes back many, many 1,000s of years. And we've always had welcome to country when we have big celebrations and big corroborees. And we celebrate by song and dance. It's done today as I'm doing it orally. It's now less significant, all the same important.
So, today is a gathering. Today is a corroboree. So, we're continuing on that tradition that's been going on for 1,000s of years because welcome to country doesn't see Aboriginal or non Aboriginal, or our ethnicity, it just sees us as Australians. So, once again, we're continuing on that tradition today. And it's really wonderful that I got that opportunity to come along and welcome people to country. I was born at (INAUDIBLE) where the Europeans first touched the East Coast of Australia. My clan land runs from Masego, OK, pardon me. Up here to Redbank. So, my people are Gadigal people who have had the longest continuous unbroken association with Europeans and settlement of Australia. So, once again, it's really special and unique that I come and stay. And I get cheeky about this as well, I come and stay on the most beautiful traditional land in the most beautiful city in the most beautiful country in the world, and invite people to traditional lands. So, to each and every one of you, welcome to my country, welcome to your country, welcome to our country.
And just in keeping with Aboriginal customer protocol, I want to pay respects to elders and descendants both past and present of my people or people of the Eora, and thank them for the caring of the waterways in the land for 1,000s of years in which we all benefit from today. And extend that welcome and gratitude to each and every one of you, and pay respects to your elders and descendants both past and present as well. If it were not for those people, none of us would be here today. When we take that moment to pay respects to elder's past and present, we then remember that they are just died in the line from the past, but they're real people that did real lives and real achievements, the same as us today. So, and wanna say again to each and every one of you welcome. And just in closing, otherwise I say now we believe within our culture that any given time there are 1,000s of our ancestors around us. And I feel that every time I come down into the city here. So, may the spirits of my ancestors walk beside each and every one of you and protect you while you're on Gadigal land, Eora country, as I know they walk beside and protect me.
And I want to say, just in closing, a big thank you to Telstra for the beautiful invitation to come along today and give welcome to country at this special time for you all. And also thank State and Federal Government, and private enterprise for the importance of giving back to welcome to country. Because welcome to country encompasses all Australians. Thank you and have a good day. Thank you. (APPLAUSE) (VIDEO PLAYS)
SPEAKER:
Telstra began with one mission, to connect Australians to each other and to the world. But the world is now a different place moving at a different pace. We are the incumbent. We have a choice to disrupt and lead or be disrupted. Our moment is now to disrupt not just the market but ourselves to reinvent, to truly commit to our customers and revolutionize their relationship with Telstra. How? First, we're going to simplify our products radically. We'll start with a customer then a connection, not just any, the best on earth. Then we'll give them a brilliantly simple digital experience. The ability to build their own world with the best technology, the best entertainment, the best services and the power to change when and how they want. For business that means the control, flexibility and security to scale technology as their business grows. It's not just our products, Telstra itself will change. We'll extract more value from our infrastructure and reduce our costs. We'll get leaner to streamline and to simplify how we work, making Telstra easier for our customers and better for our employees.
When? The new starts now. Every quarter new advancements will arise. Over the next three years it will be fully realized and we will wonder how we ever operated the old way. This is our moment to move ahead. This is the new. (VIDEO STOPS)
JOHN MULLEN:
Great. Good morning ladies and gentlemen. So, my name is John Mullen. And it's my pleasure to welcome you this morning to Telstra's 2018 Annual General Meeting. Your directors who include your chief executive officer, Andy Penn are all here today. And they join me in offering you a very warm welcome. Thank you especially to Uncle Ray Davison for the earlier Welcome to Country. This meeting is being webcast and also I extend my welcome to those shareholders who are joining us online. That (INAUDIBLE) I would like to formally declare the meeting is open. And notice a meeting was distributed earlier which set out the business and the resolutions to be considered today. I propose to take that notice as read. There are four items of business on today's agenda. Firstly, presentations by myself and the CEO, Andrew Penn. Secondly, discussion of our 2018 financial statements and reports. Thirdly, the consideration of the election and reelection of directors. And finally, consideration of the remuneration report.
Voting on items three and four will be conducted by poll and that poll is now open. If there's any reason that you wish to leave the meeting early. Please be aware you can still vote by completing your voting card and placing it in one of the ballot boxes near the exits. Shareholders are also able to use the link vote app. And this can be downloaded from the Apple App Store or Google Play Store. If you prefer to lodge your vote during the meeting using a mobile phone or tablet. I now like to introduce my colleagues with me here today. With me here on stage, Andrew Penn, our Chief Executive Officer. Sue Laver, company secretary. Robyn Denholm, our chief financial officer and my fellow members of the board. Can I particularly also welcome new director Roy Chestnutt who joined the board in May of this year. And (INAUDIBLE) who has been nominated by the board for election at today's meeting. I would also like to introduce Andrew Price from our auditors and Sanyang. Where he is, there he is.
Andrew is here to answer any questions you may have on conduct of the audit or on the auditor's report itself. So, in my remarks this morning I will only speak briefly about our 2018 results. Instead I intend to focus most of my remarks this morning on the vitally important task now underway to position Telstra for future success in what is a dynamic and rapidly changing market. I will also touch upon the complicated and difficult issue of remuneration. So, turning first to our financial results. So, despite the very significant challenges Telstra faced in 2018. Our results were in line with guidance and showed strong subscriber growth in both fixed and mobile services. On a reported basis our total income grew by 3% to $29 billion earnings before interest, taxes, depreciation and amortization reduced by 5.2% to 10.1 billion. And net profit after tax reduced by 8.9% to 3.5 billion as the effect of the NBN on Telstra financials escalated. Importantly this year we also added 342,000 retail mobile customers.
83,000 retail fixed broadband customers. And 135,000 customers on a retail bundle. The total dividend for the 2018 financial year was 22 cents per share comprising ordinary dividend of 15 cents and a special dividend of seven cents relating to the one off receipts received from the transmission of affix customers to the NBN. Now, I will return to the topic of performance, our share price and the dividend in more detail shortly. Firstly, though when we talk about Telstra's profit it's really important to reflect on what this actually means. Telstra's profit comes from the efforts and commitment of more than 30,000 employees. The vast majority of them Australians. The profits that we earn benefit our owners, our shareholders and the vast majority of whom are everyday Australians including many of you in the room here today. This year we pay 2.6 billion in dividends to our 1.3 million Telstra shareholders. We pay 1.5 billion in Australian income taxes. 200 million in state payroll taxes and a further 100 million in other federal state and local taxes.
This makes Telstra one of the largest contributors to corporate tax here in Australia. All of this underpins who we are as a company and defines our role, our place and the value we create in Australian society. Our financial numbers and the profits we make are critical but as we're increasingly reminded these days the company also has to respect its social licence and ensure that it contributes to the communities in which it operates. I think Telstra can be very proud of its record in this regard. Especially regarding the important role Telstra continues to play in connecting and supporting communities including in regional and remote areas and in serving the needs of our customers in vulnerable circumstances. As digital technologies play an increasingly central role in our lives, there remains a significant gap between those who are connected and those who are not. And to bridge that gap this year we helped around 1 million vulnerable customers to stay connected. This includes assistance for people on low incomes impacted by domestic or family violence or people living with a disability.
We also reached more than 48,000 people through our digital literacy programs. And we enabled over 4,000 community focused organizations to provide digital learning opportunities. Through the Telstra Foundation we support not for profits that help young people succeed in a connected world. And this year we invested in digital learning experiences in schools, public libraries and remote indigenous communities. No other telecommunications company can match Telstra for its involvement in and its impact on the communities in which we operate. So, let me now turn to the important steps that we've taken this year to position Telstra for success in a rapidly changing and increasingly difficult market. All companies are defined by how they respond in challenging times. And there's no doubt Telstra and in fact telecommunications companies around the world are operating in times of enormous change. Those of you who follow trends in other countries will have seen that what is happening to Telstra is also happening to big telcos in the US, in Europe and elsewhere.
Almost every day we see examples of telcos restructuring their businesses, laying off employees, selling business units. In other ways seeking to adapt to this unprecedented disruption. Of course this challenge is not just unique to Telstra or to the telecommunications industry. There are many companies that are facing huge disruption in their sectors. With the rise of digital giants like Amazon, Google and Netflix and the emergence of online competitors which have destroyed their traditional business models and fragmented their customer base. It is sobering indeed that of the top 50 companies in Australia by market capitalization in 1980 only 10 remain in today's top 50. The millennial generation is forsaking printed newspapers for online news. Home loan phones for mobiles, stream video on demand instead of free to air TV and social media instead of handwritten letters. These were all things that my generation took for granted. And Telstra is right in the middle of this disruption. And we're seeing the strong profits disappear that we used to make on fixed broadband, on home phones, global roaming, excess usage charges, the yellow pages and so on.
This is an unstoppable trend. The world has changed and that change is accelerating. To deny this will be just like saying better journalism would prevent online media from replacing print newspapers. All similarly better marketing would persuade people to buy physical DVDs instead of downloading songs online. Now all of this said, of course, the future is far from all doom and gloom to the country. The future is exciting. It is full of unknowns. It is full of disruption. But it's also full of enormous opportunity. And while we're losing many of our old profitable products and services the demand for new core products and services continues to grow rapidly. And in the long term the strength of Telstra's networks, our assets, our balance sheet and our talented people will provide us with a great position of strength to tackle these new challenges head on. Telecommunications networks are among the most important pieces of infrastructure in the world today. And the demand for telecommunication services has never been greater.
We expect a five fold increase in traffic on our mobile networks over the next five years. This will be driven by smartphones, the increasingly popular streaming of high definition video on phones and in homes, Cloud computing in business and the rapidly growing list of connected devices that already extends to watches, cars, air conditioners and 1,000s of other connected products and appliances. But to succeed in this new world and to find a way to translate this demand into revenue and profit we need to completely reinvent Telstra into a new digitally enabled business able not just to compete but to win. So, then we have not been sitting on our hands complaining about this changing world. But instead for a couple of years now we've been working hard on planning for these changes and defining the bold steps that are necessary to transform the business. This has resulted in our new Telstra 2022 or T22 as we call it. A strategy that we announced in June of this year. T22 is about massively simplifying our operations and product set, improving the customer experience and reducing our cost base.
We need to completely transform Telstra into the telecommunications equivalent of an Amazon, Uber or Netflix a company really easy to interact with offering great service, clear products and with customer interaction predominantly online. But this requires a dramatic reinvention of Telstra. Telstra's size and legacy have significant assets that have contributed to our class success. But they're also now acting as a barrier and they're getting in the way of what Telstra now needs to be, a company agile and nimble enough to respond quickly to rapidly changing market dynamics. At every AGM the issue of service performance is raised rightfully. And every time we assure you that we are focused on improving customer service. Well, we do continue to make progress and we are materially improving every year. Yet there will be many people here today including friends or family of all of us who can recount a bad service experience or customer service outcome from Telstra from time to time. The reality is Telstra is simply too big and too complex to ever 100% fix this issue while we rely on manual intervention.
Telstra handles over 900 million data and mobile connections every day. And even if a minute fraction of those go wrong it's still a huge number of people impacted. For Telstra to fix this once and for all there is simply no alternative other than disrupting ourselves and becoming a digital business where instead of 35 million customer service calls per annum. These calls are all but eliminated as customers interact with us digitally. Instead of waiting weeks for a new phone and visiting a store you can order online and the phone will be delivered to you fully working and ready to go within 24 hours. Instead of over 1,800 complicated services and products. A simple menu of 20 plans actionable at the click of a button with no contracts and instant activation. And its core therefore, T22 is about delivering simpler, more flexible products with a great digital service experience. We believe our plan is amongst the most ambitious in the telecommunications industry. And this plan includes digitizing our entire core operation, reducing consumer plans to just 20, reducing two to four layers of management, eliminating the needs for two thirds of customer service calls.
Continuing to provide the best network in Australia and taking out $2.5 billion of cost. Andy Penn will provide more detail on this T22 strategy in his presentation. So, you may well ask well, why do this now? Why not earlier? There are two principal reasons for this. Firstly, to reinvent ourselves into this new Telstra means voluntarily giving up many of the earnings that came from all those legacy products such as global roaming and data overage charges. The other reason for why now is that we could not have moved much earlier even if we'd wanted to. To undertake a transformation of this magnitude requires that we build an entirely new digital stack and IT infrastructure to support these new products and services and ways of interacting with customers. And that is why just over two years ago we announced our $3 billion additional strategic investment. Without that investment we simply could not be embarking on T22 today. Sadly, however the hardest part of what we're doing is the impact that it will have on jobs at Telstra.
We know that the loss of 1,000s of jobs will have a major impact on the company or on the lives of those affected. Even though we will be retraining and hiring different skills at the same time to partially offset these job losses. Let me be very clear though. The objective is not to create a specific number of job losses but rather it is to radically transform interaction with Telstra to a largely digital process. The job losses will then be the end result of this transformation not the goal in itself. And so the precise number of jobs to be lost will not be clear until we complete the program. In addition, apart from ensuring that we are treating impacted employees with dignity and care, as a board we are measuring senior executives on the level of employee engagement that is maintained through this process and not by how many roles are removed. Now, T22 is not just impacting employees. It's also driving significant renewal in both the management team and amongst the board of directors.
Andy will talk about his management team shortly. But we continue to also reshape the board putting in place the right balance between experience including global telecommunications experience and fresh thinking. You'll hear shortly from the director standing for election and reelection as well as those leaving the board. But first, I'd like to acknowledge director Stephen Moss, Russell Higgins and Trevor Swallow who have announced their intention to retire from the board at the end of today's meeting. Russell and Steve both joined the board in 2009 and have come to the end of their three times three year terms. And Trey who unfortunately could not be with us here today has been a director since 2015. All three have made incredibly valuable contributions and all three will be missed. On behalf of the board and shareholders I'd like to thank them for their hugely valuable contribution and their great commitment to Telstra. Then I'm absolutely delighted that we have two new directors for significant telecommunications experience, Roy Chestnutt and (INAUDIBLE) standing for election at this meeting.
At this time of disruption in the global telecommunications sector, an intense competition for suitably experienced directors. Can I say the board is absolutely delighted to be able to attract directors of the caliber of Roy and Nick. Both very senior executives from the highest level telecommunications industry in the US and Europe. As we all know Australia is a long way from Europe and the US. And the commitment that both Roy and Nick Jan are making in respect of our very demanding board meeting cycle is hugely appreciated. Both are exceptionally experienced and capable executives with outstanding track records of managing disruption exactly like what we're going through but in much larger overseas markets. shareholders will also be aware that current director Margie Seale is also standing for reelection. Margie is a highly valued and respected member of our board who has contributed a great deal to Telstra and we're absolutely delighted that she is standing for reelection. Now, I'd like to talk to you about the important and linked issues of company performance, share price, dividends and executive remuneration.
Firstly, I hear the critics say that Telstra's performance has been poor this year. I believe that this is simply not true. In the face of the disruption mentioned earlier Telstra has actually still managed to deliver on its guidance, make a 3.5 billion net profit after tax and broadly maintain market share in most segments. What has been disappointing to all however is the company's share price performance and the need to cut the dividend. So, when talking about performance I think that it is critical that this distinction be clearly made. So, then why has the company's share price underperformed and why did we have to cut the dividends? Well, the disruption in the marketplace, new competitors, the digital revolution and all these things. They're happening to many industries. And although the telecommunications industry is at forefront, dealing with this and being successful in the new world is the job that we are paid to do. We're doing well in this regard. We have highly ambitious plans as to how to compete in the future and we back ourselves to win against Optus, Vodafone and TPG.
Well, challenging this is not the major cause of our share price decline. But the absolutely unique challenge we do have is the NBN which as shareholders would know is taking Telstra's places the wholesale network provider of fixed services in Australia. The impact of the NBN is the single biggest impact on Telstra's financial and it is profound. The NBN will have reduced Telstra is net profit after tax by close to a half when fully rolled out. Not a few percent, half. Having been privatized by the government in 1997 the government effectively now renationalizing half of the company again. To give some scale to that impact. What we're losing through this policy of half our business is approximately equivalent to a company the size of Qantas. This has also led to increase competition in mobiles and in turn the entrance of a fourth mobile operator in the form of TPG now in a proposed merger with Vodafone. As we all know, a net profit is the principal driver of how much dividend the company can pay.
So, when a company loses up to half of its net profit to such a decision the impact on its results, on its dividend and on its share price is obvious. There are few precedents in Australia for a challenge of this magnitude. And it sits right at the very heart of the issues we faced this year. And this and the increasing impact of it going forward is why we had to cut the dividend and why the share price is down. Now, it's easy for critics to say well, just come up with a plan and a strategy to fix it or fire the board and the management team and everything will be OK again. But there is no magic bullet that can fix the loss of up to half a company's net profit. We need to get real about this. And we need to acknowledge it for what it is. My board colleagues and I are acutely aware that for many retail investors in addition to their portfolio valuation the dividend is an important part of their retirement income. I would love nothing more than to be able to stand before you and say that all this change is just a temporary blip.
And we'll soon be back to the old stable world of legacy profits and an ever increasing dividend but I cannot. Telstra's world has changed and it's going to keep on changing. So, before I ask Andy to address the meeting I want to make some brief comments on the fourth item of today's agenda. The remuneration report as this is inextricably linked to the performance comments that I have just made. I obviously know that this is a matter of great concern both to many shareholders as well as external stakeholders and observers. The chairman of the board's remuneration committee, Peter Hall will take you through some of the details shortly. But before he does the board is very aware that concerns have been raised around remuneration report by proxy advisors and others meaning that a substantial number of shareholders will not approve the report. This will clearly give us what is termed a first strike. This is deeply, deeply disappointing to my board colleagues and to me. I simply cannot overstate the amount of time that we devote to remuneration and how seriously we take the responsibility.
Some observers out there seem to think that directors sit around like the witches of Macbeth scheming as how to manipulate incentive schemes to give improper benefit to already excessive executive salaries. Let me tell you nothing can actually be further from the truth. The Telstra board like other big company boards takes this responsibility incredibly seriously. And we spent an inordinate amount of time really trying to get the balance right between protecting shareholders interests and not overpaying executives. While at the same time motivating, incentivizing and retaining the best management term we can at the same time. Our executive remuneration in very large listed companies is always an exodus issue particularly as in Telstra's case where market dynamics have been challenging and shareholder returns have not been at the level we would have hoped for. But the fact is, Telstra is a $35 billion company with around 30,000 employees, 1.3 million shareholders and we operate at the competitive cutting edge of telecommunications markets here in Australia as well as in markets around the world.
As I said in my earlier remarks we're also operating in times of great challenge and volatility. And the future of the company demands that we implement one of the largest, fastest and most complex transformation strategies. In this environment first class leadership could not be more critical. And a number of things contribute to our being able to attract, retain and motivate high caliber executives. One of course of which is remuneration. Now, this is especially the case when attracting first class talent from overseas and we have recently done and we will continue to do. These overseas executives will simply not give up well paid jobs overseas to join Telstra unless we have competitive remuneration strategies.
SPEAKER:
Now, this said, I do personally believe that executive salaries are too high across the board in Australia, but changing this takes time and needs to be embraced by all of corporate Australia, not just one company or one industry as the marketplace for talent is international and is industry agnostic. We are trying to do our bit in Telstra, however, and this can be seen by the fact that David Thodey's salary was lower than Sol Trujillo’s, Andy Penn's salary is lower than David Thodey, and I expect that Andy's eventual successor will receive a lower salary again. Andy himself has seen his actual remuneration dropped by almost 50% over the last two years as the company has been under pressure. So, we're not only reducing overall remuneration levels, but our remuneration clearly does flex down with shareholder outcomes, even when management has done a good job. Now, this is not the time or the place to argue the whole point, but the question of remuneration has become the single most difficult issue for many big company boards.
It has become incredibly overcomplicated, and it has spawned a whole industry of advisors and consultants trying to help us make sense of all this. I'm old enough to remember when a CEO just earned a big salary and that was it. Then over the years, stakeholders felt the compensation had to be variable and depend on performance. So, the schemes became more and more complicated. The end result of this is that, although no doubt, well-intentioned by all concerned, we've ended up with a situation where pretty well everybody's unhappy. No two shareholders seem to agree on what is the best solution. So, many do not feel that their interests are being properly protected. Executives in turn often get frustrated and just wait to the end of the year to find out whether they will receive any variable compensation or not, which means their compensation is less and less driving behaviour as was the original intent. On top of all that, society increasingly thinks that all big company executives are paid too much anyway.
So, I may sound a bit facetious, but I do not mean to be. This year, Telstra’s Remuneration Committee and Board spent a huge amount of time trying to get the 2018 result right. We thought that we had got it right, but then even though we believed that management had fairly earned their variable compensation at a level of 47% of maximum, the board was acutely aware of the pain that shareholders experienced in 2018. As a result, the board chose to unilaterally exercise its discretion and the variable remuneration of the CEO and Group Executives was reduced by 30% to an average of some 33%, excluding the Group Executive Wholesale, of their maximum opportunity for the year. We thought that was right. Clearly, however, many shareholders thought that this was not enough. Now, in meeting with many shareholders before this meeting, some of the same shareholders who voted for our variable remuneration scheme last year have now voted against it, even though the scheme has not changed. Some shareholders will only support Relative Total Shareholder Return, or RTSR, as a measure and some others object to our using RTSR at all.
Some shareholders want all financial metrics and some want combination. Some are happy with our level of disclosure, some want more. Proxy advisors who were OK with our combined scheme last year, now say they're not happy with it. I think if we call a spade, a spade here, the bottom line is that it would seem for many shareholders. If they see the value of their shares diminished, then they consider that management has performed badly and should not receive any of their variable compensation irrespective of whether management have done a good job that year or not. So, although it's often dressed up in other language, clearly the outcome, the issue here is the outcome, not the scheme. And that means that we can make all the changes we like to the scheme and we will never please everybody. So, I think this is over simplistic and simply wrong. The share price cannot be the only metric by which we evaluate management performance. Reality is that external factors like the nbn are very substantial drivers of Telstra share price performance.
And we believe that the decline in the company's financial performance and share price would've been far worse if management had not done an excellent job in such an environment. I would remind shareholders that Telstra share price decline over the two years to June 2018 was less than that of our two listed competitors, TPG and Vocus, who experienced similar pressures from the nbn as we did. And Telstra has broadly maintained its market share in fixed and mobile, despite the competitive environment. Now, also, surely it is even more important to incentivise our executives to perform strongly in bad times than in good times. And if so, then we must draw a clear distinction between share price performance and management performance. If share price performance is really the only criteria to be used in measuring management performance, then in difficult times like today, the payment of any variable compensation at all is gonna meet with similar criticism. Conversely, when the share price is up, investors tend to be happy with a company strategy, they support the board, they like the CEO and the management, and they approve the Remuneration Report.
Now, that may also not be justified, since, as we all know, sometimes arising tide lifts all boats. Now, all of this said, if indeed, we are moving to a world where variable compensation is seen principally as a bonus for positive share price development, then if this is what shareholders want, we must listen. What it does mean, however, is then why do we need all these complicated remuneration structures at all? Maybe there's a case for doing away entirely with all these complex schemes and just go back to a fixed salary, commensurate with the difficulty of the role and maybe pay one half in cash and one half in shares locked up for five years, no metrics, no adjustments, no exclusions and no complicated tables. We would save thousands of hours of RemCo meetings, the Rem Report would be reduced to one page, and there'd be no more need for the armies of consultants and advisors, and the AGM would be over in half the time as well. Now, all of this places the board in a very difficult situation though, as we genuinely search for solutions that satisfy everybody today.
And in the end, all we can do as a board is to diligently set targets for management that we think are ambitious and deliver lasting value to shareholders despite the market environment. Now, this next year is also gonna be a difficult year for Telstra, as everybody knows, but we cannot change direction every time a proxy advisor or an individual shareholder finds a new fault with our approach. And we cannot say to management that there will be zero variable remuneration this year even if you do a great job. So, we will listen, we will consult yet again and we will do everything we possibly can to amend and enhance our remuneration policies, where it is demonstrated that we can do better, but we cannot compromise on doing what we think is right for the long term health of the company and for you, our shareholders. I am very willing to apologise if despite our best efforts, we have not been adequately transparent in our remuneration disclosures, or if we have missed enhancements that could make our structures better.
If anyone has a better solution, we would welcome it. However, I cannot apologise for continuing to do what we believe is the right thing for the company and the right thing for shareholders in the long term. So, in conclusion then, 2018 has been a pretty dramatic year for Telstra. The company delivered solid financial performance in very challenging conditions. Most importantly though, it was a year where we took the decision to proactively and radically transform our company. So, we've chosen not just to try to adapt to the change and the disruption happening around us, but to actually lead the transformation of the industry in Australia. I am sure that we will make some mistakes and I'm sure that despite our best efforts, we will not hit 100% of every target, but this is one of the boldest strategies adopted by a large, incumbent telco globally. And we are determined to do everything we possibly can to transform Telstra from being the leader in the old world, to being the leader in the new world of telecommunications in Australia.
So, finally, before I invite Andy to address you, let me sincerely thank you, our shareholders, for your patients, your loyalty and your support during what we absolutely understand is a really difficult and frustrating time for you. Let me also thank our customers for their ongoing support - without them, there would be no Telstra. And lastly, but by no means least, let me thank every member of staff who works for Telstra. We are acutely aware that we are asking more and more of you at a time when there is great concern over job security in the future and your commitment to Telstra and our transformation process is exemplary. The Board appreciates all that you do, and I believe so too do our shareholders. Thank you all very much for listening. And now, let me introduce our Chief Executive Andy Penn, invite him to address the meeting. Thank you. (AUDIENCE CLAP)
ANDREW PENN:
Well, thank you, Chairman, and good morning, everybody. Thank you for those that are joining us here in Sydney, and also welcome to those shareholders that are joining us online this morning. As the Chairman said, it is unquestionably a critical time for Telestra. As indeed, it is for the whole of the telecommunications industry, not just here in Australia, but around the world globally. We sit at the cusp of the next evolution of telecommunications technology - 5G. However, it's not just 5G on its own, 5G is arriving at exactly the same time as other transformations in technology and these are accelerating - software-defined networkings, IoT, machine learning and the cloud to mention just a few. The combination of these create an exciting future. They also offer significant opportunities for your company Telstra, which I will cover later in my comments. However, if we are to take advantage of them and be the telco of the future that we need to be, we need to build new skills and new capabilities.
And that is exactly what we have been doing through the investments that we have been making and the changes that we're implementing in the company. And indeed, we are very well placed in this regard. In fact, I believe we're as placed as any telco globally. However, we equally face one of the most challenging times the company has ever experienced. As the Chairman outlined, the nbn is having a profound effect on the industry and the company. As we have described many times, the financial impact alone is to reduce our EBITDA by at least $3 billion per annum, and we have already absorbed 1.4 billion of that. The impact on the bottom line and therefore EPS from which we pay dividends is even greater and up to 50% reduction in net profit after tax. Of course, I do hear you say that, of course, we have known about the nbn for a long time. So, clearly, this should not be a surprise. That is true. But at the same time, it is no simple task to replace $3 billion in earnings, which is the Chairman has pointed out is the equivalent of the entire business today for many of Australia's largest companies.
The task has also been made considerably harder by the intense and increased competition in the market. Notwithstanding this, we have been responding, pulling every lever available to us and pulling it as hard as we possibly can. We have continued to grow our customer numbers across fixed and mobile. We have refocused our efforts on our core business by restructuring and reducing our investments in Foxtel and Telstra Ventures, as well as exiting Ooyala. We have continued to grow our NAS business and expand our margin. We have increased our offerings in the enterprise market. We have delivered a 700 million reduction in our fixed costs since 2016, but most importantly, we have been continuing to invest for the future. But we also believe that we reached a tipping point in 2018, a point where we need to be even more radical to accelerate the changes that we need to make. And that is why we launched our T22 strategy in June. We absolutely understand the need to be held to account, but during these difficult times, we all need to be aligned around the challenges that we've face.
The changes that we are making, particularly around the way we serve our customers in the future, are more radical than anything that we have seen around the world. And our global peers are watching us. I can assure you, we are doing everything in our power to make T22 a success and to continue to make this company great. In my presentation this morning, I will cover four things. Firstly, I will provide you with an overview of how the company performed in 2018 building on the Chairman's comments. Secondly, I will describe the progress that we are making in transforming the company, both through the strategic program of investments that we announced two years ago in 2016 and through our T22 strategy. Thirdly, I will comment on why I believe there are significant opportunities as we transition to the next evolution of technology, in particular 5G. And also, why I do believe that we are as well placed as any telco globally to take advantage of these, given the preparations that we have been making and the investments we have been making as well.
And finally, I will confirm our guidance for 2019. Now, the Chairman has already taken you through the high-level financial results, but I wanted to share some more detail around the operational achievements. The ultimate measure of a business, of course, is its ability to attract new customers and retain existing customers. During the year, we added 342,000 new retail mobile services bringing total mobile services at the company to 17.7 million. This included 304,000 in a critically important postpaid handheld mobile sector. In fixed, we added 88,000 retail broadband services, including 48,000 from our brand Belong, bringing the total of our fixed brand broadband services to more than 3.6 million. We estimate our fourth quarter performance represented approximately 70% market share in net postpaid mobile handheld, and a similar share in net fixed editions as well. Our nbn market share for the year excluding satellite ended at 51%. This strong subscriber growth has also continued into the first quarter of 2019.
Revenue in our applications and services business NAS was up 8.6% to 3.6 billion. And we continued to expand the margin in this business. Likewise, we achieved growth in our global connectivity business up 5.1% in local currency with EBITDA up 3% in the second half of the year. Machine to machine, which is our emerging internet of things business, also had a strong year with revenues up 13%. We are now connecting one to 2,000 things a day to our network, whether they be sensors, vehicles or machines. We are clearly leading the market in Australia in IoT. These are significant achievements in the face of a difficult operating environment. And we are very pleased with the momentum. Now, for our customers, Episode NPS is the measure of their satisfaction with our service in relation to a particular episode. By episode, I mean, for example, a move. So, from when a customer first contacts us to advise us that they are moving home until they are in their new home with all of their services successfully transferred.
Other episodes for our customers include the process buying and activating a new mobile phone or a service for an enterprise customer, how we address faults, which can happen, for example, when someone damages some of our equipment and other changes that our customers request to their service. I'm very pleased to say that Episode NPS was up five points in 2018 as we continue to invest to fix pain points for our customers and improve their experience with us. For example, changes such as the introduction of our smart modem, enhancements to live chat and improvements to our digital channels has seen the number of calls coming into our call centres fall by 13% during the year to less than 40 million. We have made a number of improvements to the Telstra 24x7 app. And the number of active users of that app increased more than 20% during the year to 4 million. This is a clear indication of the growing desire across our customer base for people to want to interact digitally with us. Our media portfolio also continues to offer very unique experiences and differentiated services for both our mobile and fixed customers.
In 2018, another 1 million customers started using our Sports Live Pass across AFL, NRL and the netball. And we now have 2.3 million sports fans accessing this service and expect that number to grow further with the recent addition of the A-League soccer. In the home, over 50% of our fixed broadband customers are active entertainment users with either Telstra TV or Foxtel from Telstra. We have 1.3 million Telstra TV devices in the market with active users watching more than 120 hours of free to air and streaming per month through this very, very popular service. We also had a very strong year for our customers on the nbn where continue to lead in the industry adding 770,000 new nbn connections in 2018. That's somewhere in the order of two and a half to 3,000 every single day. In fact, including nbn activations and servicing, our techs undertake approximately 20 to 25,000 jobs a day. We call them truck rolls - that's every time at Telstra tech is on the road doing a job for our customers - 6 million times a year.
Now, activating the whole country on the nbn is a huge undertaking for everybody in the industry and probably for Telstra and nbn more than any. It is why complaint levels across the industry are up. Two years ago, in 2017 financial year, complaints across the industry to the industry's ombudsman, the TIO, were up 40%. This was driven largely by the ramp-up of the rollout of the nbn in that year. The good news is whilst in industry complaints were up again in 2018, it was by a much lower level, 6%, and encouragingly for Telstra, our TIO complaints are actually down 20% in the first quarter of 2019 showing a very positive trend. And I believe that this is proof of the considerable improvements that we made to the nbn activation process on our part. It will also, of course, no doubt be due to the fact that Telstra's high level of capacity provisioning from the nbn is giving our customers a minimum of 90% of their maximum speed, even during the most busiest times of the day. Now, one of the reasons that the nbn is having such a profound impact on Telstra and the industry economically is because of wholesale broadband prices aware these are going under the nbn.
Now, the wholesale price is basically how much the retail service providers such as Telstra and of course our competitors pay to the nbn for every single customer that we connect every month to the nbn. It's a monthly charge. Historically, of course, as you heard from the Chairman, Telstra was the industry's wholesale provider for fixed broadband services in Australia. Indeed, we still are for the homes in Australia that are not yet connected to the nbn, the price we charge our competitors for access to our network when they provide broadband services to their customers is set by the ACCC. And on an equivalent basis to the nbn, this is currently approximately $20 per customer per month. The average wholesale price currently being charged by the nbn to the industry is $44 a month, more than double. And their plan is to increase that to $51 per month. And that is why Telstra and all of the telcos selling nbn today are facing a fixed-line market where reseller margins are rapidly falling to zero.
Now, of course, you could say, well, we could just put the retail price up, but I do not believe that we can simply charge our customers more - that is not the right answer, nor can we continue to sell nbn making little or no money as an industry. Something needs to give. The current arrangements are unsustainable, and ultimately it can only lead to poorer service and higher prices for broadband, for all Australians. Consumer prices in Australia for broadband are already among the highest in the world, and they will go higher if the wholesale price is not addressed. It has to come down. And I don't mean $2. I mean, by more than $20. Now, I realised the government has invested a lot of money into the nbn and the technology is being upgraded to ultimately provide faster speeds more capacity. And that the current high prices are set to recover that investment. However, that is the lot of the telco. There is not a market in the world where telcos are increasing their prices at this rate. We're innovating to provide greater speeds and more capacity for our customers for largely the same price.
So, let me turn to our T22 strategy. There is no doubt the severity of the impact of the nbn is greater than we all predicted. And that is the challenge that is unique to Australia. However, there are broader challenges affecting every business in every market across Australia and of course around the world, particularly those brought around by the digital disruption that the Chairman alluded to. And of course, at Telstra, we are not immune to these. And in combination with the nbn, this is why we believe we reached a tipping point in 2018 leading to the announcement of our T22 strategy in June. The strategy has four pillars. The first, to radically simplify our products offerings, including eliminating customer pain points and creating all-new digital experiences. Basically here, we are choosing to do fewer things, but do them extremely well. And I will talk about our progress in this regard shortly. The second pillar is to establish a standalone infrastructure business to drive performance and provide future optionality for our infrastructure assets post the rollout of the nbn.
This business, which we're calling for the time being Telstra InfraCo is already up and running. And we are now in the process of setting up all of the internal commercial arrangements to ensure we maximise the value of our infrastructure and sweat these assets harder than we have ever done before. The third pillar is to greatly simplify our structure and ways of working to empower our people and serve our customers. On the 30th of July, I announced my new management team that will support the implementation of our T22 strategy. With these changes, we will be welcoming to the team, some truly world-class talent. Michael Ebeid, the former very successful CEO of SBS, will lead our enterprise business. Michael has had a long and distinguished career, not just with SBS, but also including the best part of a decade in telecommunications, as well as in technology with IBM. Nikos Katinakis also joins us to lead networks and technology. Nikos has extensive international experience through a long career in telecommunications with Ericsson, Rodgers in Canada, and most recently, where he was responsible for the build and operation of the incredibly innovative Reliance Jio mobile network in India.
Christian von Reventlow will also join us on the 1st of November to lead product technology, a role that he most recently performed for Deutsche Telecom. In this role, Christian had responsibility to covering all of Deutsche Telecom's operations globally, including T-Mobile in the US. He's a globally regarded leader in telecommunications technology having worked in the industry in both Europe and Silicon Valley. In addition to Michael, Nikos and Christian, a number of my other executives have stepped into their new roles. Robyn Denholm, who's on the stage with us here today, is our new Chief Financial Officer, Alex Badenoch is heading up our overall Transformation Program in addition to her current responsibilities as Group Executive of Human Resources and Brendon Riley commenced last week as the CEO of our newly established infrastructure co-business, along with David Burns, Group Executive of Global Business Services, Carmel Mulhern, Group Executive of Corporate Affairs and our General Council, and Michael Ackland, Group Executive of Consumer and Small Business.
That makes up the whole of the executive team and they're all here and can speak with you here today. I should say, whilst I am commenting on the team that Michael is leading the consumer small business, whilst Vicki Brady is on an extended sick leave, and we wish her the very best for her speedy recovery. In addition to the changes to my team over the last quarter, we have all already reduced one to two layers of management across most of the organisation. We've increased the spans of control for the top 300 managers across the organisation by 30%. And we have also made the very difficult decision and have announced 2,600 of the 8,000 roles that we are reducing as part of the T22 implementation. The fourth pillar of our T22 program is to deliver leading cost reduction and portfolio management. Our productivity program is already well established. We have delivered 700 million of the 2.5 billion commitment that we have made to the market. And we are targeting a further cost reduction of more than 400 million in 2019.
One of the key drivers of our costs are the changes we have to pay, charges we have to pay to the nbn for access to their network. This is the wholesale price that I was referring to earlier. Now, by the time the nbn is fully rolled out, we expect the total amount of these to reach $2.5 billion per annum. And as you will see, our productivity program is aimed at offsetting those completely. Also, as part of the focus, our portfolio management, we have recently announced the restructure of Telstra Ventures and last week we completed the exit of our US-based intelligent video business, Ooyala. We did this through a management buyout with upside sharing arrangements for Telstra if the business achieves profitable growth and is ultimately sold. One of the biggest challenges in developing the T22 strategy was, of course, balancing the critical need to transform against the legacy that has been built up over decades in the business. And by legacy, I mean, legacy in systems, legacy in products and legacy in processes.
Now, there are two reasons why companies like Telstra find it hard to leave this legacy behind. The first is you need to have built the new technology platforms to migrate to, and I'm gonna come back to this. Secondly, however, and the Chairman alluded to this, there is often value in the legacy from fees and charges that customers have historically paid on old plans, and companies and their shareholders find these hard to let go. That is why we have made it very clear in our T22 strategy that this is likely to eliminate up to 500 million in revenues for our services over the next three years with excess data charges being the first example. This is clearly not an insignificant amount of profit for the company, but we believe it is the right thing to do. It is the right thing to do for our customers and it is the right thing to do for you our shareholders because ultimately, we believe it will be more than offset by more and better services per customer. Lower costs from the simplicity that it will drive in the business and ultimately, new sources of growth.
Too often, this legacy sits at the heart of the paying points our customers are experiencing, which is why we have to be committed to systematically removing it. As an example, in July we launched Peace of Mind Data, making data access charges a thing of the past for many of our new mobile plans. Before that, our customers were telling us that they fear the excess data charges and that was stopping them from getting the most out of their plans. Peace of Mind Data removes that fear, removes that frustration, removes that paying point, and is an example of the type of business that we're becoming under T22. The feedback since the launch of the plans that we've been getting from our customers is incredibly positive. Shortly, we will also stop charging customers for rental phones, a move that we expect to benefit up to 300,000 customers. We will also drop charges for call number displays on many of our older plans, benefiting another 60,000 customers. We also plan to shift to a new digital billing experience with direct debit as a default.
This means that customers that take up our digital billing experience, Telstra would no longer charge late payment fees, charges for over the counter cash payments, or paper bill fees as customers will be on a direct debit with a digital receipt. Indeed, in preparation for phasing out of paper bills, from the start of next financial year, we will stop charging our customers the $2-a-month fee. These are just some of the examples of the legacy fees and charges that we are designing out of our plans for the future and removing for our customers. Our next big launch for customers comes this month with a focus on choice, giving customers the flexibility to choose and pay for only the services that they want. In the meantime, we've launched our digitally connected workplace service for our small, medium business-sized customers. So, let me come back to the first of those reasons why companies find it hard to leave legacy behind. And that is, of course, you first need to have built the new technology to migrate to.
In a company like Telstra, this is no small undertaking. The size and complexity of our network systems, products and processes is enormous. The number of interactions we have with our customers, and that our systems need to record is in the hundreds of millions a year. The number of transactions on our network is in the hundreds of billions a year. In 2016, we announced we would be investing up to $3 billion of additional capital on a strategic program of investment centred on creating the networks of the future and digitising our business. So far, we have invested around $1.8 billion, including $1.5 billion on the network and 300 million on digitisation. An important part of the network program is preparing for 5G and I'm gonna come to 5G when I make some comments on growth shortly. But suffice to say, our network is 5G ready, already. In the meantime, of course, there are other ongoing investments in our mobile network, which are not 5G. 4G will be with us for a very long time, and we continue to lead in 4G, having launched the 1st gigabit service a couple of years ago, Voice over LTE, 4GX, which itself delivers twice the speed of normal 4G.
During the year on 4G, we also launched LTE broadcast to enable more efficient and a better experience for our customers watching video. We also added 500 new mobile sites, including those within the black spots program, that's more than one every single day. And, we added 400 small cells and upgraded a further 1,100 mobile sites. For IoT, we have built two networks servicing different use cases. Our Cat M1 network for IoT has been enabled nationally, and it already has around 3 million square kilometers of coverage. It's ideal for higher data volume mobile solutions such as connected vehicles. Telstra's Narrowband IoT has been enabled nationally as well, and this has more than 3.5 million square kilometers of coverage. This is ideal for lower volume data usage, long battery life, fix solution, things like sensors in agriculture, electricity meters and lights. We are one of the first carriers in the world to launch IoT platforms on both Cat M1 and Narrowband. Of course, also on our network, service reliability and resilience remains a key factor for our customers and a key network differentiator for Telstra.
You can never guarantee that there will be no service interruptions in telecommunications. Our network is the combination of a very large network of physical assets. We have 250,000 kilometers of fiber laid across the country, 9,500 mobile towers, more than 5,000 telephone exchanges and 200,000 routers, servers and other technology devices. It does get damaged every day by all sorts of things. You would frankly be surprised by the damage a cockatoo and other wildlife can inflict on a mobile tower. However despite some incidents, since 2016, we have improved resiliency and redundancy and we have reduced mobile outages by more than 80%. The network investments that we have been making have been critical to build the capacity that we need for the future. They have also enabled us to create the software-defined foundations on which we are now rolling out the business systems for our customers. Now, to achieve truly straight-through digital experiences, our business systems, our customer systems have to be integrated all the way back into the network through a software layer, which we call our OSS.
All of this work has been completed over the last two years with the investments that we are making. We now have not only the network upgrades completed, but also the core computer systems on which we are now building the new products that we're launching under the T22 program this year. The bottom line is, without these investments, what we're doing under T22 would simply not have been possible. Before turning to guidance, let me make a couple of quick comments on growth. There is no doubt that we are facing an extraordinarily challenging environment right now. I seriously do not want to underestimate that. However, it is important that we do not lose sight of the opportunities for growth that do exist in the future. In this regard, let me just comment on two, 5G and the Internet of Things. From previous evolutions in mobile technology, we know three things that I believe are gonna be relevant also for 5G. Firstly, the industry enjoys positive growth in the first couple of years following the rollout of a new mobile generation or, as we call it, a G.
Early adopters will pay more to get access to that technology first, and the industry seeks to achieve a return on the significant capital investments that it has made rolling out the new G. Secondly, those telcos that perform the best are those that lead and adopt the new technology first and fast. And, this is exactly what we did in 3G, it's exactly what we did in 4G and it is exactly what we're doing in 5G. Thirdly, it is impossible to predict all of the opportunities and use cases that the new G will enable at the earlier stage of its evolution. However, take-up rates and adoption tends to be faster and more significant than initially contemplated. I have no doubt that's gonna be the case with 5G, as it was with 4G and with 3G. We are very well advanced in our preparation for 5G. And as I mentioned before, our network is 5G ready. Our 5G Innovation Centre on the Gold Coast has been the centre of our activities. In April, we enabled the world's first precinct of 5G-enabled Wi-Fi hotspots.
Also in April, we trialled the first 5G connected car in Australia. We're already rolling out 5G technology on our network and we have more than 200 5G sites planned to be live around Australia by the end of the calendar year. While the commercial devices for 5G such as handsets, phones and tablets are not yet available, our readiness program means that as soon as the manufacturers make them, we will be able to test them and use them. As I mentioned, though, in my opening, it's not just that 5G is coming, 5G is actually happening at the same time as a number of other technology innovations arriving at scale. To the layman, it may feel like technology is everywhere, but the reality is, very few industries are fully automated or digitised, particularly large capital industries. Most things today are actually not connected and most data is actually not analysed to drive the productivity improvements and new opportunities. Now, this is all about to change in the world of the Internet of Things and Telstra is at the forefront of this, launching services in a range of sectors including mining, logistics, agri-tech, smart metering.
And, this is why we remain incredibly excited and optimistic about the future. Before finishing up, I'd like to take you through our guidance for 2019. The guidance that we presented to the market for 2019 with our full year results a couple of months ago included an assumption regarding the NBN rollout. Subsequently, on the 31st of August, NBN released their latest corporate plan, and this included a slower rollout than previously estimated. While the lower volumes impact Telstra's outlook for 2019, it's anticipated these changes will be financially positive to Telstra over the full rollout period, and that's due to the effects of the natural hedge. We provided the market with an updated guidance earlier this month in relation to 2019, but let me just reconfirm what that is now. We expect total income to be in the range of $26.2 to $28.1 billion. We expect 2019 EBITDA, excluding restructuring costs, to be in the range of $8.7 to $9.4 billion. In 2019, we expect restructuring costs to be around $600 million.
We expect 2019 net one-off NBN definitive agreement receipts less the cost to connect these at the payments from NBN to be in the range of $1.5 to $1.7 billion. We expect capex to be in the range of $3.9 to $4.4 billion. Finally, we expect cape-free cash flow to be in the range of $3.1 to $3.6 billion. In closing, I'd like to add my thanks to that of the chairman to our dedicated and hardworking team. I know that we are going through a challenging time at the moment and that the returns to the shareholders are not what we would all like them to be. But, there is not an employee in the company who is not working extraordinarily hard to deliver for our customers and for you, our shareholders. I'm incredibly impressed with how passionately the whole team has embraced the need for change and engage with our new T22 strategy. Moreover, they are doing so, showing incredible resilience and courage against the background of the uncertainty created by the changes that we need to make. Thank you, and I will now hand back to the chairman.
(APPLAUSE)
JOHN MULLEN:
Thank you, Andy. There are three remaining items of business, and I will shortly introduce and invite questions on those items. But before I do, I will outline the question and voting procedures for today's meeting. When you registered this morning, you will have been given a card. Yellow cards are for shareholders who may speak and vote. Blue cards are for shareholders who may speak but not vote, and you will need your card to ask a question or to re-enter the meeting. I will introduce each item and then invite questions from the floor. There are several microphones in the room. If you'd like to ask a question, please move to the reserve seating area behind one of the microphones. Please show your card to the microphone attendant and give your name. As a courtesy to all shareholders, please also state your affiliation if you're not here today in your personal capacity. The microphone attendant will invite you to the microphone when your turn comes and in the interests of all shareholders today, please just ask one question at a time if you can.
And, keep your questions and comments to no more than a couple of minutes to allow as many shareholders as possible to speak. And, please ask questions which are relevant to shareholders as a whole. If you have an individual, customer or shareholder issue, please speak with one of our customer service staff who can help you. They are located in the room and in the customer service area outside and they're wearing Telstra shirts. Now, if we can't answer your question today properly, then we will aim to provide you with a response after the meeting. There are two items requiring a shareholder vote today. For shareholders who are able to vote at today's meeting, you can lodge your vote by either completing the voting boxes on the back of your yellow card or by using the Link Vote app on your mobile phone or tablet device. If you've already registered to use the Link Vote app today, your yellow card will have a green stripe across it as you will be logging your vote through the app, so please follow the prompts on the device to lodge your vote.
If you have any questions about voting or using the app at today's meeting, please speak with one of our staff in the room here or in the shareholder registration area outside. They will be very happy to assist you. We have received proxies from approximately 25,050 shareholders and direct votes from approximately 14,350 shareholders. The votes recorded for and against each item will be shown on the slide behind me at the conclusion of the discussion of that item. The four numbers displayed will include proxies received and available to be voted by the chairman of the meeting. Telstra Share Register Miss Fran Kelly at Link Market Services Ltd. will act as returning officer in relation to the poll and the results of the poll will be available later today on the ASX and on our websites. Lastly, a late lunch will be served at approximately 12:00 noon. However, if the meeting is still underway at that time, we will not be adjourning the meeting for lunch. So, I now turn to Item two on today's agenda, which is to discuss the company's financial statements and reports for the year ended 30th of June 2018.
This item provides shareholders with the opportunity to ask questions about and to comment on our 2018 financial statements and reports, as well as the business operations and management of Telstra. You may also ask questions of our auditor. If you have a question about our results or any general questions about your company, this is the time to ask your question. So, I would now invite shareholders to move to a microphone to ask any questions you may have on this item. I think microphone one, yeah.
SPEAKER:
Good morning, Chairman, I would like to introduce Lee Kilton.
LEE KILTON:
Thank you, and good morning, Chair. It was a really interesting commentary you gave on the company, and I appreciate that and thank you for your insights. I'm just rather sorry this wasn't five years ago and not today that we are having this discussion. Because as you rightly said, nobody thought the rollout of the NBN was a surprise, we knew about this for a long time. I'm here representing my self-managed super fund and also my private interests in Telstra. We invested in Telstra because we want to deliver a modest but comfortable retirement, and Telstra ticked the boxes for doing that. So, we have a significant investment in Telstra, and I am somewhat disappointed that today we are not looking at the sort of returns that will give us that modest and comfortable retirement for two reasons. We face headwinds in two directions as a self-funded retiree whose in pension mode in my self-managed super fund. I face the prospect of a 25% reduction in the Telstra dividend. But, I also face the prospect of a change in government where a Labour government would remove the refund of franking credits, which would again further reduce my income by another 25 to 30%.
I'd like to just comment on both of those. The first is the reduction by Telstra in the dividend. It is disturbing that at this point in time, we are down 25% on last year and on previous years and on the calculations I made when making my investment. It seems somewhat surprising that we've known about the NBN, and this has been the fundamental cause we've heard all day today on the reduction in profitability. Whilst I appreciate it's a huge number that needs to be addressed, we have chosen to pay and elect the best brains to lead this company, both on the board and at senior executive level. It is quite surprising, I find, that in this day of moving technology, there isn't a single person under the age of 30, of, I beg your pardon of 50, under the age of 50 on your board. And, I don't believe that the generation that's moving through today isn't capable of adding a powerful voice to the direction and the innovative direction of Telstra. We don't have to be sticking to the same tried and tested systems and products.
We should be looking at innovation, and there are plenty of young people out there these days in the IT world that I believe could add great value to your board. And, I'm truly surprised that we are not looking at younger people coming on in generational change. I share your generation. I'm quite happy with what we have achieved over our lifetimes, but I think we need to recognise that there are younger people that should be brought in because maybe we should be thinking further outside of the square than we are. I say that because next year, it appears that we are facing a further close to 20% reduction in the earnings in Telstra, which means that our dividends are more than likely going to be reduced even further next year from the forward estimates that you've given us. That is a huge reduction to people like me in how we live. It's not a question of whether we live on 1 million or 4 million, it's a question on a modest living that we earn out of our shareholding in Telstra. Further, if we look at the incoming potential government taking away our franking credits of a further 25%, we are in serious trouble.
You have a policy of paying out between 70 and 90% of profits to shareholders as dividends. This year, we're on 70%. I would strongly urge you to look at increasing that to the 90% range, particularly in the first year, because if there is a change of government, at least we'll get the benefit of the franking credits for the next 12 months. And, I would seriously put to you that you look at increasing your dividend pay out this year. Thank you. (APPLAUSE)
JOHN MULLEN:
Thank you, Mr Kilton, there's quite a lot in that. I've tried to distill three or four of the key things you mentioned and answer them as best I can. So firstly, you talked about the impact of the NBN and that we've known it was coming. Yes, we have. The NBN was first announced 10 or 11 years ago. However, at that time, we had no idea of what the actual economics of the NBN would do to us. We actually thought, until only a couple of two or three years ago, that there would still be a reasonable profit margin to be made in as a reseller of the NBN services. And as you heard from the chief executive earlier, the costs have risen so high that in that wholesale access, that that's not the case. So, we've only actually known about the impact on Telstra to this degree of specificity for the last two or three years. And we have, of course, then been taking a lot of action since that time. Your main point then, I think, was around the dividend and the franking credits. Look, we absolutely share your frustration and your concern.
We would love to pay a higher dividend. The reality is that dividend comes out of net profit, as I said, and we have to cut our cloth to suit. We are losing that amount of earnings that impacts both the dividend, the share price and a lot of other things that we do. The government's side of it, I'm not gonna get drawn into debate about dividend imputation, but we'll all have to live with whatever those decisions are. But I think they have to be seen separately to what Telstra does. We can't respond to direct government issues. So yes, we're very mindful and I hear you saying, raise the dividend from 70 to 90. We will obviously pay as much as we think is fiscally responsible to our shareholders in dividend. We also, remember, have to protect our balance sheet. We are an A-rated company. We believe it is critically important that we retain that A-rating at a time when there is so much disruption going on in the industry. Now as to the younger generation, yes, this is something we talk about quite a lot.
One thing I can assure you is that by the time we finish T-22, we'll have completely re-jigged our board. It will look very, very different to what it looked two or three years ago, and you're starting to see some of the impact of that right now. Now, while we don't have millennials on the board, I can assure you we have a lot of very young people in the management team. Some of them are here and they're all younger than me. And if you go to any internal company meeting, there are a lot of young people who are sharing their voice and their views. So I think from that perspective, we'll wait and see if we if it happens on the board, I'm not against it at all. But, I can absolutely assure you there's a loud voice for younger people in Telstra. I think those, I hope, were the main points that you raised. But if I didn't cover them all, you can come back to the microphone later, please. Number two, I think? Yeah.
LEE KILTON:
Chairman, I would like to introduce John Ellery from Melbourne.
JOHN MULLEN:
And my water.
JOHN ELLERY:
Thank you to the board for this opportunity. My name is John Ellery. I'm actually from the Communication Workers Union. I am in Victoria. I've been a employee of that union for 24 years and prior to that, 19 years as a Telstra employee, so I've seen it all. Approximately four months ago, Telstra and its unions commenced enterprise agreement negotiations, which will set out the employment terms and conditions of nearly all of those 30,000 staff that you mentioned before in your comments. During those negotiations, Telstra's HR group tabled an offer. I'd call it an offer, inverted commas, of 1.5% per year, which is obviously less than the current CPI measure. These are the very people that you hold highly in your commentary previously about how valuable they are. We were advised prior to that tabling of the offer, the members of the board, in other words, you people that sit in front of us, endorsed that woeful offer. And, I call it a slap in the face to the staff that you so allegedly highly value.
And, those very staff are going to provide you the competitive edge, and all of the shareholders present, will provide you that competitive edge into the future. The breathtaking contradiction between the remuneration report for the executives and the disgraceful EBA offer, leaves the staff of Telstra disgusted. I hear this on a daily basis in my job, I hope you people do as well. Maybe the message doesn't get through to you people. They recently rejected this so-called offer by a massive majority. 81% voted 'no'. That's how much a slap in the face it was for you in making such a woeful offer to those very staff you hardly regard. So clearly, something needs to change. We call on the board to immediately upgrade its endorsed pay offer and resolve what could be a very nasty dispute between the parties. We urge this action as a matter of urgency. Thank you. (APPLAUSE)
JOHN MULLEN:
Thank you, Mr Ellery. Thank you very much. I have to say in and 40 years of being in business, the human side, and particularly, when as a manager you're forced to make decisions, particularly around layoffs, et cetera, has never got any easier. We, and I'm sure I speak for my colleagues, it is of the least pleasant part of one's job that our employees are not numbers on a page. They are all individuals with families and aspirations, and we see them that way every time. So, when we are restructuring the company to lose a significant number of jobs as we are sadly now doing, we take that responsibility extremely seriously. Similarly, I'm obviously not gonna get into an EA bargaining dispute here at the AGM, but you've heard from shareholders and there is enormous pressure on the company, on the board and the company, to deliver better financial results. And so, we have to try and balance all of the cost inputs and labour is a very big cost input to Telstra. We have to try and get a balance between delivering more returns for shareholders, but at the same time, looking after our employees as well as we possibly can, responsibly and ethically.
We don't, maybe, always get that balance right to the satisfaction of both sides, but we certainly diligently try to do so and we will continue to do so. And I'm sure, I'm on the board and management, but in Andy and Alex's teams and in the discussions with the union and with employees, I'm sure they will consider the ethical responsibility and to look after employees as much as we can during this difficult time. I know I can't give you the answer you want to hear, but believe me, we take it very seriously and properly.
SPEAKER 1:
Thank you. My turn too, again, I think? Yeah.
SPEAKER 2:
Chairman, I would like to introduce Rowan Weir, from Sydney.
ROWAN WEIR:
Good morning, Chairman. My name's Rowan Weir, and I live in Cremorne Point. And mine is a customer issue, but I would like to highlight to the people and to you just how difficult it is to deal with Telstra, and with the National Broadband. All I really need, after all this community and modernists, is possibly a man from Telstra to turn up with a shovel and remove a safety hazard that is on the footpath in front of my place. And it all goes back to the connections of the National Broadband, which is connected to about four connections. I live in a duplex, two are useless. And I have to in be a Unit one and Unit two to get connections because they don't understand that it's a house with a flat above it. So, I am now in unit one and unit two, and most unskilled people have turned up from the broadband to connect it. It's on ground level, you can't get under the house. They connect two National Broadband Connection whilst step away overseas, to a disused health Telstra junction pit. I now have got from another one, but it's a book I have on all this.
But I basically, need Telstra, everyone say broadband, not my everything, Telstra to remove this huge yellow plate that is over a small junction digital box with no connections. And all over the footpath and sealed down with asphalt. And these young kids come down on scooters. There's prams go up. There's bikes, the postman. It's a scenic (INAUDIBLE). And there's no way I can get rid of it. And there's nowhere I can find anyone from Telstra, anyone that turns up to fix the Telstra towers or the subcontractors. Yeah. All need is... And you just can't get anyone. And the people in the Telstra shops are great, but they don't. And they say it's broadband. And it goes round and round and round. And the broadband I complained to, I could go for days, weeks if you've got the time. The broadband, I sent the complaint off to them and they turned up once again while I'm out. And then, they really wanted to know if was connected the broadband, and to count how many connections, and that goes into statistics.
So, that's the damn, what it is. But as I said, a man with a shovel just to take it away.
SPEAKER 1:
Right. There can't be more.
ROWAN WEIR:
I could go into our I came home to find the cutting my driveway that's suspended on, you know, one these concrete ones. They were going to cut it all the way down to where they could put it on to get under the house, which is on ground level. I could go for days on the national broadband. I got them stopped. The driveway would have collapsed, but now (INAUDIBLE). But I'll see somebody later, but it is absolutely impossible, to find somebody that can come and take a responsibility and do anything. I have no trouble with the people that I go to. In the house, I've got angry when I think of it. I've got all the old connections from 50 years away. I don't know whether you get rid of them. And I've got something that flashes blue and I don't turn it off.
SPEAKER 1:
Right.
ROWAN WEIR:
And technically, I'd take whatever it is you're supposed to be.
SPEAKER 1:
Right. Let me have a go. So, firstly, miss Weir, I am not intimately acquainted with your footbath. Although, I feel I am a lot more acquainted now than I have expected. So, let me say two things. Firstly, specifically, I think, Andy and I here and I'm dropping Andy. We'll commit you to have that thing fixed, your yellow plate or whatever it is within the next couple of days. So, if you will see one of these people here and you can hold us accountable for that. Well, Andy, anyway. Then secondly, and this is a serious point, the NBN connection has been complicated. We've seen a huge spike in complaints that have come to us and also gone to the ombudsman and others over that connection process. However, the good news is that the team have worked extremely diligently on correcting that. And with NBN, has come out with some very innovative products like the hybrid modem, which if there is a landline connection problem that just switches over to 4G and the customer doesn't even know when the NBN sorts it out.
It is getting materially better. I think, there was a reduction of some 25% or something early in the last quarter of the complaints. I think, that we're over that hill and it is getting a lot better. So, we will fix your problem and we will also continue to work generically across making the transition a better experience. So, Microphone three
SPEAKER 2:
Chairman, I'd like to introduce Bryce Sutcliffe from (UNKNOWN).
BRYCE:
Thank you. Well, this is my first annual general meeting of Telstra, and it's quite a memorable one. Most of my questions have been answered, especially, the franking credit problem. I know it's a political issue, and it's extremely likely that next year we will be losing our banking credits. I hope that that can be taken on board and some, sort of, recompense or some adjustment from the wise man at the head table, can do something about that. Now, I've listened closely to the comments from the board, the chairman, and the chief executive officer, and our vision was a mixture of of some apprehension and a little bit of optimism. Now, I'm reflecting the general feeling of this meeting. And if I am, I'm encouraged to ask you collectively, what can we expect tomorrow without fading share price? And my high expectations through the years, since Mr. Howard recommended mums and dads to buy the second Telstra share issue at $7. 40, my expectations have always been since then, that we would reach that lofty peak.
Well, we've dropped down to 255 and 250 this year. That was a shock to a lot of us and took a bit of getting used to because many of us that represents a half of our investment. And then, allied to the franking credit, it's going to put us in a very, very difficult position if we're in that category of shareholders. Now, if the board can assure me that their optimism for the future is real, and if they can assure me that their pessimism that they couldn't apologize for. And we have been rather well asleep at the wheel with the NBN. We have missed all those ministers in Canberra who took advantage of you. And and as a result of that, you could not find the expectations that you promised us. Now, can you be optimistic about tomorrow morning when the reporters report this meeting?
SPEAKER 1:
Alright. Thank you, Mr. Sutcliffe. Firstly, I got two or three things again, I've taken out of what you said there. Firstly, obviously, the franking credit issue is not in our control. It's not appropriate for us as a private company to comment on that. What will be will be, and we will all have to obey the law of the land just as we do with the NBN. And I do disagree with your comment that we asleep at the wheel with the NBN to the country. It's consumed an enormous amount of time in firstly, understanding what the impact of the NBN would be, and it's taken quite a number of years for that to come out. And the,n once we were aware of what the impact, is to to do something about it and mitigate that impact as much as we can. And as I said earlier in my in my speech, we will do everything we possibly can, but we cannot replace the loss of 50% of our net profit. That is the engine that generates dividends. We are where we are with that. Are we optimistic? Yes, we are. Absolutely. We are optimistic.
I would much rather have us assets than any other telco in Australia. We've repeated many times we have the best people, we've got the best networks. We spend more money on maintaining those networks and keeping ahead of the competition than anybody else, and we'll continue to do that. So, I'm very optimistic for the future. But I cannot wave a magic wand and say that we can replace the impact of the NBN overnight. It is going to take years as we work through this entirely new digital world that Telstra is entering. So, microphone four.
SPEAKER 2:
Chairman, I would like to introduce Susan Konkon from Sydney.
SUSAN KONKON:
Good morning, chairman of the board. My name is Susan Konkan. I'm here representing myself as a shareholder, our family trust, and my parents who own shares. And together we have a total of more than 100,000 shares together. I'd be interested to know if any of you on the board and in management have acquired shares equal to that amount using your own hard earned money, as we did? The reason why I say that is because we know as shareholders that the board is directly responsible for protecting and managing shareholders interests in the company. And we all believe that it's reasonable for us to expect the board to oversee and govern management in a way that generates shareholder value. With all due respect, my parents and I are personally disappointed in the way that Telstra is being managed and the impact it's having on shareholders, as we've heard previously. This year, we were hit hard with a 30% decline in dividend versus prior year. It's the lowest it's ever been in the last 11 years.
During the global financial crisis, the dividend was steady at 28 cents. What happened to the resilience of the dividend? And in the next year, we're actually... Well, what I've read is that analysts are forecasting the dividends to drop another 16%. The gentleman previously said it was around 20%. So, what are your plans to bring the dividend back to the 31 cents we saw last year? Which was off the back of a steady increase in dividends in the last four to five years. Are you benchmarking yourselves or what are you doing to benchmark yourselves against dominant telcos in other geographies like AT&T, Verizon, Bell Canada, who are showing record growth in their dividends year over year? A different question. You mentioned that NBN is obviously the biggest driver and impact on your financial performance. Share your focus on Telstra ventures. And what return can we expect on that? We saw you write off 500 million in February. At the start of this year, if you look at the Harvard Business Review and the research they've done on startups, which is highly speculative rather than investments, they say that seventy 75% of startups fail.
Conventional wisdom says that 90% of startups fail. So, what return can we expect on your involvement there in Telstra Ventures? Thank you. Those are my two questions.
SPEAKER 1:
Good. Well, again, a few questions there, I think, that just came for me. Let me have a go at them. Firstly, you asked about directors acquiring shares. One thing you may have noticed if you read the remuneration report, is that we this year doubled the requirement for directors to hold shares. It used to be a requirement to hold 50% of the board fee in shares. We doubled that to 100% during the course of the year. And most of us, other than the brand new directors, obviously haven't been here long yet, are already at that level. So, I can assure you, directors do have personal holdings paid for out of their own personal funds that mirror exactly the experience that you have as shareholders. Secondly, you talked again about getting the dividend back to the 31 cents, and the resilience, et cetera. I don't want to just keep repeating the same thing, but if you lose half your income from which you are going to pay a dividend, there has to be an impact on the dividend. Now we could, as a company, be completely, fiscally responsible.
We could go and borrow a huge amount of money and weaken our balance sheet. It would have to prop up dividends higher than they should be. But we think ultimately that is weakening the company structurally and is just something that we shouldn't do. However, we will pay as much in dividends as we can do to our shareholders. That goes without saying. You asked if we benchmarked ourselves against other telcos, we do. And one of the great advantages we have of bringing the talent onto the board that we now have (UNKNOWN), is we've got first hand experience of executives who have run Telstra equivalents in the rest of the world. So, we do benchmark. And you talked about optimism. We are actually very optimistic. The difference in the Australian market and Telstra situation from many of those other markets, is the NBN. I'm not being boring and repeating it over and over. As I said in my speech, we hold ourselves accountable to compete in the modern digital world. The disruption, the competition with TPG, and all these other things, that's what we have to manage and we think we can do a pretty good job of that.
We're very optimistic. But we cannot wave a magic wand and replace that 50% of profits lost through the NBN, overnight. That bit is going to take longer. And lastly, I think, you mentioned about Telstra Ventures and a write off. I think to be precise, we haven't made any write offs to do with Telstra Ventures. Telstra Ventures has actually been a success. What we have done with Telstra Ventures is where we took all of the responsibility for those investments ourselves. I think, we had about 300 million or something invested in them. And that was really, research and development for a better word. We took small stakes in a number of emerging technologies that we think could be beneficial to Telstra in the longer run. Now, not all of those will work, but we think one or two will. The decision we took during the year was that we're probably, not the best owner of a venture capital fund. So, we did a deal, a company called, HarbourVest to let them manage that. That's what they do every day.
But we retain a 25% (INAUDIBLE) in HarbourVest. So, we retain access to the technologies that come out of that. That's a think tank of new technologies, but we we give them the day to day management to another entity. Where we did make a write off, which is probably what your you're referring to, was the investment we made in (UNKNOWN), which was or is a technology company in the United States. And I can only say that we stuffed up. That we've made lots of investments over the years. Some have been very successful. You might remember Autohome, we had a $2.1 billion profit on that one. On (UNKNOWN), we didn't. And we're all a of that. The board can't blame management. We were all part of those decisions. It seemed like the right decision at the time. That technology is still valuable technology. We still use it, but we have decided that it's better to exit that business. We have retained some upside. If we make a great success of it and it becomes the next Facebook, well, we've still got some upside.
But we thought it better to dispose of that interest now, cut our losses and concentrate on the core business and the challenges we have at. I hope that answers your questions. Thank you. Number three.
SPEAKER 2:
Chairman, I'd to introduce Elwin Shuman, from Brisbane.
ELWIN SHUMAN:
Thank you, Mr. Chairman. I'm trying to clarify what's going to happen in the future regarding the split of Telstra into two separate companies. First of all, what is going to happen? When is it going to happen? And what's going to happen in regard to shareholdings? Are our shareholdings are going to be split 50-50 either way or some other proportion? Are we going to be offered new shares or what's likely to happen? I noticed in Page 19 of the annual report, there is a bit of a clue there, that talks about Telstra consumer and small business, Telstra enterprise, Telstra operations. All of that and then, a subtitle. So, presumably that might be one company. And then, there's Telstra InfraCo eliminations and a grand total. Am I right in assuming that this is going to be the structure of the two companies or is it going to be something else? Thank you.
SPEAKER 1:
Yeah. OK. So, firstly, there is no decision made to split the company into two separate companies. What we have done is we are doing a virtual split as it were, so, we can identify the core infrastructure component of Telstra as opposed to the retail side, that people engage with every day. The reason we're doing that is a number of reasons. Firstly, we believe that the Telstra share price is undervalued. One of the reasons we say that is if you look at that InfraCo business, we're the standalone company. It's extremely attractive to infrastructure type of investors. And we believe that it could or should be valued at considerably higher multiple like, double or more, the multiple of earnings that we achieve in Telstra as a whole. Because there was so much doubt around the NBN and all these other things when it's all lumped together, we think that depresses the share price. So, we think it makes a lot of sense to separate out that infrastructure code and make it transparent to the market.
That this is a an asset that is extremely valuable. The other reason, which we've said publicly, is we believe that at some stage, the issue with the NBN will have to be addressed by government. Government on one side or the other. And we think, that we want to be in a position to capture the benefit for Telstra shareholders, should that happen. The NBN pays Telstra about a billion dollars a year for accessing its all its ducks and the like. If and when the NBN is privatized, we think that it could be. And it could be. Now, certainly, there could be a lot of value uplift to Telstra shareholders. If there was some form of combination of that infrastructure business with with the NBN. Clearly, while we're an integrated. Telstra, we could never do that. The competition authorities would never allow us to have any commercial relationship or tie up with NBN. But where the company is separated, we potentially could. So, what we're trying to do is preserve optionality. It may happen next year.
It may happen in five years. It may never happen. But we would like to be in a position to move quickly if indeed, there is an opportunity there to capture a lot of that value arbitrage uplift. So, that's why we're we're doing it. It's a it's a $5 billion business with 3 billion plus of (INAUDIBLE) in itself, which is an extremely valuable asset. And as you know, infrastructure funds pay double digit multiples for companies like that. So, we're preserving optionality, but there's absolutely no decision today to do anything other than internally restructure. So, we're in a position to make a decision in the future. I hope that helps. Microphone two.
SPEAKER 2:
Chairman, I would like to introduce Jonathan (UNKNOWN), from Brisbane.
JONATHAN:
Good morning. My name is Jonathan Ring. I work for the community in public sector union. And hopefully, what I have to say today, can resonate beyond the 80 plus percent of Telstra staff who recently had to vote to reject an insulting paying conditions offer from this company. And I'm here today, to speak against the executive remuneration report. And I'm going to ask shareholders to vote that report down. I think, it's an absurdity that in the coming financial year, people capability and engagement will be one of your measuring points for your executive remuneration. In a quirk of math, 1% of pay increase for the Telstra staff is loosely equivalent to 1% of the after tax profit of this company. And we're standing here today being asked to rubber stamp bonus payments for seven executives, that equates to roughly 20% of what it would take to change the lives of 25,000 hardworking staff for this organization. Now, that's seven executives whose threadbare plan in T22, has no chance of success, if one in three of the staff doing the job won't be there to do it.
This group does not have a plan to engage their staff to work harder with less and for less. And that means they don't have a plan for the investors in this room, to make your share price improve. OK. Slashing nine and a half thousand odd jobs comes after years of wholesale cuts. And the services already suffered and will continue to suffer. And when the service suffers, customers walk. And when customers walk, your share price goes down. As shareholders, I understand your motivation to see your price lift, but it's not happening with this plan. And I ask you what in the T22 plan do you see that convinces you that this group can deliver for you? And I put it to you, Mr. Chairman, how can you justify paying millions to seven executives, when that would equate to 20% of what it would cost to fix your pay in path, I believe? It is just unacceptable, and I ask everybody to vote against the executive remuneration report. Thank you.
SPEAKER 1:
Thank you, Mr. Ring. Thank you very much. That's eloquently put, and I absolutely, understand where you're coming from. Let me respond, though, to the three main points I took out. Firstly, why did the board include engagement index in measurement of management performance in this coming year? Because exactly to your point, I think, it's very easy for management to say, "Well, we're losing all these jobs. Were bound to get a bad employee opinion survey results." And that, we believe, would be a get out. And therefore, I think it's actually quite brave of management to take on the challenge of undertaking those unpleasant but necessary cuts, and at the same time trying to maintain the morale, and enthusiasm, and commitment of those that remain. You then talked about job cuts generally, and the impact on service, et cetera. Sadly, as I've said before, I know we know these are human beings. These are not numbers on an Excel spreadsheet, but we've got to get real. If you go to David Jones not so long ago, you went into the lift and you said somebody said to you, "Which floor?" And you said, "Three." And went, Jing ,jing and he went up to level three.
You now press a button that just moved on. You now download your movie or your song on the internet. You don't go into the video store that used to hire lots of people. So, I don't like it any more than you do, but it's a fact of life. If Telstra does not adapt and commit to being successful in that new world, then Telstra will fail. There are no companies too big to fail anymore, and Telstra may have been in luxury of that position years ago. It's not today. So, we have to make those decisions. We try our best to balance them. To look after the interests of employees on one side, the shareholders on the other. And it's difficult. We don't always get it 100% right, but we are trying very hard. Lastly, you commented on the executive pay, and I know I said in my speech, if you look at the the multiples that executives generally, if you if you look at the difference between those at the bottom and the top, it's substantial. Again, we have to do our very best as a board to get a balance. We need to attract the best talent and maintain, and incentivize the best talent.
We look at the multiples. You might be aware that in the United States, the multiple during an average salary and the top CEO is about 300 times. In the UK, it's about 180. As here now, it is about 50. So, it's still a big number, I understand that, but we're by no means out of kilter. And I would also point out that Andy's remuneration has fallen by 50% in the last two years, commensurate with the pain that others have felt. And it is the lowest salary Telstra has paid a CEO in over eight years. That's not something I'm proud of, but it is a fact. It's not like Andy salary has been going up and up while other people's was not to the contrary. It has fallen. So, we are extremely conscious of that. And we will do our very best to balance. But I cannot say where... And he says we've got some fantastic talent. Like the two executives brought in from overseas. And they earned big salaries overseas. We can't say, 'Well, come to Australia we'll pay half." We just can't do that. We won't attract the quality of talent.
So, we are responsible about it and we try to get the right balance as best we can. Which I know is not the answer you want to hear, but it's from my heart. Thank you. Mike Fancher.
SPEAKER 2:
Chairman, I would like to introduce Shane Murphy, from Sydney.
SHANE MURPHY:
Thank you. Chairman, just a couple of the comments. First of all, I'm Shane Murphy. I'm the national president of the Communications Electrical Plumbing Union, and I stand here shoulder to shoulder with every shareholder. All of our members who work for Telstra are also shareholders, and we hold nearly 200,000 proxies, today, from the workers at Telstra. And we'll certainly, be exercising our vote against the remuneration report, and we urge shareholders to join us.
SPEAKER:
Just a comment, Chairman, you say that the board's view is it needs to pay the type of salaries and executive bonuses to maintain the best people and for Telstra into the future. We ask, then why doesn't that apply to your workforce, and your workers who are at the backbone of the company, and who are at the forefront of customer service, and are leading the way in building your networks now and for the future? You simply can't sit here and say from a board's point of view, it's OK that we need to pay people at the top this type of salary and the reasons for it. But for those who formed the big part of the company, and are a big part of the way forward for the future and are also shareholders you say, they are simply only entitled to 1.5%. So today, on the back of that, and in light of where the shareholders shares are currently sitting, the beans of dollars that have been wiped off the company over the last 12 or 18 months, we'd urge shareholders to block the remuneration report. Thank you.
JOHN MULLEN:
Thank you, Mr Murphy. We're extremely aware there was already a very large vote against the remuneration report. We're not living in a vacuum. I have personally with a number of my colleagues been round all of our major investors over the last few weeks, and more. And so, I'm acutely aware of what people think. So, I tried to explain in my speech earlier, we have to get a balance. We hear that, we absolutely hear that. But we don't think paying nothing, we only paid 33% of the variable component, which is a lot of money still, I accept that. But it's not like we paid out the full amount to many by any means we think they did a good job. And during the year, we measured performance in whole number of ways. At the end of the year, we came out arithmetically with a result. Management were quite entitled to say, well, why don't I get paid that amount. We as a company, and management were exemplary in their discussions with us said, we think even paying out at that level 47% out of it would have been is too high given the pain that the shareholders have suffered.
So, we made a decision to unilaterally cut that and reduce it to 33%. We thought the 33% was about right. We obviously got it wrong. The clear reaction from almost everybody was too much. However, again, when you say what's right for one and there's not a right for the other, we see both management and the workforce in exactly the same situation, except actually management are taking some quite large cuts. So, while you may not be happy with the 1.5% that is being offered to the workforce, that's not a 50% reduction like Andy has gone through. And I know the absolute quantum still there, but it's not like we are continually paying executives bigger increases than we are paying management. That is absolutely, hasn't happened and will not happen. And lastly, you know, you said that, you commented why don't we want the best people in the employee workforce. Of course we do. We want the best people at all levels. As a board here, we are directly responsible for the salary and compensation of the senior leadership team.
But below that, of course, our managers are responsible for attracting, motivating and retaining the best possible people. And I believe we do have the best possible people. And I know that when paid raise times come around, everybody wants more, and our company tries to offer a bit less. But I think that we've got some ethical and honest people running that process and they will do their very best to get a compromise that won't be what everybody wants but equally, it's looking after the impact on shareholders here who are equally concerned about the financial results of the company. Thank you. Microphone one.
SPEAKER:
Hello, Chairman. I'd like to introduce you (UNKNOWN) from Sydney. Thank you, Mr Chairman. I'm your long term investor in this company. My self managed super fund, my company and myself. During this time we had many executives, some better than others where the CEO who wouldn't sell company shares to his mother. But our last CEO Mr David Thodey, was one of the best CEOs that this company ever had. David knew to succeed in his job, he needed to improve the service level and returns the trust of this company to our customers and us the shareholders. From this boardroom, he requested from us as the shareholders to report directly to him, or his management team of any issue with the company. This was a genius idea. By contacted senior management that has the power to fix or improve the service slowly but surely, our customers started to come back to us. I personally use the service and was very satisfied. Our share price started to go up and almost to the level that we bought them at a second float, then they will resign.
If I was on the board, I would offer him any package to keep him with the company. Unfortunately, for us, he leaves the company, in our surprise, started to hit new lows. I tried to contact our management team, and guess what? The direct number of the management team was disappeared from Telstra website. I have tried different ways to find the phone number to our management team without success. I would like to know why our management remove this number from the website. And I would like to know how this management team are going to improve the service and return trust to us the shareholders to the share price will start to rise again. Also, I would like to know how I can contact your management team. Thank you.
JOHN MULLEN:
Thank you. Thank you, (UNKNWON). So, you mentioned mainly I think customer service, and that the highs and lows that we've experienced. So, David did a fantastic job in his tenure, of making the company much more customer focused than it ever was before. That has actually continued, that has not gone backwards to the country. By pretty well every metric, we're performing better today than we were back then. Is it acceptable? Absolutely not. Not sure I made the comments before, we still make lots of mistakes every day that impact customers, and we're working exceptionally hard to fix that with a whole purpose of T22 and the simplification of everything else that we talked about. The direct contact number, I wasn't actually aware there was a specific number, but I can tell you Andy and myself and most of everybody else along here, our emails are open, our phones are open, we take customer issues personally all the time. Every day, every week I would get one and we try to address those as we did with that lady earlier.
So, there's absolutely no reversal of process of access I can assure you. And we'll have a look at that. If there was a number that has disappeared or something, I'll make sure we deal with that. Thank you. Number one again, please.
SPEAKER:
Alright Chairman, I'd like to introduce you Ian Willis, and he's from Brisbane.
IAN WILLIS:
Good morning Chairman and fellow shareholders. This is totally different. I'm still getting and my neighbors are still getting the phone calls from India. I'm being told my internet is going to be cut off. I'm being told my phone is going to cut off. I've been told I've recently had an accident, a car accident. The last time was in 1996 in Greenville in Tennessee. And the (INAUDIBLE) one of all was that I had someone ring me up and tell me that I had the tax safe office money. It's a rather amusing call. I dragged him out for 15 minutes, and then pointed out to them the Tax Office made a deposit in my bank account the previous night with my tax return. Now, the excellent ones. In England now, the parliament there is debating a penalty bill and it's half a million pounds for firms making unsolicited phone calls. These emanate out of India. Is there any way possible that Telstra can block all incoming phone calls from India to a Telstra home subscriber. Just let me finish. Let me finish.
To a Telstra home subscriber between the hours of 12 noon and 7pm, Monday to Friday, and that will eliminate the problem.
JOHN MULLEN:
Look, we all have that problem. I do, I get the calls at home as well. The reality is that if it is a persistent nuisance call from one location, we can block those calls. But a lot of these scams use hundreds of thousands of phone numbers that rotate. So, we block the number, doesn't make the slightest bit of difference it just, the computer generates another number the next minute and goes on rolling through that. So, unless you try and block all calls from Russia or all the calls from somewhere, you just, you really can't do it. So, we've put as much effort as we can into education trying to recognize these things just like we do with emails, fraudulent phishing emails, etc. But to your point, if it's a specific nuisance person, we can deal with it. If it's random computer generated calls, it's virtually impossible, I'm afraid. I wish I could give you a better answer. Microphone one again, please.
SPEAKER:
Hello, Chairman, I'd like to introduce you (UNKNOWN), and she's from Sydney. Hello. Good morning. Dear Mr Chairman, and other order board member. I am (UNKNOWN), a JP of New South Wales from Vietnam. Talking a lot 40 years living in Australia, talking in Pacific 20 years in Sydney. And I am the first shareholder. When the Telstra come out the moment that, remember how many years ago, I forgot. And now, up to now all the high tech control high, and on the one hand it is fantastic, excellent, marvelous. Ladies and gentlemen, give them a big hand. Come on. Now. That's good, because when I remember, yeah, in the early 60s in Vietnam, the first black and white TV come out and look back up to now, right? The high technology, wonderful. And even now, in the (INAUDIBLE) 345 and building, and the AIA insurance company, I am a formal sales rep from insurance company AIA, OK? Here, the evidence. Ladies and gentlemen, do you guys remember 10 years ago the stock exchange corrupt and AIG American company corrupt, remember?
Look, we are in Sydney, we are still surviving. And why (INAUDIBLE). So, what? Ladies and gentlemen let me tell you, OK? Telstra company the golden goose. The Telstra company poll give the golden egg. Win every time. Come on give them a big hand. Thank you very much. Ladies and gentlemen, let me tell you one thing, the new technology is good on the one hand, but also bad in the other hand. Why? Recently the internet treating, right? Remember? ladies and gentlemen, remember the internet trading a lot acquired and come up. And I'm a Telstra shareholder but I've never used mobile phone. Why? I never use everything online. Why? My safety, my privacy, my security. Unfortunately, I've still been hooked in. Guess what? That's very exciting special meal. I'm one of the really, really, really lucky bloody with them. Get hooked in internet tradings stealing my credit card. How much? Six grand. Test online, test online, test online. Oh boy, oh boy. I don't understand why. No, I never can escape.
Anyway, six grand only. I'm very happy. Because we as the medium company, I'm very happy to tell everyone I'm a shareholder, and also I'm really happy to tell everyone a former sales rep from AIA, right? AIA. 10 years ago, every member they run away. I am stay with them trust online until we die, OK? Ladies and gentlemen, I am the good example. I would like to take the opportunity on behalf of this, and somebody say thank you for doing a good job. Now in conclusion, I got four suggestion. Next year, the AGM meeting, I expect to provide the interpreting for the disadvantaged moment that they could not understand your work. They have the equal opportunity to understand provide the interpreter Cantonese and Mandarin for them. That's the first one. And second one, put up that NBN, the big TV and let them play. A big one for those homeless people. Give them an equal opportunity to catch up the up the update news, OK? They have the right to know what happened. For example, the world game, the football game.
And recently, the (INAUDIBLE) and American they came to Sydney. So what? And they have the right to watch it. I got two TV at home, but I never watch it. Since the 2010, the detention old thing I'm never home because I'm with the homeless people every night and watch them play. I look after those groups. I look after them. So, the second one and the next one, the AGM and whether we come to Sydney all the time, because Sydney is the best city, better than Melbourne, OK? Yeah. And then, OK in conclusion, because the high key give me the headache trouble, six grand at the obviously grand free lamb of God. I'm selling gold and diamond, OK? And because my credit card is 23,000 a year, a pattern, and I'm lucky I'm been hooked, just me. Free lamb of God. Nothing. If you guy from Hong Kong, and you look at the Hang Seng share, (INAUDIBLE). So, we are still alive, we are still here. That's why I give them a big hand. And anyway, I call for help, and AI insurance I applied the loan 10,000 to pay the debt and interest is free.
Thank you very much. Thank you.
JOHN MULLEN:
Well, thank you for your enthusiasm. I think we have a vacancy in corporate communications. If you'd like to see (UNKNOWN) down here later, we'll do that. Look, at all seriousness, thank you for those nice comments. And actually, Australia's much richer for people like you who have joined our community and made it what it is. It's also nice to hear things every now and again. Telstra actually does a hell of a lot of things, right. So obviously, this forum is to express dissatisfaction as mainly with things that go wrong and we're culpable or responsible for all those things, and we'll work on them. But actually, Telstra deals with millions of customers and millions of transactions every day, very satisfactory. So, it is nice every now and again, particularly the management team to hear that it's not all bad. Your comments on the disadvantaged, we're extremely proud of Telstra's record in that respect. I think you may have heard in my speech, we reach out to over a million people every year.
That's about three quarters of a million I think Andy, of pensioners and others who get discounts on our services. We also have special arrangements for people with disabilities, people undergoing domestic violence, all those sort of things. I don't think there's any telco in Australia that can match the record of what we do. And lastly, if I'm to get out alive, I will not comment on Melbourne versus Sydney. So, number one again, please.
SPEAKER:
Chairman, I'd like to introduce to you, Mattia Ruff, and she's from Sydney. Good morning, Mr Chairman, and valuable shareholders. My name is Mattia Ruff. My question is, what steps will it take to repair the native reputation the company has gained over the last several years? Thank you.
JOHN MULLEN:
You want to answer that now? So, what's the reputation? Negative. Well, I like to think that Telstra reputation overall is strong, as a critical provider of infrastructure in Australia. Are there things that we could do better? Yes, absolutely there are, of course. We know that our customer service is not where it should be, which again, repeat the whole discussion that we've had earlier today, we are working extremely hard on getting that. I would like to get to the point where nobody complains about Telstra, everybody is delighted with Telstra. And that is not the case today. So, we have to work on that. And clearly from a shareholder perspective, the impact on earnings that, again, we've talked about at length has not helped our reputation. And you see that in the vote on the report and other things like that. But what I can assure you is that everyone along this table here and my colleagues sitting here, try really hard to improve the reputation of Telstra and do the right thing. Nobody is sitting on their hands just accepting it as it is.
Thank you. Microphone two, please.
SPEAKER:
Chairman, I would like to introduce (UNKNOWN) from Sydney. Thanks Mr Chairman. Just a short question. It's about the, you put two graphs up on the board including TPG. Now, what was the relationship between this company and TPG? Are they competitors or is it other relationships?
JOHN MULLEN:
Yes. So, TPG is a fully fledged and respected competitor of ours. And all we sought to do with that slide was demonstrate that while we don't like the share price decline in Telstra, it has actually been less over that period to the end of last financial year than TPG and also Vocus, who are to publicly quoted other telcos who are also experiencing the same NBN pressures. So, we were just doing the point that while it's not good, we're not alone, the whole industry has experienced the same pressure. Just to interrupt for one second, you'll be delighted to know that lunch and refreshments are now being served in the prefunction area. You're extremely welcome to go and get first pick, but we will not adjourning the meeting. We'll have to keep going, I'm afraid we've got a tight timetable. Thank you. So, microphone four.
SPEAKER:
Chairman, I would like to introduce shareholder Neal McInnes. Welcome shareholder, welcome committee and everyone else. I just like to briefly mentioned on shareholder in Telstra true I've got quite a few shares in my personal superannuation fund. I was employed by Telstra. I was employed for Telstra for 25 years, which has been a great company for me and I've very appreciative what Telstra has made me succeed in getting and everything like that. I just recently got made redundant. So, I'm not a disgruntled person, because I just got made redundant. But one thing does concern me is I've worked on the towers for last 25 years all over New South Wales, I probably do some weeks 2000km a week. and the site of the towers and the tracks and everything else, it's getting a bit dilapidated. We have some sort of what he called maintenance and maintenance issues. We have maintenance, Alton Towers and all that sort of stuff. But it's it's the biggest problem is, as we've all been talking about tonight, everything is about the almighty dollar, the dollar, everyone.
The shareholders all want their money's worth, anything like that. But without the almighty company Telstra, what it has been for all these years, when the old days Telstra was just Telstra, no one else we had, we did have. We did have great years with Frank Blount and Foudy. And I thought because of the NBN and all that sort of stuff, But all I can see is how and where the board is coming from. We have got to change in our ways, and all that sort of stuff. It's very hard. And some, it's like Dell days. We had $1, for example, was 100%, we had all that dollar. But then, (INAUDIBLE) come along, then we only probably had 90 cents in the dollar, then come down, down, down, now we probably got about 52 cents in $1. So, we do have to change our ways. But the most important thing is Telstra should be number one in Australia, and hopefully one of the top companies in the world is its employees. And as employees, we got to pay them right money. What Shane Murphy said was correct, what the Chairman said and what Andy Penn said that we all do deserve the right amount of money, and the money situation is as chairman said that Andy Penn state in the 50% pay cut, but any might make $4 million a year.
And God love him, he probably does deserve that because he's done a lot of courses, he did this and that and it goes. But the guy in Telstra, he might be only on $80,000 a year. So, if he took a pay cut of 50% he be on 40,000 a year. So, you can't really put apples to apples in that retrospect, Chairman. But my biggest concern is the maintenance on the towers in the bush. And I can, you know, I don't want any thing to happen. That's all. Thank you very much.
JOHN MULLEN:
Thank you. Mr McInnes. Look. Firstly, let me say absolutely, categorically, there is absolutely no way that the board or management team of Telstra would ever countenance underspending in areas of safety and maintenance of essential infrastructure. I'm absolutely confident that I've got my hand on my heart and say that is the one tower somewhere. That isn't right. I'm sure there is. But as a general principle, we are extremely diligent about that. We've spent over $4 billion a year in CapEx, a lot of which goes into maintaining that sort of equipment, which I think it would be more CapEx and the rest of the industry put together. Yeah, we think so. It's, you know, and we have never cut CapEx on maintaining essential equipment or, more importantly, putting employees lives at risk. That is a huge responsibility that we have. Your second point about people. Yes, look, I think it's been said over and over here. CapEx is one thing, but the ultimate backbone of a company are people. Everybody forgot the bank account.
You can spend CapEx, but you can't invent people who are not motivated and who are driving the company and taking it forward. We have fantastic people as good as any in the industry. I hear clearly the message from a couple of the union members who have spoken totally understandably they are representing their member's interests, and they're never going to understand if it impacts you personally, or, you know, it would never get to satisfy everybody with the balance of executive salaries and all the rest of it. But we've tried really hard to demonstrate. We are not paying over bloated amounts to executives, it's coming down. And it has come down significantly. And I know 4 millions is an awful lot more than 80,000, but it is heading in the right direction. And we're not shortchanging on our employees, either. We will continue to look after them as best we can and try to get that balance right. Thank you. Microphone one, please.
SPEAKER:
Chairman, I'd like to introduce you Antoinette Grant, and she's from Sydney. Hello, my name is Antoinette Grant. I just want to say one or two negative things before the positives. But I don't expect you to respond because you have already. I have for the last 10 years voted against all remuneration reports because as a matter of principle, I disagree with the whole system that, as you said, takes up heaps of time, and has to go past the lawyers and has to pass the sniff test, which usually doesn't, the so-called Pap test, it usually doesn't. And one suggestion of that would be that the board not just look at remuneration in the Anglo-Saxon world, because if you look to America, etc, obviously the figures are much higher. If you look in the rest of the world of rich, there are heaps of countries that pay their executives a fixed salary and pay them considerably less. And I don't see that you get any less quality for paying somewhat less. It might be different people, but that doesn't mean that they are not doing their job for a fixed salary.
And if you have to increase the fixed salary, rather than the complicated measures that also take up 50% probably of the time doing your annual report every year because I've done similar annual reports for different company quite some time ago. The other just one little snide remark. When you say the executives are now having to take all these shares, it is wonderful to take all the shares when the price is very low, because we all hope the price is going up. And so consequently, that I see that as another way of them making money that looks less suspicious to the shareholders than it would otherwise. But I don't expect the response from you, because you have explained everything really well. And I thank you for the, most of your remarks were extremely informative. And I know you can't change exterior situations and conditions. The only other thing is, I do agree with unions, precisely in the fact that you could employ that many more people for the money you would save on the other side.
And I think any offer below inflation is not a genuine offer. But having said that, I am very happy with Telstra. I've always had good service from Telstra. I have absolutely no complaints apart from these things that are common to all companies. So, I really don't particularly want to single out Telstra as being different from any other companies, I just think the whole culture needs to change in all companies. And maybe that should be through government regulations, etc. So, I am very happy with Telstra, and I agree with the lady who does all this good work. We shouldn't just look at it.
MISS GRAHAM:
Share price, et cetera, because we are actually very lucky that we do have shares. There are heaps of people out there who can't afford to have shares. And really, so we are really amongst the lucky people even if you are self-supporting retirees. We are lucky because we are self-supporting, which means we have enough money to have a better life than the people who are on pensions, et cetera. So I think there has to be a balance, and I think the new direction that Telstra is going for is the only direction they can go, of course, to survive. And just don't forget all the people, all the people like us who are not so technically savvy. We need a bit of transition time and as you said, there's teaching in various places, et cetera. But my actual question is relating to security because all the instances we hear these days is about all the millions of people that have where data has been breached, etc. And I just wanted to check what your ideas are on keeping us secure from that kind of stuff.
CHAIRMAN:
Thank you, Miss Graham, thank you very much for a very constructive set of comments and questions. So I will respond to your first points, even though you kindly said I didn't need to. The relativity of salaries without going over the whole thing again. Is a source of considerable challenge, I think, for society as a whole. I reflect that if Andy was the CEO of the same company in Japan, he would probably earn about $600,000. If he was doing the same job in the United States, he probably earned 25 million. So is $4 about right? Everybody will have a different view, but we have to realize we are acting in a bigger space than just one company. We benchmark the salary against ASX 20 companies, ASX 10 companies. Andy, he is below the median there, I think we're the eighth or ninth biggest stock in the stock market. Andy's salary is 13 to 14 something like that. So we do check all of those things and we are continually as I said before trying to reduce the overall level of remuneration. I agree with you, I think executive pay is too high.
But as I said before without going into the whole thing, we have to be competitive. We have to attract the best talent and we're trying to do that. You said it was a snide comment about the price that people bought their shares. That's not snide at all. It's a good observation. Actually, I think if you look back the majority of Executive directors certainly bought their shares at far higher prices than they are today. We've just brought in the rule now they've gotta spend more to have 100% coverage. But most of us, I think are pretty well there anyway. And most of those were bought at much higher prices. You said that you sympathize with the unions. So do I. I think these gentlemen are doing an extremely good job of protecting their members' interests, of course. And I'm not critical in the slightest. I just ask for a balance and understanding that we can't please everybody. We have to try and get a midway course that satisfies as many as possible. You mentioned older people, and yes, we're very aware of that, that as we digitise and go into this modern world, there will be more and more digital-enabled technologies and interactions with the company, which will not suit everybody.
But we believe they will suit the great majority. But those who are not comfortable with it will always have an out. You'll always be able to speak to a person, you'll always be able to go into a shop and talk to someone if you're not comfortable with the technology. And last but not least, you mentioned security and data breaches. I think Telstra can genuinely hold its head up there as being one of the leaders in data security in Australia. We've recently opened is it three or four? Two, two large data centres that are absolutely world-class and security centres. And we are actually selling those services to other major companies who rely on Telstra to provide that security. Now, sadly, there are an awful lot of bad people out there trying to do the wrong thing, and we will never be able to give a cast down on a 100% guarantee that we're on top of it. But I think we would have to be right at the top of leading companies in Australia managing data security. Thank you. Microphone Two.
SPEAKER:
Chairman, I would like to introduce William Bell from Sydney.
WILLIAM BELL:
Yes, good morning, Chairman. Two years ago, I got up at this Annual General Meeting and I probably asked several questions of the board. When you look at some of the things that happened in a friend's business. Two mobile sent to him basically, it seems were deactivated he couldn't use them. The dot system, the worst system ever introduced. You talk about customer service four hours on the phone to a Telstra person up at Townsville, and he didn't fix the problem and I've brought that up. No one from Telstra after about a week or two after the Annual General Meeting. What was the problem? What's the problem? And no one ever got back to me. Four hours on a phone to try and fix a problem, and he couldn't fix it because he didn't know-how. It was a different system and only because of David Thodey I got someone to look at that system. With a Telstra technician, and our IT and we sorted the problem. Now, if anyone else in a company similar to ours had that problem, would Telstra be able to fix it?
I don't know if they have even done enough research. When you talk to technicians and they say, Oh, you had the letter, C-1-1-1? No, no, you go into the IP address name David Thodey phone number thing safe. I've got it and finished. But we were not teaching even our technicians how to do anything. With what I'm bringing up today is it's really annoying. And this is why my friend is no longer our business, he's with Business Telecom. Not because of Telstra, because Telstra gave him poor customer service. He had his home phone and ADSL2 internet at home. On his business account, which you can do. He says he wanna go now because his son was downloading a 30-megabyte file. And it's going to take 24 hours at one megabit speed on that ADSL2. So I suggest he go to cable. He already had Foxtel. So all he wanted to do is change over to Foxtel, well not sorry Telstra internet on the cable and even taped (UNKNOWN) Foxtel on to Telstra. We're on the phone for an hour and a half with Telstra. This is just totally unacceptable.
Yeah, it's just and it just really annoyed the time the friend, which is his wife, spoke from Montrose (UNKNOWN) to Eastwood on her mobile in the car to try and get it connected. In the end, they sent everything out late and everything else. And what we did it'll be $250 to connect, and we hit there in three days. Alex, just don't worry, I'll go down to (UNKNOWN) Jaker, buy a splitter and I'll connect it up. I rang Telstra and it was up and running. But it's just so long to take things. The overseas call centres, you ring them up sometimes. And I've had various friends, cousins, they do not like these overseas call centres. They don't seem to virtually help you. And it is just annoying to have them. You know, I know they save money, but it's great to talk to Australians. The overseas call centres sometimes do good jobs, but most times most people say they don't. You know, with Telstra, one of the good things you've done lately is your Ads. I love your Ads. But where up here in all these management is your customer service?
The last time I brought it up with Andrew, I don't believe he was approachable, you know. 'Cause with David if I found something which was broken in Telstra. I could bring up with David and he would get it fixed. Andrew just doesn't seem to be interested the last time I met him. Maybe it was just a misunderstanding between the two of us. But I see many things wrong with Telstra. You know with one of those, whatever those pits are, those round ones. WeIl not like a tower one that was fallen over for three months. It was on the internet, Foxtel, or on Facebook. All of this was she took a photo sent it to David Thodey within three days it was concreted back in and standing up. If anyone rolled it, it could have broken hundreds of wires. But David seemed to have been able to do something. I don't see that the same thing in Andrew Penn. You know it's just annoying with Telstra, with the customer service. It's just you know it's so frustrating sometimes to do things in Telstra. You know, there are things you do well.
I asked Andrew about replacing all the torches. Just a simple little torch. But the thing is a LED torch in the van, which will be the old halogen torch. They run the LED torches six to seven times longer on the same battery. I was told of a guy about three months ago. Oh yeah, I've just got a new LED light torch. Now, why wasn't that done two years ago when I first brought it up? Or is it? The torch broke we don't have the other torch. So we'll just give you this one now, which is cannot save you money. Yeah. Where are you going to improve your customer service? Thank you very much.
CHAIRMAN:
Thank you, Mr Bell. I remember well, the discussion about the torch last year. It went on for quite some time. Let me say two or three things. Firstly, I can't obviously respond to the specifics of what you've experienced or haven't experienced. It sounds terrible, and I apologize on behalf of the company if that has happened. If there's still ongoing issues and please, before you leave, see one of us and we will make sure that somebody addresses it for you. The question about Andy being approachable and I'm not sure we should have a widespread discussion about poor old Andy while he's sitting here. But I just don't accept that I must say Andy is one of the most approachable people I know. If you had trouble getting through to him by email or phone or whatever it is, then come out and have a talk to him and sort it out. But he's I can assure you he's a very approachable person. I do not think that's a legitimate complaint. And that's basically it, Mr Bell. We spent an hour and a half on it last year, so hopefully.
Thank you. Microphone four.
SPEAKER:
Hi Chairman. I have shareholder Reginald William Lobb.
REGINALD WILLIAM LOBB:
Thank you, Chairman. Thank you for your presentation this morning and the CEO's presentation. I don't think many people will. Some people were not listening, including the first question that was raised. It was very dangerous for a government to sell off instrumentalities and in that sense, recommend them, and I'm in sympathy with those people. I would it's obvious that people on the podium have had good bladder training because many of us have had to go out and return. Some years ago, Sir Hermann Black, the late Sir Herman Black, was chancellor of Sydney University. And he was a very human person he liked to meet the working people. And when he went to the USA on one occasion, he went to a particular union. And he was amazed that they were able to go to companies. And say, before the company's announcements had been made, the union representative would go and say. We know that the profit you are about to announce is a certain figure and those companies were staggered. I can feel for the workers of telecom.
I was an accountant and I ended up president of a public service union. I didn't have to worry about the economic solvent that was done by the union itself. I'm wondering, Sir, is it possible? And this might not be possible. For some in some way for the employees of Telstra to be given the financial situation directly if the union cannot cooperate. It's a hard thing for them. I agree with you totally and everything you've said about Director and CEO and Executive remuneration. That's a fact of life from my accounting background and from my study of some 30 companies. I'm not as good as Jack Tilburn, but Jack Tilburn, the late Jack Tilburn. And so that is a primary question in fact. So I had great difficulty getting up here to ask a question. The lady was very helpful, but there was a gentleman there. He interrogated me. Thank you.
CHAIRMAN:
Thank you very much, Mr Lobb. So look, I think the main question there was, can we give employees or unions or both more financial information? I think we do. Andy Penn communicates on a regular basis with a newsletter to all employees. The main challenge we have is that as a public company, we cannot selectively disclose bits of financial information to individual groups, whether their employees or other shareholders or whatever. So we have to be very careful that when we make any pronouncement on financial or anything else, it would affect potentially the share price of the company that that is done publicly across the board. So that obviously limits us from giving month by month type updates on financial performance. But again, the executive doors are open, my door is open at any time to talk to the union leader or to talk to an individual employee about the company and where we think it's going, what the future looks like, financial, those sort of things. Provided you understand the restrictions that we have.
And thank you for the comment on bladder control. It was all right until then.
AUDIENCE:
(LAUGHS)
CHAIRMAN:
So hopefully we get through quicker. Great microphone Three.
SPEAKER:
Chairman I introduce Robert Caterson from Sydney.
ROBERT CATERSON:
Thank you very much for this opportunity. What I can't understand is why did we ever in the first place, you know, with the wisdom that you know is on boards of directors and senior management take on such an albatross as the NBN? When we know the NBN is one of you know. We've seen in the media, we've seen all over the, you know, the consumer affairs programs. It is not fit for purpose at the present time. So why are we still promoting it you know, for any other reason? Our main business is communication. The best platform for communication today is mobile technology. Even we had a former prime minister even saying that this NBN was gonna be, you know, the worst, worst thing ever invented. You know, we have to be flexible with our communication platforms. So why have we still persisted with the NBN? We've seen how other businesses, even today's news, we saw how Amazon has crushed. An icon in the business, Sears Roebuck. Sears is it's like David Jones and Myer will. We're seeing how Myer is going.
Now, do we wanna see this company going the same way. Because we're inflexible to meeting those challenges and these disruptors. You know, the biggest disruption in this business today is the NBN. And that's why we need to make sure that we can exit this, we should be exiting the NBN and embracing more flexible communication platforms.
CHAIRMAN:
Thank you, Mr...
ROBERT CATERSON:
And we should be here to make money for our shareholders. Not the gloom and doom about, you know, the politics of franking credits and this. The more profit we make for our shareholders will outweigh what Mr Shorten will do to this company and all the companies with these policies. We have to be in the business of making money, not having the excuse for losing 50% of our profit because we have embraced an albatross technology.
CHAIRMAN:
Thank you very much, Mr Caterson. I would remind you that the NBN was a decision of the government that was made several governments ago, 10 or 11 years ago. Now, Telstra at the time had extensive debate on the likely impact on Telstra, but the government went ahead with the NBN anyway. It is the law of the land and has been reinforced by successive governments since then. We have no option. The NBN is here to stay. We are obliged to use the NBN for our fixed line service to customers. That is non-negotiable. So now, whatever the rights and wrongs I think of having got to where we are, we need to embrace the NBN. The NBN needs to be a successful critical piece of infrastructure for Australia and for that to happen. It needs to be high speed and useful. It needs to be low cost, as our CEO mentioned earlier. And it needs to be at a price that is affordable for the 180 something resellers, including ourselves that are now in the market to make a profit. Because if we don't make a profit, we won't be using the NBN, which will make the problem even worse.
So sadly, I agree with you. But that die has long since cast. The NBN is here to stay and we now have to try and help to make it work. Thank you. (INAUDIBLE) Sorry nobody can hear what you're saying, I'm afraid. But I think you're saying, can't we move on? I have to give shareholders the opportunity to ask questions. And yes, a lot of them are repetitive, but. (INAUDIBLE) Well, unfortunately, I cannot responsibly cut off questions while they are still here, and yes, some of them are repetitive, but I will continue to answer them until it's exhausted. So next, please, microphone Three.
SPEAKER:
Chairman I introduce Garry Ma from Sydney.
GARRY MA:
Chairman my name is Garry Ma. I have two questions for the board. Based on your presentation and also the CEOs presentation and all the commentaries from this morning. They're all pointing to a very, very rosy picture for the future. So what my question the first question is. If the share price of Telstra is undervalued, has the board been thinking of going to the market to buy back some of the shares and share those benefits with these shareholders? The second question I'm gonna ask is for the 9,000 staff in tow to leave the company later on this year. Here today in terms of headcounts, not FTE, not contract staff, how many actually left the company? Thank you.
CHAIRMAN:
Thank you very much, Mr Ma. So firstly, you say that we're painting a rosy picture. I think where we are trying to paint an optimistic future. But we're also being as responsible and open and realistic as we can about the challenges that we face, particularly in the short to medium term. Am I optimistic for the long term? Extremely I think Telstra has a great future. But we would be deceiving you if we tried to tell you that it's all roses and easy sailing for the next year or two. It's not it's going to be difficult. You mentioned secondly about capital returns. We have actually returned $2.5 billion to shareholders in special buybacks. Not special sorry in buybacks over the last years, I think in 2014, 2016 we did that. We've also if you look over the last 10 years, Telstra has returned $41 billion to shareholders in dividends and buybacks. Which I think puts the company right up the top of returns in cash from shareholders. Lastly, you talked about the 9,000 people leaving and the absolute numbers that remain.
And firstly, of course, this is a three-year program, and no one could put their hand on their heart and say exactly how many people over the three years will be influenced by these decisions. As I said in my speech, the goal is not to reduce a certain number of headcount to the contrary. The goal is to modernize and digitize our company, which in turn will inevitably sadly lead to some job losses. That will also not only impact the direct employees, which is what those numbers relate to. But also, of course, overseas call centres and other areas where people are employed on behalf of Telstra. But they don't appear in our headcount 'cause they work for other companies or whatever. Those will also be cut back. Our goal is to eliminate two-thirds of the customer service calls that we receive, so 35 million calls a year. The goal is to reduce those by two thirds by 2022. Inevitably, all the people who are answering those calls today will have to shrink with that. Thank you. Microphone One.
SPEAKER:
Chairman, I'd like to introduce to you, Erica van Ilrst (UNKNOWN) and she's from Sydney.
ERICA VAN IIRST:
Mr Chair, the Board, thank you for giving me this opportunity to address you. I've come here virtually as a last resort. My question is about customer service. I've been a customer and a shareholder of Telstra for near on 40 years. For the last several years, I have had such bad static or crackling on my line that I often can't hear the people who are calling me. I can't hold long conversations. I have family overseas. It has affected my relationship with my family overseas because I just can't hold long conversations on the phone with them. And as I say, I've come as a last resort. Last year for several months, I couldn't use the phone at all. Following that, I took the matter to the ombudsman's office. But of course, it always comes back to Telstra. So unless Telstra's going to do something. Take it to the Ombudsman's office. This year, I've had at least six different technicians in my home. I've had others outside. I have been told by at least three technicians that the problem is the cabling in the street and that they have told Telstra.
They've reported the problem to Telstra. Two of them told me for 10 years, and Telstra has told them they're not to do anything. It's just a patch-up job because we're all waiting for the NBN. In the meantime, I can't use my phone. I've been told this as a said by several technicians. Goes back to the ombudsman's office we're playing table tennis. I'm supposed to be a priority customer. All I can think is, God forbid if I'm a priority customer, what about all the other poor people out there? But yesterday, I do have a tiny bit of good news for this story. It hasn't finished yet, but yesterday I had some outside people arrive who were going to put some new cabling. They did put some new cabling. They told me they were going to put 20 metres of panels they put 50 metres of new cabling somewhere. And the problem is there that they told me then, Oh yes, but we can only do to that point. And then another team does this type of work and another team does that type of work. So, you know, it's not up to us.
We can't do anything more. It's all so bitsy. OK, this is ridiculous. If I was on the board and heard a story like this, I'd be ashamed actually to have a customer report such a thing. I know it's not up to you personally. I understand this sort of thing, but this is unacceptable. It should be unacceptable to everybody who hears this sort of thing. And I don't know what you can, what you'd like to do about it. I think that you know, I seem to I don't know what other the steps I can take. But I'm still being sent the bills, by the way. Even though a lot of the bills show that I'm ringing the same number repeatedly because I can't hear the person. So I keep saying I'll ring you back, I might get a clearer line, you know? So I'm still being billed for this not fit for purpose as it were service. What can be done, please?
CHAIRMAN:
OK, thank you Miss Van Ilrst. You'll forgive me that I'm obviously not familiar with the particular circumstances that you're referring to. It sounds dreadful. What I can assure you is that again, if you would like to see one of the people walking around in shirts, we will take your name. We will get on to it and we'll get back to you with a proper response. Hopefully, that resolves it one way or the other, if indeed we can resolve it, which I hope we can. But without knowing the details, it's really hard to give you more assurance on that. But we will take it seriously and I don't like hearing these stories from customers. It is embarrassing and we should be ashamed of it. You're right. Thank you. Have we noted that? Great. Microphone three, please.
SPEAKER:
Chairman, I introduce Polga from Sydney.
POLGA:
Thank you, Mr. Chairman. My question is a follow on from something in one of your presentations in one of the presentations where you spoke about two to four layers of the organization being removed as part of the streamlining, simplification and cost reduction. I was wondering how many layers there are between the CEO and someone on what I would refer to as the shop floor in a van driving around fixing problems. And the reason for asking the question isn't so much about cost reduction. It's about the lower number of layers, gives better communication, both up and down the organization. And I'm also wondering what is done to make sure in such a big organization that. What people at the ground floor want to say gets heard right through the organisation and is not being filtered out on its way up?
CHAIRMAN:
Thank you. So firstly, the two to four layers as part of this whole T22 program, we have.
SPEAKER:
Gone right through the whole whole business looking at those spans of control and how many layers could be reduced. Obviously, a lot of the focus has been on the employee workforce, but further down. But there's been just as much reduction, if not more, in white collar executive roles as there has been in the general workforce. The actual number of layers. Alex? Eight? Eight to ten being reduced by two to four. Yeap. OK, thank you. In the second part of your question around, how can people be heard? We have one of the most active Yammer groups in Australia, I think it's fair to say. Where any employee at any time can raise an issue, and that's an online community response to that from other employees, but also from management. I think we have a better communication than most companies. Thank you. Number three again. Chairman I introduce Norma Anderson from Sydney. Mr Chairman and everybody, good afternoon. We started morning, but it's half of the afternoon now. So anyway, I just would like to make a few comments and then a question at the end.
Firstly, I'd like to commend you and the board for the presentation you made for the Telstra 2022. I'd like to know, though, which of those presentation is already in place now and being implemented now? And like, what's the timeframe and which of those would be achieved later in 2022 and which one would be from now? Secondly, I'd like to commend you for changing your policy on requiring the board and other officers to take on Telstra shares instead of cash for your STI and LTIs. At least when we suffer, you suffer too. Thank you. Is that the end or more? Now, please try to deliver what you have outlined in your T2022. And I think all this negativities and, you know, picking on salaries and packages, I think will be history. And we would be more forgiving and sort of not really mind all these packages. It's just now it is being focused on because we are hurting. I bought my shares, I added some more shares. I'm one of the IPO shareholders. I added lately, I bought at $6 plus and now it's $3 or $2 below or $3 below.
And the next day when I bought, it just tank. So I don't know, you know, I'm a pensioner and I'm hoping that my investment, my hard earned money that I invested into Telstra would somehow, you know, give me a reasonable income. But shareholder share is, I guess, not really. No one can predict what happens tomorrow. First, on those people who commented and complained about scammer calls, Telstra, I think, could not screen the calls. It's impossible. But what I do, this is what I do. I bought an answering machine. I screen my calls, I delete all the scammers. And if my friends or my family is calling, then I pick up the phone. You know, you don't have to put up with them. Or if you know that they're scammers, just hang up. So please just try to do something now to improve the share price. And thank you for all your hard work. It's not a notice, OK? We still have the dividends, but it's been reduced 30 percent and it's a fair bit for people like me who are depending on our dividend income.
Thank you very much and good afternoon. Thank you very much, Miss Anderson. Thank you. So firstly, thank you for your kind words. As I said, it's nice to get some praise from time to time for some of the things that do go right. You had a couple of questions in there. The timeframe of the deliverables on T22. We have actually published quite a extensive breakdown of the program over the four or three years, rather sorry to the end of 2022. We also recently published by way of a shareholder letter. The metrics that the management team are held accountable for delivering as part of T22. And we will continue to do that each year so you can see how the phasing of those deliverables will take place over the time. I think we hopefully have delivered a level of transparency that's probably second to none in the (UNKNOWN). Thanks also for your comments on directors and managers holding shares. We agree with you, the more that remuneration is in shares, the more the alignment there is with the shareholders like yourselves.
So I very much agree with that. What are we doing to get the share price up and the investment returns? I think we've covered that in some detail today. We are working as hard as we can within the constraints that we have. And last but not least, the scams also again, I think we've covered that and we appreciate your contribution there. Thank you. Now you will be absolutely delighted to know there are no more questions on my screen. (INAUDIBLE). So one last chance, are there anymore? Otherwise, I will move on. Great. I didn't ask the questions, you did. So our next item is item three, the director election and re-election. Before we get to that, as I mentioned in my opening remarks, I would like to invite two of your retiring directors, Russell Higgins and Steve Vamos to say a few words. Well, good morning, no its good afternoon. Fancy that, ladies and gentlemen after nine years of service on the Telstra board, I will be retiring at the end of today's meeting. And as long as my bladder holds out, I'll just spend one minute telling you a little bit about reflecting on that nine year journey.
At the time that I joined the Telstra board, two significant events had happened and they've had a profound impact on our company over the whole of my time on the Telstra board. The first of this was the iPhone and other similar smartphones had been released to the marketplace with a bang, and they had a big impact on our networks. This and other factors led to an explosion of the data being carried on our fixed and mobile networks and enabled customers to communicate, work and be entertained as never before. This, for sure, presented opportunities for Telstra, but it also presented challenges in that it necessitated very large capital investments and the adoption of new technologies. The second event was the renationalization of our fixed networks by the government, through the decision to build the NBN. After two years, a very difficult and arduous negotiations, we reached an agreement with the government. About Telstra and the NBN to enable Telstra participation in the rollout of the NBN.
That agreement delivered $11 billion of value to Telstra shareholders. Including through an agreement with a 30 year life for NBN Co to use our infrastructure. I'm extremely grateful for the opportunity to bring my skills and experience to bear on the challenges and opportunities that have arisen in our company over the last nine years. We have now set the sales of the company to meet the challenges of today's marketplace and to create opportunities with the T22 strategy. And I wish my colleagues on the board and the management team all the best in the implementation of that strategy. And finally, I'd like to thank you the shareholders for your support over this very exciting journey. Thank you. Thank you, Russell. Steve. Thanks chairman. Good afternoon everyone. I really just want to thank all of you for the opportunity to serve on your board over the last nine years. A couple of things sort of stand out for me when I look at the journey. One was just constant and rapid industry change, and that's nothing different to what I've experienced in my career in the technology industry with companies like Microsoft, Apple and IBM.
Change is something that is happening faster. It's happening in everything that we do that's not going to change. It's going to touch all of us, no matter what we do, no matter what business we're in. Sometimes those changes in the industry can be challenging, other times they can actually help you. But at the end of the day, I think, as our chairman said, it really is about how you respond, and that really leads me to reflect on the tremendous opportunity I've had to work with a great bunch of people, who are incredibly committed and world class in the board and the management team of Telstra. And I really want to end by thanking them and wishing John, Andy, the board and the management, the people of Telstra the very best for the future. I believe that T22 is a comprehensive, well thought out strategy that is well underway in being executed. And once again, I thank all of you for the opportunity to serve on your board. Thank you very much. Russell and Steve, on behalf of the board, and I'm sure I can speak for shareholders here, I'd like to give you a huge thank you for your valuable contribution and extensive commitment to Telstra.
You will both be greatly missed. Thank you. Now we have three candidates standing for election or re-election, and their details are set out in the notice of meeting. So I'd now like to invite Roy, Maggie and Niek Jan to address the meeting in that order. Thank you. Thank you, chairman. Thank you, Russell and Stephen, for your brief tenure that I got to share over the last few months, I've learned a lot from both of you and I wish you the best. Good afternoon. I'm Roy Chestnut and I'm excited to be standing for election as a director today. I very much enjoyed the journey so far, having joined the board in May. I have 30 years of experience in the telecommunications industry. I left Verizon Communications at the end of last year from in New York, where I was for the last six and a half years, was head of strategy and M&A for Verizon. I was on the board of directors during that tenure of the GSMA, which is the international standards boards for the wireless companies. So, I established a lot of relationships around the world and know a lot about the companies around the world.
And I also chaired the Strategy Committee, which is comprised of 25 industry leading chief strategy officers from around the world. I believe I'm well placed to positively contribute to your company, in particular light of the rapid change that we've talked about today, and Steve and Russell are both mentioned over their tenure that are facing and creating a tense competition that's facing Telstra. I look forward to actively contributing my experience to the benefit of your company and all Telstra shareholders if my election is supported today. Thank you very much. Maggie. Good afternoon, everybody, and thank you very much for joining us today. My name is Maggie Seale and I'm standing for re-election. I joined your board in 2012 and I'm now a member of the Audit and Risk Committee and have been since then. I'm a professional company director across a range of industry sectors, which makes me acutely aware of and provides me with valuable insights into the importance of and issues around technology, connectivity and organizational change.
As a consumer and a business person, I note the speed of change driven by technology, the new services delivered and the hunger for more. My special focus is on understanding consumer markets, customer engagement, brand management, strategic and business development, corporate culture and governing the transition to new business models, all of which I have extensive experience in both from an executive and non-executive life. Telstra is going through enormous required and important change. Should I gain your support for my re-election today, I look forward to continuing to contribute to Telstra's development and future success. Thank you very much. Thank you. Thank you very much, John. Good afternoon, ladies and gentlemen. My name is Niek Jan Van Damme, I'm Dutch and I feel honored to be and have been invited and nominated by the Telstra directors to join the board. Since 2009, I moved to Germany and I'm still living in Germany. I've almost 20 years of professional experience in the telecommunications industry, having led a Challenger mobile organization in the Netherlands.
And then I move to Germany to the fixed and mobile business for Deutsche Telekom. In these roles, I have always focused on the customer on increasing customer satisfaction. And of course, also because you heard plenty about it in this industry, reduction of cost, largely supported by digitization that resulted in growing revenue and (UNKNOWN) in Germany. Although the industry is basically a global one, Europe has been at the forefront of many developments in this industry. For example, in the digitization of the networks, in the development of converged products solutions and in customer experience. And I will make sure that I share this experience to the benefit of Telstra. I believe that customer orientation will increasingly be a different trading factor for the industry. I also believe that we need top management at all levels in the organization. And I will not cease to share my beliefs and my experience in industries that I worked in for 35 years and that go beyond telecommunications, industries and companies like (UNKNOWN) that put high value in the development of the people.
If elected today, I look forward of being part of the trust, the board of directors to contribute to the success of the company and to ask for your support in my election. Thank you very much. OK, thank you very much. We'll now move to the election. So firstly, Item 3A, which is to consider the election of Roy Chestnut. Roy has been a very timely and impactful addition to the board and, as you've heard, brings with him more than 30 years of director of communications experience and significant perspective from both US and global markets. I won't go through all his many accomplishments, you've heard those, other than to say that the board other than Roy, of course himself, recommends his election, and I'll now take any questions that you may have regarding Roy's candidature. OK, I take it there are no questions, thank you very much. There was a question. Sorry. Please, do you want to go to a microphone, please? And they'll give you. (INAUDIBLE). And now my question is that, how many contributing to the company, the board of directors?
I noticed that some board of directors have multiple positions, have serves other company's board as well. And that's the question I want to ask because for them, plus there's some board director (INAUDIBLE). And then some I notice that it's close interactions. For example, Optus with Telstra's competitors. Is that true? Optus and Telstra compete. Yes. And then I found that with the cross, the border director membership, and they are my concern. Sometimes I feel a little bit conflicting interest. I feel like that in that. Because I've reached a board that is sure to be totally independent and not influenced by the Optus the board of directors. So I noticed that, that's why I ask that question. Another question is how many meetings per year board of director that have? And what's the contribution is on the manager of the company for? (CROSSTALK). Oh, sorry. OK. OK. Let her finished please. I'm sorry. I'm just. OK. Let me try to answer those. Please, please. Everyone's got a right to ask a question.
So let me answer those. So firstly, the main responsibility we all have is to discharge our duties to Telstra, and that is a collective responsibility that we have as directors and I have as chairman to ensure the directors do that. So whether they sit on one other board or two not for profits or three or none is their own choice. But we do continually refresh twice a year. We look at everybody's contributions and how the board is performing. And if there starts to be a conflict where people are not able to devote the time, then obviously we address it. So you can be assured that everybody here gives their 100 per cent attention to the Telstra board. Your specific question then about Optus. We would never have a director who is on Optus board and a Telstra board. That's not possible. We would never have a directly competing dual directorships. Yeah, just with this one, because some if say that multiple directorship, if say you are in that Telstra and then you are in Lanny's or as a director, but as an Optus, the director also that same the board amendment that's, you know, that's that introduction.
But that's how I can so that so that's how suitable should have, that's part of the introduction. So that, you know, that's yeah. We cannot and should not control who people interact with in other boards or even their own friends. I mean, there are plenty of people who have friendships with people who work for other companies. But in a broad setting, no, we are rigorous that we will not have an overlap of somebody representing two companies, seeing confidential information from two companies at the same time. That does not happen. Thank you. So if there are no further questions, we will now vote on this item. The proxy and direct voting position is being shown on the slide behind me. As indicated in the notice of meeting, I intend to vote all available proxies on this item in favor of Roy's election. So please complete your vote now for Item three A. Good, we move on. Yup. OK, so I now turn to item three B, which is to consider the re-election of Maggie Seale. Maggie has been a non-executive director since 2012, and she's a valuable member of the audit and Risk Committee again will not go through her background.
You heard from Maggie directly, but I will say the board other than Maggie, recommends her re-election, so I'll now take any questions that we may have in respect of Maggie's re-election. Any questions, please? Yes. Hello, chairman. I have Lee (UNKNOWN) from Sydney. I'm actually from the Northern Rivers, but that's okay. I just want to reiterate my comment earlier on Mr chairman, that I do believe we should be looking at generational change on the board. Whilst I'm quite sure that Margaret still makes a great contribution, she did say she's a professional company director and I'm sure we could find younger generational people involved in the IT space that would make a great contribution to the board. Clearly, it's not going to happen at this meeting, but I'll make that as a comment for future changes in directorships. That we shouldn't be looking at professional company directors who are always operating in this space. Thank you. Yes. Thank you very much. That's a valuable comment, and I appreciate having raised it a second time.
We do try obviously, we've only got 11 slots on the board. We try to cover a number of critical inputs. So geography, telecommunications experience, ordinary experience, financial experience to chair audit committees, gender and a whole range of factors which we try to balance. We've only got 11 positions, so it never necessarily going to have a perfect situation the entire time. But we are renewing our board, as you can see with two, three directors. So (UNKNOWN) who's not here. Sadly, (UNKNOWN) was, I think, probably our youngest director. We've lost her now for understandable reasons. But your point is valid. We note it and we'll take it into account. There are no further questions. I would now. Oh, there are. So sorry. Jumping the gun. Please. Thank you Mr Chairman, I just would like to know if Margaret can say what other directorships she has. Margaret do you want to address that? Happy to do that. Is my microphone working? Yes, I'm on the Ramsay Health Care Board and the center group board.
They are the public company boards I'm on. Thank you Margaret. Good. I'll give it a second time. Any more questions? Nope. Great. Thank you. So as indicated in the notice of meeting, I intend to vote all available proxies on this item in favor of Margaret's reelection. So please complete your vote now for item three b. Thank you. I now turn to item three c on today's agenda, which is to consider the election of Niek Jan Van Damme. As you've heard from Niek Jan, he has a fantastic background in telecommunications, ending most recently on the Deutsche Telekom Board of Management. And provides a very significant perspective from the European telecommunications market. We unanimously recommend Nick Jones election. We believe that his skills will be enormously beneficial on the board as we support management, delivering Telstra's major transformation through the T22 strategy. I now take any questions you may have regarding Niek Jan's election. We have one question here, please. Number two.
Thank you, Mr Chairman. My name's David Jackson. Mr Van Damme, I must have misunderstood, but did you said you would move to Germany? But does that mean you're living in Germany now or you're living here? That's correct. I live in Germany. So how are you going to be travelling backwards and forwards? By plane. No. But how you're going to be living. Let's not be flippant about this is a very serious question. Are you able to spend the time and miss sufficient time to deal with Telstra matters? That's my point. Given that you're living in Germany and therefore you're not here all the time. Yeah, I can give you a background. I retired if I can call it retired as of the 1st of January, and I was already asked when it was known that I would retire. I think late October last year if I would be interested to join this board. In the beginning, I was a little bit hesitant because I respect the travel time that is involved in this job, but have given it considerable time to think about and the consideration.
I like the country very much. I know Telstra as a company, which is, I think, a very interesting company and combining that with other activities. I've said I can find the time given that I have no other board memberships to spend four to six times being in Australia or elsewhere where the board will meet. Modern communications such as face time also allows me to do this job in a way I think is proper and I have the time and experience to support the company. Thank you very much. Let me just briefly add there if I may. Obviously, Telstra is a big fish in a little pond here, but we're a small fish in the global pond and it's critical if we're going to get telecommunications expertise at this level we are going to have to go overseas to find that those resources, both in management ranks as well as in the board. But for both Roy, I know and Niek Jan we spent a lot of time explaining the time commitment that it is considerable. The question of that lady asked There we have a lot of meetings, we have committees, we have intermediate monthly board calls, etcetera.
So we went to great lengths to make sure that both external overseas board directors fully understood the commitment. They have given us that commitment and I accept that wholeheartedly, and I'm sure that should that change, they will let us know. But today we're very comfortable that they can deliver that. So as we should now any more questions? Yes. This is where I mentioned off again. Please. Thanks again Mr Chairman. Just to understand the reason why you want to appointed Mr Van Damme as the director, do you have an intention to go to Europe to get some? I just would like to find the reason why you appointed person from Germany to the Australian board. If there is something behind it or? Nope, that's fine. That's good question, that there is no intention to enter the German market or the Dutch market, I can assure you. What we are doing is trying to source the most skilled, most capable and most professional directors in the world to help Telstra go through this transformation. And Niek Jan has been through a very similar disruption in both the Dutch markets and in the German markets.
Therefore, he has firsthand experience of the challenges that Telstra is facing with T22. And that brings a tremendous level of international perspective on the challenges we face that are not available in Australia. We're only embarking on this now. Thank you Mr Chairman, you've got my support. Thank you. We appreciate it.
JOHN MULLEN:
No more questions? Good, thank you. As indicated in the notice of meeting, I tend to vote all available proxies on this item as well in favour of Niek Jan's election, so please complete your vote form now for item 3c. Good. So I think I know hand over to you, Peter. Yeah? (INAUDIBLE). Yup. I don't have it on. Oh yes. Sorry. Sorry to slip up. Over to you.
PETER HEARL:
Well, good morning. Hello, fellow shareholders. Right now, I wish I was sitting out where you are because it'll be a few yards closer to the bathroom. That said, it's my pleasure to be able to present to you our remuneration report for 2018 financial year. Our remuneration report details the remuneration framework and outcomes for directors, the CEO and certain senior executives for the 2018 financial year. Through our remuneration report, we seek to enable you, our shareholders, to understand the links between our strategy, our business performance and remuneration outcomes. In preparing this year's report, we've built on last year's report and further enhanced the transparency of our reporting. In particular, we've provided more detail on the targets set by the board, which drive variable remuneration outcomes and our performance against them. Last week, the chairman also provided a letter to shareholders outlining in even greater detail the background to the 2018 Executive Variable Remuneration Plan, or EVP for short its outcomes and the targets for our 2019 plan.
Our disclosure of targets and outcomes is at the leading edge of ASX 20 companies. No other ASX 20 company provides the level of transparency for future annual variable targets, as we've provided in our shareholder letter. Further to the comments, the chairman has already made on remuneration in his opening remarks, I will focus on CEO and senior executive remuneration for the past year. The two components of remuneration for the CEO and senior executives are fixed remuneration and variable remuneration. Each year, we'll review CEO and executive fixed remuneration in light of the company's remuneration budget, each executive's individual performance, their specific accountabilities and their remuneration relative to comparable roles in the ASX 20. The CEO received a modest 2.8% increase to his fixed remuneration, effective the 1st of October 2017. It's important to note that his fixed remuneration had not changed since he was appointed CEO in May 2015. So this equates to a less than one per cent fixed remuneration pay rise per year since then.
With respect to variable remuneration, there are two important aspects I'd like to highlight this morning. I should say this afternoon, in relation to the 2018 financial year. The first is the alignment between our remuneration structure and outcomes relative to both company performance and shareholder value. The second is the board's exercise of significant restraint in determining the outcome under the EVP. At its sole discretion, your board reduced the EVP outcome by 30% after taking account of some critical issues, including your shareholder experience over the 2018 financial year. As I explained at last year's meeting, the 2018 financial year saw the introduction of the then-new EVP. This plan replaced our previous more traditional short term and long term incentive plans. As the chairman has highlighted, our remuneration structure is designed to tie executive financial rewards to the success of our strategy and shareholder outcomes. The EVP is fundamental in delivering against these objectives by combining both short and long term performance assessments under the 2018 financial year plan.
The amount executives can receive is dependent on whether Telstra achieves particular financial and customer targets set by the board and their individual performance. 65% of the award opportunity is delivered over the longer term through the use of equity, with a portion vesting over two years and another larger portion subject to Telstra's share price performance compared to other ASX 100 companies commonly referred to as relative total shareholder return, or RTSR, and that's measured over a four or five year period. And finally, the board maintains absolute discretion to ensure remuneration outcomes for executives are appropriate in the context of Telstra's performance, our customers' experience and our shareholders' expectations. Taking all these factors into account in respect of the 2018 financial year, the board reduced the EVP outcome for executives by 30%, which I will now explain in a bit more detail. Telstra's full-year results for the 2018 Financial year were in line with guidance, delivering solid results in the context of a very challenging market, including dramatic technological change and vastly increased competitive intensity.
Two of the three financial measures of the plan achieved or exceeded their target, and one of the two customer experience measures exceeded its target. Together with the progress made in defining our T22 strategy, the overall performance demonstrated reasonable delivery against our plan. This produced an initial outcome of 47% of the maximum payout opportunity under the plan, other than for the Telstra wholesale executive who was subject to a different set of targets for regulatory reasons, which was explained in our report. However, the board recognised that your shareholder experience was less than satisfactory, far less than satisfactory. After taking account of the decline in total shareholder returns over the 2018 financial year, coupled with the fact that Telstra underperformed against the ASX market and relevant peers in that respect. In light of these issues, and as I've already said, the board exercised its sole discretion and reduced the planned outcomes for the CEO and group executives for the year by 30%.
As a result, the CEO and group executives other than Telstra Wholesale received 33% of their maximum opportunity under the plan. For the CEO, this adjustment meant that its outcome under the plan was reduced by $1.35 million for the 2018 financial year versus the prior year. The actual pay and benefits the CEO and senior executives received or became entitled to in the 2018 financial year were also significantly lower compared with last year. For the CEO, his remuneration was 28% lower in comparison to the last year and has almost halved in comparison to two years ago. In addition, the CEO and senior executives did not receive any awards under the long term incentive plan for the 2016 financial year, which was tested on June 30th, 2018, as the minimum performance targets were not met. Another component of our framework is our executive share ownership policy. This requires our CEO and senior executives to hold Telstra shares to the value of 100 per cent of their fixed remuneration within five years of their appointment to the group executive level.
Andy continues to hold in excess of 100 per cent of his fixed remuneration in Telstra shares, so he too shares your experience as a shareholder. Turning now to non-executive director remuneration, non-executive directors are remunerated with set fees and do not receive any performance-based pay. This enables non-executive directors to maintain independence and impartiality when making decisions affecting the future direction of the company. Other than the change to remuneration committee fees which took effect from July 1st last year, 2017, in which we explained last year there were no changes to the board or other committee fees during the year. The chairman's board fee has not changed since 2014, and the non-executive director base fee has not changed since 2012. To align the interests of non-executive directors with those of shareholders, we have in place a director ownership policy. In August of 2018 to further strengthen the alignment of our interests, the board increased the minimum shareholding requirement to 100% of the value of the annual non-executive director base fees.
And John has already spoken to this. These shares must be acquired within five years of appointment, so we also share your experience as a shareholder. As we've emphasized this morning, our executive remuneration structure is designed to align remuneration outcomes with company performance and long term shareholder value creation. We believe the final board determined remuneration outcomes for the CEO and senior executives for the 2018 financial year are totally consistent with this and the board, other than Mr Penn, has recommended shareholders vote in favour of the adoption of the remuneration report. We recognise, however, that despite the action by the board to reduce executive remuneration outcomes for 2018, a number of you are disappointed with this year's remuneration outcome. As the chairman as mentioned already, we will receive a first strike on our remuneration report today based on proxy and indirect voting position, which is now being shown on the slide behind me. In both our 2018 remuneration report and the Chairman's shareholder letter, we've provided information about our EVP for 2019, including why we believe shareholder interests are reflected in the plan, we have set out for management and the targets which underpin their variable pay opportunity, which are focused on the delivery of our ambitious and very bold Telstra 2022 strategy.
Following this meeting, we will continue to engage with our shareholders and other stakeholders and listen to your feedback. We will consider opportunities to further enhance our reward structure. We will also continue to focus on the alignment of your interests with the interests of our executives and the generation of long term shareholder value. Ladies and gentlemen, that concludes my formal presentation. I'll now be happy to take any questions you may have on item four. We have... Do you have a question? Microphone one.
SPEAKER:
Sorry, Mr Chairman, I think the remuneration has gone in the right direction as far as I'm concerned, as a shareholder. Certainly, where we're making great strides, I believe there was a comment earlier on from the chairman that we need to have cultural change as to how we remunerate our executives. And I guess if you working on that, that's a good thing. But talking about cultural change, I've also had a 25% reduction in my earnings from Telstra this year and probably close to 50% in my capital value. So I share the pain of Mr Penn with his 25% reduction. But there are little things that seem to go unnoticed in these reports, and Telstra is not as bad as many of the companies that I have shares in. There's an item called non-monetary benefits that refers to the remuneration of non-executive directors, and I just find it a little disingenuous that, for example, the chairman who earns $755,000 for his participation, also gets $6000 worth of Telstra product so that he can familiarise himself with the products of the company that he chairs, and that has gone up 20% since last year.
I really just find it unacceptable that he should accept. It's only a small and try to mount, but it's indicative of a culture where people reading these things say, Why on earth should the chairman get an additional $6,000 worth of product that the rest of us have to pay for? Some of the others are less than that, but there are a number of them that are enjoying the benefits of Telstra products.
PETER HEARL:
Can I just respond and then I'll be happy to let John respond. One of the things, the reasons behind this is that our board are heavily engaged, highly engaged in testing products and in the interests of total transparency these products are given to us to trial and test, and consequently, we've declared them in our remuneration report. That's why it's an interest of total transparency that they're in there, they're given not as a benefit, they're actually given by and large to trial and test new products. And John, I don't know whether you want to add anything to that. Thank you for your question. Oh, we've got a question on Microphone three.
SPEAKER:
I'd like to introduce John Hillman from (UNKNOWN).
PETER HEARL:
Morning, John. Afternoon, John, I should say.
JOHN:
Morning share. Morning board. And morning shareholders. I should first say, given some of the speakers earlier today from unions i.e. representing employees as well as shareholders. Of course, those employees that I'm not a union representative. In fact, I'm probably at the other end of the scale. In a sense, I have been for many years during my working life as a human resources manager, and I'm well aware that and I'm sure the board and directors are two that employees are our greatest asset, without a doubt. So my question really is fairly similar to the last speaker in some ways. Mr Chairman, is it not a... not just not a good look? Is it not a very bad look when the CEO gets a 2.8% increase on his fixed remuneration? I think 6,000 was the calculation, and you're quite possibly heading for very, very disruptive industrial relations issues, because you knocked back a 1.5%, I think it was, I wasn't paying full attention. Proposed increase by the union. Now, if that was a ridiculous amount and maybe 2.8%, I'll say a ridiculous amount, which happens to be exactly that increase for the CEO.
If that was a silly amount, a high amount three, four, five per cent, I could well and truly understand as a former HR manager. OK, guys, we've got to have this IR dispute. But for heaven's sake, it's not only a bad look, it's probably, don't you think, bad business to head towards industrial disruption because you don't want to pay an increase which simply matches inflation? You know, we've got a comment earlier in your report. Sorry, I'm addressing the chair, but you as the chair while you're standing and one of the quotes you said in delivering your report was that the remuneration changes that are recommended were because minimum performance targets were not met. Now, these are bonuses. If a minimum performance target is not met, I would think that bonuses should not apply. Full stop. I'd be interested in your comments on that. But unfortunately, because of these and the other things that I've been reading and listening to, I have to this time vote against the remuneration report.
Thank you.
PETER HEARL:
Oh, thank you for your comments and questions. A couple of things. The 2.8% increase that Andy received, as I said in my remarks, is spread over three and a half years, so it equates to less than one per cent per annum. Secondly, on the enterprise bargain agreement that you spoke to, we have offered the 1.5% increase and the unions have rejected that. Despite that, our offer was for a 1.5% per annum increase for three years. We have actually paid that first 1.5%. As an act of good faith while we continue to negotiate with the unions. And I think you've also got to take into account that the fixed remuneration increase of 1.5% which the union rejected in their vote, but have, you know, accepted in terms of actual pay from October the 1st is just but one part of a total remuneration package. And the other thing, and I'll explain a little bit more about that in a minute. But the other point to note is that the fixed pay increase for senior leaders in this business on a go-forward basis will be no higher than that, which is contained in our new enterprise bargain agreement.
The vast majority of our people, including up to the front line, receive incentive pay under short term incentives and sales plans. And that's an important part of our overall remuneration package. In financial year 18, those lower-level incentive plan sales plans paid out to the tune of about 90% of target. The offer that's on the table also includes the continuation of the very attractive terms and conditions which will be protected over the next three years. They include up to an 80-week redundancy cap and appropriate rate of accruals, the Telstra additional day of paid leave, the ability to request flexible work arrangements, and our leading-edge 36.75-hour working week. So I think the point I'd make is that the 1.5% that we've paid, we've offered, we continue to negotiate in good faith needs to be taken in the context of the total packages that our employees enjoy. Is there a... Oh, sorry, four.
SPEAKER:
Chairman, I would like to introduce Noel Levi.
NOEL LEVI:
Mr Chairman, I've just got a few comments. First of all, that remuneration. It's too generous. The second thing is it's very complicated this new scheme. It's... I looked at these long term incentives for a number of years and different companies, and this one is just difficult. It's got 21 pages on the remuneration and that indicates, of course, a lot about how simple it is or how difficult it is. The other thing is the actual remuneration from the year just gone that was achieved from customer experience, which is not something which is very objective. It's a subjective thing, I imagine. And the other thing was programming for the T22 strategy, which is again, not quantitative as far as we are concerned. And then they get quite a large amount of their benefits. Shareholders don't, so I think that part of this new scheme, whatever it's called, needs to be changed so it becomes more quantitative so we can work out what's actually been tested. The other thing then what the chief executive's remuneration... I had my calculator, I thought it wasn't working, but based on their fixed annual remuneration, that's the equivalent of 45,000 a week.
And then they have said on their remuneration and they can get up to 200% of their fixed annual remuneration. So that would been another 90,000 in my calculations. And that was disappointing. But then when I turned over the page, they said they could reach 400%. I didn't bother calculating how much that would be. These remuneration or this remuneration package is not acceptable, especially in the manner in which shareholders are suffering. I realized the environment you're working in, it's very difficult, but you can't be getting these sort of generous potential handouts, just hoping that you will succeed. So I'm completely... The other reason I came to the meeting earlier this morning, but went to another meeting cochlea, which is quite a good company, their chief executive officer there have to take 30% of options, and that's the minimum. Now the CEO for next year, you know what he's taking? 80% as options. That indicates to me the CEO thinks the share price is going to be up and when these are serviced and he's paying for the shares paying $200, over $200 for them.
So I can't see why you can't have options again.
PETER HEARL:
Oh, thank you for your comments and the few questions in there. The first thing I'd say is that nothing in our remuneration report or our remuneration activity could ever be connoted as a handout. That our executives have to earn every cent of their payout. You can argue and debate the construct of the plan, but every one of these dimensions of the executive variable plan is earned. Specifically, the customer experience metric is not a soft metric, it's a hard metric that is measured through and audited every year. I totally agree with your comment about the complexity in our remuneration report. 21 pages is way too long. Believe you, me. I'd love to have it as one or two pages and we one of our goals is to dramatically simplify the reporting of remuneration and perhaps the only way we can get it that is to simplify our remuneration structure. But we're not going to take a knee jerk reaction to what changes we may or may not need to make we'll take everybody's feedback and input, including feedback from today's meeting, and continue to work on it.
But at the end of the day, we compete in a global market and we need to attract, retain the best and brightest people in this industry. So I appreciate your comments and thank you. Microphone two.
SPEAKER:
Hi chairman, I have Ian Graves from Sydney.
IAN GRAVES:
Mr. Chairman, I'm representing the Australian Shareholders Association as a proxy holder. But one question I do have is that although you have explained how Mr Penn had had his bonuses reduced. But why in a poor financially and culturally year is the CEO awarded a bonus that is equivalent to more than 100% of his fixed annual remuneration?
PETER HEARL:
Well, the answer is quite simple is that we have a plan, we held our executives accountable for it. We had a normal outcome of 47% of the maximum payout and we took it a decision as a board to reduce that amount by 30%, which was broadly in line with the reduction in shareholder value over the same time frame. And that's the math of it.
IAN GRAVES:
But doesn't that show that there's something wrong with the metric itself and the multiples?
PETER HEARL:
We don't believe so. We went into financial year 18, socializing our plan in great detail with stakeholders and shareholders, and we got almost universal support for the program going into the year. 12 months later, those same people, those same proxies and shareholders have done a 180 and voted against it. So we need to take on board that feedback and we need to consider it going forward. But we did what we thought was the right thing to do with the nominal outcome and reduce it by 30%, which, as I said, was broadly in line with the experience of you, our shareholders.
IAN GRAVES:
Well, can I ask then that you could take on board this comment that you will review the multiples to make sure that they're better in line with societal expectations?
PETER HEARL:
We'll certainly be taking all feedback and considering it.
IAN GRAVES:
Thank you. PETER HEARL: Thank you. It doesn't appear to be any more questions, so I will hand the podium back to the chair. Thank you.
JOHN MULLEN:
Thanks, Peter. Thank you, shareholders. We have now finalized the discussion of Item four and the proxy indirect voting position on the item, which was displayed earlier is, I think, being shown behind me again, as indicated in the notice of meeting, I intend to vote all of our proxies in favour of item four. So, please now complete your vote on this item. Shareholders, you'll be pleased to know that concludes our discussion of all the items on today's agenda. If you haven't already done so, please complete your voting. Attendants are carrying ballot boxes throughout the room, and ballot boxes are also located near the exits. The poll will remain open for a further 15 minutes to enable any last shareholders to cast their votes and the results of the poll will be available later today and can be obtained by visiting the ASX or our website. All items of business having been considered, I now declare the meeting closed, subject to finalization of the poll. Thanks to all those who viewed the AGM online.
Thanks also very much to all of you for your attendance and your patience today, and I invite you to join us for lunch or what's left of it in the foyer. Thank you.
The 2017 AGM of Telstra Corporation Limited was held on Tuesday 17 October 2017 at the Melbourne Convention and Exhibition Centre, 1 Convention Centre Place, South Wharf VIC.
2017 AGM recording
Video content description
Recording of the 2017 AGM held on Tuesday 17 October 2017 at the Melbourne Convention and Exhibition Centre.
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PAULINE:
My name is Pauline (UNKNOWN), a Yorta Yorta woman with bloodlines connecting me to South Central Victoria, the home of five Kulin Nations. This acknowledgement of country is an important act of cultural respect, and I take this moment to honour the Elders who have lived and died for their culture. Elders who continue to carry knowledge and practice culture, articulating who they are in their own words and by their own definition. Standing right here, I acknowledge the Boonwurrung, the river Birrarung, Woiwurrung, Wathaurong, Djadjawurrung, and my great, great grandparents country, Taungurung. I acknowledge that I live and benefit in this country called Naarm, Melbourne. I'm kept nourished and connected and grounded. And for this, I'm grateful. Working within Telstra gives me the opportunity to embed cultural knowledge and listen for areas where we can transform together. We can drive change, embedding cultural knowledge. This is vital to who we are and how we do business. Because Telstra's business connects so many people in the far corners of this country, including our international relationships.
We are mindful that who we are and what we do, can have a ripple effect, creating impactful, positive change in people's lives. It's a lifetime commitment to look after our humanity, and we can't be complacent. We owe it to ourselves and to each other. I'm proud to say I'm of the oldest living culture in the world spanning 65,000 years. And you can imagine we've seen a few highs and we've seen a few lows, and we've taken a few risks. But we're still here. I guarantee we'll see a few more highs, we'll see a few more lows, and undoubtedly take a few more risks. That's not only a constant for us. It's a universal theme throughout human societies. I would also like to take this opportunity to extend this acknowledgment to all of you here today. And lastly, in his own words, humanitarian award winner Gunditjmara man Archie Roach says, Be careful when you walk through this land. A child was born here. Thank you and have a great day. (VIDEO STARTS) It's a magical time to be alive. Things we never imagined possible in our part of our everyday lives, cars that drive themselves, farms that run themselves, in cities that think for themselves.
To many, it's daunting, to others, it's the greatest opportunity of our times. That's us. We are technology optimists. We believe in the power of technology to help transform any business of any size in any location. Now, we have reimagined ourselves as a world-class technology company that empowers people to connect. Our network has always been exceptional. Now we're making it smarter, more intuitive, more attentive, so we can become the makers of the magic. Together, we can make billions of devices talk to one another. We can make our cities run like clockwork. Help our architects walk through buildings before they're built. Let our farmers know when it's time to water and help our front line stay safe. Together, we can help secure your most valuable information, and expand your business from Sydney to San Fran. And less time that takes to fly there. There is no one better placed to be Australia's world-class technology company. We have the history, the partnerships, and the resources.
Together, we will be the magicians. And together we will thrive. (VIDEO ENDS)
JOHN MULLEN:
Thank you, Pauline. Thank you very much for that acknowledgement of country, earlier. Good morning, ladies and gentlemen. My name is John Mullen. It's my great privilege to be the chairman of your company. On behalf of my fellow directors, it's a pleasure to welcome you all here this morning. And I also extend a very warm welcome to the many shareholders joining us today online. We have a quorum, and I would therefore like to declare the meeting now open. And notice of the meeting was distributed earlier, setting out the business and resolutions to be considered at today's meeting, and I will take that notice as read. There are five items of business on today's agenda. Firstly, presentations by myself, and the Chief Executive Officer, Andrew Penn. Secondly, a discussion of our 2017 financial statements and reports. Consideration of the re-election of directors, consideration of the proposed grant of performance rights and restricted shares to the CEO. And finally, consideration of the remuneration report.
Voting on items three to five will be conducted by a poll, and that poll is now open. If for any reason, though, you wish to leave the meeting early, you can still vote by completing your voting card and placing it in one of the ballot boxes near the exits. For those shareholders who have registered to use the link vote app, it is also now open for you to lodge your votes electronically if you so wish. Let me now introduce my colleagues here with me today. So, with me here on the stage, Andrew Penn, our Chief Executive Officer, Damien Coleman, our Company Secretary, Warwick Bray, Chief Financial Officer, and my fellow members of the board. Can I also introduce Andrew Price from our auditors, Ernst & Young? Andrew is available to answer any questions that you may have on the conduct of the audit, or on the auditor's report itself. So, let me start by making some comments about Telstra's performance in the 2017 financial year. 2017 was a year of solid progress for the company. It was a year where we delivered our guidance to the market.
We grew income, earnings and profit on a continuing all like for like basis. On a reported basis from continuing operations, total revenue increased by 4.3% to 28.2 billion, and EBITDA was up 2% to 10.7 billion. And one of the most important measures for any company, though, is that it continues to attract new customers. And this year, Telstra added 218,000 new retail mobile services, and 132,000 new retail broadband services. In addition, we achieved 676,000 new NBN connections. Now, these results show that we are very much holding our own in what is an increasingly competitive and rapidly changing marketplace. This year, we also continued our important work to continue to reduce costs and boost productivity. We were able to reduce our underlying fixed costs by $244 million, and we remain on track to achieve at least 1.5 billion of productivity savings by financial year 22. In short, we still have a long way to go, but we are making good progress. And this year, the board announced the fully franked final dividend of 15.5 cents per share, bringing the total dividend for the financial year to 31 cents per share.
So, that combined with the 1.5 billion on market and off-market share buybacks that we completed during the year, means that we returned $5.2 billion to shareholders in the 2017 financial year. And that level of return was one of the highest made by an ASX listed company. Now, shareholders would also be aware, though, that this year we announced the change to our dividend policy. Because I know that this is so important to many of you, I would like to comment on that in some detail. In understanding why we took this decision, it's firstly really important to understand the context. Telstra today is a strong, well-run, and well-performing company. But like many companies around the world, we're also facing unprecedented change, and challenge. Our results this year were achieved in the most competitive market environment that I have seen in nearly 10 years as a Telstra director. For Telstra, those challenges have been driven by a number of factors, including intense competition in both fixed and mobile marketplaces, an exponential rate of change in technology and connectivity, and unprecedented growth and capacity demand.
A rapid acceleration in the rollout of the NBN, which will ultimately cost Telstra some $3 billion in earnings before interest, taxes, depreciation. And the announcement that a fourth mobile network will shortly be launched in Australia. Those factors all underpin the board's decision this year to change our dividend policy. And I'm going to step through three of them carefully to help shareholders better understand why we took the difficult decision that we did, and why it is absolutely the right decision for the company. So, the first challenge that we're facing is the exponential rate of change in technology and the growing demand for connectivity. In Australia and around the world, digital technologies are now a primary engine for economic growth, and an increasingly central feature of most of our lives, and a catalyst for incredible change. I don't think there's any precedent for the scale of change that we're seeing, all of which is driven by the extraordinary pace of technological innovation.
No business at all is immune from direct or indirect impacts, and many are being disrupted. And disruption, of course, occurs where someone finds a better, quicker, easier or cheaper way of delivering a service or product. And that's what people are continually trying to do in every industry. And if we do not stay ahead in our industry, then it will unquestionably also be done to us too. 20 or 30 years ago, people thought little of having to wait a month or two for their phone to be connected. And those days are over. We're in the age of Amazon, the age of Uber, the age of Netflix. If you can't go online and get a product the same day, you simply go to another supplier. That's the type of fast, streamlined, easy experience we aspire to offer our customers. We want to eliminate frustrating and time-wasting visits to stores, the emails and telephone calls backwards and forwards, the delays and complications and frustrations. We receive around 135,000 customer service calls per day. And when I say we're committed to delivering a brilliant customer experience, we're not talking about reducing 135,000 calls to 100,000 calls.
We're talking about eliminating the need for as many calls as we possibly can every single one if that is possible. We're talking about being able to buy and activate a new phone within a few hours over the internet. We're talking about making Telstra a pleasure to deal with 100% of the time and never a frustration. Now, that is our aspiration. That is the sort of company we must become if we are to succeed in the future. We are making substantial progress towards that, but it is not an easy challenge, and we know that we still have a very long way to go. Now, in addition, these industry changes are also fundamentally altering the economics of the telecommunications sector. User prices have plummeted, but the average mobile subscriber price per megabyte falling 99%, between 2005 and 2013. And this is continuing to trend down as customers demand more value. At the same time, data speeds have skyrocketed, and today's 4G networks are 12,000 times faster at transmitting data than 2G was. And the next generation 5G, the technology, which Telstra will begin trialling next year, will be another 100 times faster, than 4G again.
All the while, demand is increasing dramatically. Last year, over 5,000 petabytes of data trebled over Telstra's fixed and mobile networks each day, 40% more than the previous year. And therefore, the volume of data that we carry is effectively doubling every 18 months to two years, where customers are expecting to pay less and less. I really cannot think of many other large established businesses in Australia, where usage of core products and services is increasing at such a pace. The second major challenge Telstra is facing is the rapidly accelerating rollout of the National Broadband Network. Shareholders will recall, the NBN is expected to have around a $3 billion negative impact on our earnings when it is fully rolled out. And put that number into context, that's the equivalent to the annual earnings of a major ASX company. The size of origin energy, or a CSL, or even a Qantas. It can take decades to build a business that size. But we don't have decades. The NBN rollout began to gather pace in 2013.
And over the past four years, about 30% of homes have been connected. But while it's taken four years to connect 30%, the NBN is expected to reach 85% connection in only the next two years. And that means in just two years, we expect to be facing the loss of 85% of the $3 billion of our earnings, and that is obviously very significant. Another additional fact that shareholders may not be aware of is that there are now 180 registered resellers of the NBN, of which Telstra is just one. So, competition levels have also increased exponentially. We currently enjoy a 52% market share, excluding satellite. But this gives you an indication of just how competitive the market has become and how profoundly the landscape is changing. The third challenge that Telstra is facing is the imminent entry of a fourth mobile network operator into the Australian market. TPG is and will be a formidable competitor, and that, there is absolutely no doubt. We do not underestimate the impact that this may have the effect on pricing, nor the fact that we must and most certainly will continue to invest heavily to maintain our mobile network superiority.
And continue to improve the experience that we offer our customers. To reiterate then, in an environment where competitive pressures are already intense, Telstra also faces unprecedented growth in capacity demand, an acceleration in the rollout of the NBN, with its implications on our earnings, and the imminent launch of a fourth mobile network in Australia. Any one of these issues on its own would be a significant challenge to any company, but all of them together represent a really unique challenge. That, then, is the context for the important changes that we have made to our dividend policy this year. So, with that background, let me just explain now, the new dividend policy itself. So, our new policy moves us away from a historical practice of paying out almost 100% of net profits, ie, returning everything that we earn to shareholders and not giving anything back for reserves against the future or for new growth opportunities. From the 2018 financial year, we will adopt an ordinary dividend payout ratio of 70 to 90% of underlying earnings, which is in line with global peers and is in line with other large local companies.
In addition to the ordinary dividend, we intend to return in the order of 75% of the net one-off NBN receipts to shareholders over time, through fully franked special dividends. These are the one-off receipts relating to the transition of our customers to the NBN. With the implementation of this new dividend policy, we expect the total dividend in fiscal year 18 to be 22 cents per share, fully franked. Then, while we cannot predict earnings out into the future, as a consequence of our new dividend policy in FY 18, the dividend has been reduced to a level where we would be disappointed if we were not able to maintain or even again, increase the total dividend over time as we seek to grow underlying earnings and the special dividends decline. This, of course, will depend on economic conditions at the time and on our ability to grow underlying earnings in order to support the ordinary dividend. Any decision about future dividends will, of course, always be contingent on our underlying earnings and will be made in accordance with our capital management framework.
Now, I'd like to say that changing the dividend policy was one of the toughest decisions the board has ever had to make. We spent many long hours debating it, many sleepless nights working through it in our minds, knowing full well, the impact that it would have on shareholders, and trying to arrive at the best balance between providing consistent shareholder returns and the strategic direction that the company must take. To have continued on the same course would also have put at real risk, or other great strength, which is our balance sheet and A bank credit rating. We believe it is absolutely fundamental to maintain our balance sheet strength in this challenging environment, so as to manage the business efficiently, effectively and invest for growth. And we must do that because of our potential competitors of the future. And not just the traditional Optus and Vodafone, but are also likely to be dynamic newer companies like Amazon, which does not pay a dividend at all, and which reinvest an evergreen cash flow in cheaper and better products.
Lastly, despite the dividend and policy change, I'd like to point out that Telstra's payout ratio and yields still remain at the higher end of ASX companies. And because we absolutely understand and appreciate the impact this policy change has had on our shareholders, we took the decision to maintain the 31 cent dividend for this full year and give advance warning of the changes, rather than just cutting the dividend overnight, as is usually the case. So, I don't like it. I know that you don't like it. But the world has changed, and it would have been irresponsible of the board not to take this tough but correct decision for the future. And it is then the future, in particular Telstra's future growth opportunities I'd now likely to focus on. I've had shareholders ask, why can't we just go out and find growth businesses to replace the $3 billion in earnings that we're losing because of the NBN, so we can maintain the dividend at previous levels? Well, firstly, that's very easy to say, and very hard to do.
As I mentioned earlier, the earnings that we are losing are more than very few ASX companies achieve in total, even after decades of existence. And to expect that we can suddenly just go out and create another $3 billion EBITDA business overnight is simply just not realistic. Secondly, I do not think that shareholders would appreciate our going out and spending billions of dollars to buy a business or businesses that would replace the lost earnings through acquisition just for the sake of making up the numbers. This would be very expensive. This could take us away from our core competencies, and a whole new areas of risk. And this could jeopardise the strength of our balance sheet. Instead, therefore, our strategy to grow the business, position it to meet the challenges and opportunities ahead, and to create long term shareholder value, is built on three strong pillars. Firstly, delivering much better customer experiences than we do now. Secondly, driving further value and growth from our core business.
And lastly, building new growth businesses close to the core. Now, this may sound a bit boring, but it is not. It is prudent, is well thought through, and it best leverages our strengths. Delivering brilliant customer experiences means offering customers simple, intuitive and increasingly digital ways to interact with us. And while our customer experience scores are excellent with big enterprise customers, we know that we fall down too often with consumers. And that's significant because one way or another, virtually everyone in Australia is a Telstra customer, whether directly as Telstra mobile user, fixed or broadband customer or indirectly through our wholesale relationships with other providers. And as I said, just now, despite our world-class networks and coverage, too many customers will have had a bad experience with Telstra or will know someone who's had a bad experience with Telstra. This has to be once and for all eliminated, and we are doing everything that we possibly can, to fix it.
If we do do this well, we will win more market share from our competitors, which will mean more revenue and more earnings should follow. Then driving value and growth from the core is about leveraging our strengths and networks and connectivity and making the best use of our skills, expertise and experience to deliver additional value. And if we do this well, our customers will be willing to pay more for better and better products and services. And lastly, building new growth businesses close to the core recognizes the opportunities that we have to expand with new products and new services in new markets. And if we do this well, we will increase our revenue and earnings from new but related areas and improve the retention of existing customers. Everywhere we look, there are these growth opportunities. 5G is coming with a huge range of new and upgraded opportunities. The Internet of Things, where there are nearly one billion intelligent sensors today in Australia and the market is forecast to be worth $5 billion in five years.
Driverless cars, drones, connected homes, artificial intelligence, machine learning, smart cities, smart agriculture and many, many more. And these are the opportunities that represent our future. But of course, as fast as these new technologies are developing, it's still going to take a few years before they are scale businesses that can replace the old legacy businesses that we are losing. So despite today's challenges, we are in a strong position as we look to grow our business. We have one of the best overall management teams in the industry and certainly the best that I have seen in my time on the board. We have an incredible mobiles business, which is, of course, built around the best network in the land. We deliver great earnings, have a strong market share and are counted as a world leader in our industry. We are the largest reseller of the NBN. Our network applications and services businesses grew income this year by 30% and has become a $3.3 billion business from a standing start just five years ago.
Our productivity program to a quarter of a billion dollars of underlying core fixed cost out of the business this year ahead of our target and is on track to deliver 1.5 billion of annual savings. And we continue to make targeted acquisitions in exciting new areas like cloud, workplace mobility, Internet of Things and Cyber Security. These new capabilities leverage our already world-class networks and will help us grow in the markets of the future. One thing we think is critically important, therefore, is that we do not allow a preoccupation with replacing the earnings lost through the NBN to be the defining point in our strategy. Our strategy is about doing what we do now much better to drive value from the businesses that we have, rather than starting from the premise of having to go out and replace the lost earnings overnight. But another way we're not going to do anything foolish just to plug that $3 billion gap. It is critical that Telstra makes bold choices and we will do that. But we have no intention of risking the company.
At the macro level, if we achieved a digital transformation of our company and deliver as good a customer experience as the new first-generation businesses that I've mentioned earlier, then we will transform our customer acquisition and customer retention. We will protect our balance sheet and we will build market share. And over time, these new markets will achieve scale and will be a major player in most of them. All of this, of course, will then lead to materially improved financial outcomes from our core business, as well as growth in the closely related markets of the future. Which should always going to be a better road to follow than starting new businesses and markets we do not know so well. Telstra remains a fantastic company with great people, with great assets and great technologies, and we have many opportunities to grow without taking excessive risk. In conclusion, then 2017 was a year of significant progress for Telstra, but also a year of significant change and challenge, and whether we like it or not, we have to accept that the world around us has changed dramatically and Telstra is having to change just as dramatically as well.
However, over our long history, we've actually used periods of change in technology and challenges in industry structure to grow a company and to move forward. Changing our dividend policy is just one change among the many that we will need to make as we enter the exciting new world of the future. Some we can control and some we cannot. But whatever the future brings, Telstra is an exceptional company with exceptional people and exceptional assets. There is absolutely no reason why we should not do just as well in this unknown world of the future as we have done in the past. And we continue to develop our capabilities, build our resources and make our network stronger, faster and better so we can continue to be at the cutting edge of companies delivering the promise. The digital age and as that digital age unfolds, we will be at the forefront and we will be better positioned than most of our competitors. Lastly, we will not forget who our shareholders are and the responsibility that we have to them.
We will continue to do everything that we can to deliver shareholder value through dividends, capital management, other value-enhancing activities despite the changes that are going on around us. In closing, then I really want to sincerely thank Andy Penn, the senior executives and the entire 32,000 strong Telstra team for their efforts in delivering the many achievements that I have described this morning. They have one of the most difficult tasks in business today, and I think they are doing a fine job. I'd also like to thank my board colleagues for their support and their strategic guidance. All of us feel very privileged to lead this great company. And lastly, I would like to thank you, our shareholders for your patience and support. With that, I'll now hand over to your Chief Executive Officer Andrew Penn to comment on our operations for the year in more detail. Thank you.
ANDREW PENN:
Well, thank you very much, chairman, and good morning, everybody. Can I also add my thanks to Pauline for that wonderful welcome to country and welcome here today? We value this opportunity to meet with you as shareholders to keep you across what we believe is a very exciting future for our company. To hear your thoughts and to address your questions, I would like to cover four things in my presentation this morning. Firstly, I will provide you with an overview of how your company performed in the 2017 financial year. Secondly, I will make some comments on the rollout of the NBN with a particular focus on what I feel are the critically important considerations and priorities for customers. Thirdly, I will comment on the progress that we are making in transforming your company to compete in this increasingly digital world. And finally, I will confirm guidance for the 2018 financial year. Turning then firstly to the financial results for 2017. 2017 was a strong year, and we are pleased to have delivered against their guidance and strategy in the context of a highly competitive and increasingly dynamic market.
Total income on a reported and guidance basis was up 4.3% to 28.2 billion dollars. Excluding the regulatory changes to mobile terminating access service or MTAS and the final access determination, FAD. Total income was up 5.9%. EBITDA was up 2% to 10.7 billion dollars on a reported basis and was up 4.5% to 11.2 billion dollars on a guidance basis. On a guidance basis and excluding the regulatory changes that I mentioned to MTAS and FAD, EBITDA was up 5%. Net profit after tax from continuing operations was up 1.1% to $3.9 billion. Earnings per share was up 2.8 per cent to 32.5 cents per share, and the board declared a final dividend of 15.5 cents per share, which was paid in September. This brought the total dividend for the year to 31 cents per share. Our number one objective, though throughout the year, was to improve the experience we provide to our customers. And while I know that there is still more that we need to do, I am pleased that we are making progress. Both strategic and episode net promoter scores, which we use to measure customer satisfaction, improved in the second half.
Up six points and two points respectively. Our mobile business performed strongly in 2017, and we saw continued strong customer growth across all segments. New mobile services were up 219,00, including 169,000 post-paid handheld customers. Retail fixed broadband services were up 132,000, and retail bundles were up 224,000. Almost 90% of our retail fixed broadband customers are now importantly on a bundle and the proportion of those who are on an entertainment bundle, which is increasing very fast grew more than 50% and now represents one-third of customers that do take a bundle with Telstra. As you heard from the chairman, our network applications and services business grew very strongly, with income up over 30% to $3.3 billion. This was driven by major contract wins and renewals, as well as growth in NBN commercial works. Within NAS, we achieved strong performances from our cyber security products, our unified communication products and from cloud business, where in particular we saw revenue growth of more than 50%.
During the year, we reduced our underlying costs by 3.5% or 244 million, which was ahead of our target. On top of this, we improve productivity in our new businesses, where we reduce costs by a further 68 million. Given this strong performance, we have increased and accelerated our productivity plans. We now intend to deliver our previous $1 billion net productivity target one year early in 2020. And we've also increased the target overall by a further $500 million and in total, therefore, we now plan to deliver more than $1.5 billion in net productivity or net cost out by 2022. The focus of our productivity work is to deliver a better customer outcome, though. And for example, this year we've been working with our assurance partners to increase first call resolution rates and through this achieved a 4% reduction in truck rolls. This year, we also further extended our mobile network with standard 4G coverage to 99% of the population. And many sites further upgraded to the new 4G X, which gives us twice the speed, and this it now extends to 90% of the population.
Finally, we also continue to make very good progress in the NBN market and added 676,000 new NBN connections taking our NBN market share, excluding satellite to 52%. But the rollout of the NBN is projected to now scale up significantly, and it is essential that during this period that the whole industry remains focused on ensuring the customers receive the best possible experience and at an affordable price because four million homes are due to be connected in the next two years alone. In this regard, there are three areas of critical importance for our customers. Firstly, the service experience. Today, the time taken to activate customers on the NBN can be considerably longer than for traditional broadband services that we activate today. This is due to the extra complex, the extra complexity that is involved. We are working closely with the NBN to assist them in streamlining our respective processes to ensure this becomes a more seamless experience for all customers. Secondly, not all customers are receiving the speeds that they were either anticipating or hoping for.
Now, this can be for a number of reasons. Critically available speeds are first determined by the underlying technology that NBN chooses to roll out. Whether this is fibre, whether it is HFC cable, whether it is ADSL and therefore copper or indeed other forms of technology. This choice has a material impact on the maximum speed ultimately, that will be available to customers, and it is a function of the rollout that the NBN determines. Once the maximum speed available, though, is determined by NBN's choice of technology in their area, the customer then chooses the appropriate plan from their retail service provider like Telstra. We call this person the RSP. The RSP must then make sure that they purchase the right amount of capacity from NBN, and this capacity is delivered through something known as CVCs. Now, the ACCC has recently issued guidelines to all our RSPs to ensure that they purchase sufficient CVCs, such that customers can expect that at least 60% of the maximum speed in their plan is available during the peak times of 7 to 10 pm.
At Telstra, our position has always been to provide the best possible network experience on the NBN. That is why we continually monitor the traffic and adjust our CVCs to meet demand. In fact, we installed robotic testers in our network some time ago to measure customer speeds to ensure that we are buying enough CVCs. There are, of course, other factors that can affect the speed that customer's experience. For example, in-home wiring and Wi-Fi configuration. Customers can find lots of tips on our website on how to optimise their broadband experience at home. We're also continuing to develop products and tools to help our customers. These include the latest gateways or modems with superior Wi-Fi performance. The Telstra home dashboard, which helps customers diagnose their own issues in the home. And we have an upcoming Wi-Fi solution that will help detect and automate, automatically optimise Wi-Fi performance for customers in the home. All of these, combined with Telstra's platinum service, are targeted to deliver the best possible experience for customers in an NBN world.
And if customers are still not experiencing what they anticipated, it is quite likely to be a fault in the NBN network or some other factor in which case they should contact us so that we can investigate and advise the NBN accordingly. The third and final factor affecting customers in the migration to NBN is affordability due to the significant costs associated with the rollout of the NBN, wholesale broadband prices in Australia from NBN are increasing by almost 100 per cent in the migration. This will increase by a further 20 to 25% over the next three to four years under NBN's plans. Now, NBN are currently conducting a review of its prices and it will be important in the long term that wholesale prices are set at a level which ensures affordability of broadband for all Australians. Let me now turn to the progress that we have made on our broader strategic direction. Telstra is a telecommunications company, a telecommunications company with more than 100 years of history, a history of connecting people and businesses in Australia and around the world.
We have always been a leader in innovation. We have always believed that technology can bring tremendous benefits for businesses, society and the nation. That is why we are always investing and always innovating. In the 1900s, Telstra built the first trunk telephone connections between Sydney and Melbourne. It was the end of the age of the Telegram. In the 1960s, Telstra late the first coaxial cables carrying telephone and TV, as well as satellite telecommunications and transmissions. In the 1980s, Telstra launched the first mobile phones in Australia, and in the 2000s we were the first to launch 3G and then again, the first to launch 4G. Many of these investments marked major transformational periods in technology innovation. We see another one now as the right and pace of change and the way in which the world is digitizing increases. In recognition of this, two years ago, we launched our vision, our vision to become a world-class technology company that empowers people to connect. There were two reasons for this change of emphasis.
Firstly, it is often said that today every business in every industry needs to be a technology company. But this concept has special meaning for us. It has special meaning for us at Telstra, and that is because the traditional worlds of telecommunications and computing are converging. What I mean by this is that there is no technology innovation that is happening today that is not intended to be connected. From drones to driverless cars, cloud computing to online banking, e-commerce to the Internet of Things. All of these applications have one thing in common they rely on high quality, fast, reliable and increasingly secure telecommunications networks. We are an organisation with a long history and deep skills in network and electrical engineering. A world leader, we have applied these skills to build the best telecommunications network in Australia. But to support these technology innovations, these new applications and services, we need to build new skills in new areas, in software engineering, in data science, in artificial intelligence and in quantum computing.
And that is what we are doing. The second reason for this change of emphasis is that these applications and services are driving significant data growth on our network. For example, streaming services such as Netflix, as the chairman referenced earlier. Telecommunications globally, telecommunications companies globally have been investing tens of billions of dollars over recent years so customers can enjoy downloading high definition movies and TV shows from streaming services like Netflix. Today, Netflix has a market capitalization and is worth more than $100 billion. However, the telecommunication companies around the world who make this experience possible have not captured value to anywhere near the same extent, and this has reduced returns on invested capital across the telecommunications industry globally. But we should not see this as a threat. We should see it as an opportunity. That is why we are technology optimists. But if we're going to take advantage of this opportunity, we must lead in the future, not only in our network, but also in offering the best applications and services on our network.
That is why our vision is to become a world-class technology company that empowers people to connect. As you heard from the chairman, though, we also need to move fast. We need to accelerate our change. Our world is not standing still. We are seeing increased competition. We are seeing increased digital disruption and we are experiencing the unique dynamic of the NBN, which has the impact of reducing our EBITDA by approximately $3 billion. It is against this background that we made two critical decisions. Firstly, we have increased our level of investment by $3 billion over the next three years, which I will talk about more in a moment. And secondly, as you heard from the chairman, we are implementing a new dividend policy where we will retain some capital to invest in the future and maintain balance sheet strength and flexibility. It was a tough decision, and we do not underestimate the impact on you as shareholders. But it's an important decision. It's about setting up the business for success in the future.
It's about giving ourselves the flexibility to invest and to compete effectively.
ANDY:
In our history, it is is pivotal moments like this that we have made important decisions to invest in our differentiation and move to the next technology first and fast. We did this with 3G. We did it with our next gen IP network. We did it with 4G and we're doing it again now with the $3 billion of incremental investment we are making and it is targeted at achieving a step change in our customer experience. We're investing in the network of the future. With data on the network growing at around 40% per annum, we will need five times the capacity of today's traffic by the early 2020s. This is about building the foundations for the next generation of the network. It's about 5G. It's about the platform for the Internet of Things, and it's about new standards in redundancy and resiliency. The second area of major investment under the program is in digitization. New companies are changing the nature of experiences that our customers are experiencing, and we need to improve ours. We also need to improve the digitization of our core operating environment.
Through these investments, we expect to deliver a step change in our customer experience, an incremental EBITDA of $500 million dollars per annum from 2021 and we have made good progress on achieving this and achieving our vision. While I know we have more to do, I would like to take a moment to step back and recognize some of the progress that we have made. Firstly, we have simplified our business and our strategy, and we are aligning our new investments much more closely to the core as we did with our acquisition of Pacnet, Readify and Kloud. We're also investing in continuing to lead with the best network and in the applications and services on the network for our customers. Secondly, we're accelerating innovation in the company through Telstra Ventures, through Moradi, through Telstra Labs, which now includes hardware and software labs, Australia's first open IoT lab, a 3D printing lab and collaboration areas for our partners and our customers. This year, we were ranked number one in the ASX 50 for innovation in the Australian Corporate Innovation Index.
Thirdly, we're making progress in building the capabilities that we will need for the future. For example, we are working to meet the ever growing, ever changing risks associated with cybersecurity. In Australia, the rate of cyber crime has doubled over the last 12 months. This year, we've added significantly to our existing capabilities through the establishment of new security operation centers, and they support our global network of more than 500 cyber security experts that work within the company today. Fourthly, we are delivering new market leading, digitally enabled applications and services. In addition to monitoring our own network and our own operations, these new security centers work in junction with our digitally enabled managed security services, enable us to monitor, detect and respond to security incidents for our enterprise customers, and our future plans are to bring new products to market, which will further extend these capabilities to consumers and small businesses with enterprise grade cyber security protection from unwanted and malicious online traffic for everybody.
We've also launched the Telstra program or network to our enterprise customers, which enables them to dynamically manage their network and their cloud requirements digitally. Where it used to take six months to stand up a very complex set of services for enterprise customers to achieve this, customers can now do it for themselves digitally in a matter of minutes. We're also launching new offers for consumers. Telstra TV provides a fantastic, digitally enabled media service for customers. With almost 1 million services already in the market, we will be launching Telstra TV2 next week with an extensive new format, including the integration of free to air and universal searching. Last month, we also launched Mobile Belong, this builds on the success of belong in the fixed market in attracting new broadband customers with simple, no frills offers. And to support all of these digital enabled offers, we are leveraging our global relationships with world leading technology companies. We have important partnerships with Google, Facebook, Apple, Microsoft, IBM, Cisco, Ericsson, Tesla and many others, bringing the best technology globally and combining it with the best network in Australia for our customers.
The fifth area that we're making very significant progress is in exactly that, the network where we are improving resiliency and redundancy and building some of the critical platforms for the future. We are well progressed in building the foundations for the next generation of mobile technology, 5G. And what sets 5G apart from earlier generations is its extremely low latency, enabling the time between a request for data being sent and that data and that message being received to be in the single milliseconds. As a consequence, 5G will enable revolutionary new automaton technologies, including autonomous driving. As a leader in setting telco standards globally, Telstra will be hosting 3GPP, which is the global standard setting body on the Gold Coast next year. At this meeting, we expect many of the global standards for 5G to be discussed and progressed. We have also commenced the transmission or rather the rollout of our optical transmission capability. This is the backbone of the network around the country that carries the consolidated data from all of our networks.
These investments will give us the capability to increase speeds to up to more than 100 terabytes per second in our call for both undersea and oversea cables. And finally, on the network, we recently launched Cadmium one. This is the network platform for the Internet of things that you heard the chairman talk about. It enables millions of low power devices and sensors to be connected. And it's important because in the future, everything that can be connected will be connected. We have now extended this platform across our 4G network with more than 3 million square kilometers of coverage across the country. It will support applications in logistics, agritech, mining and resources, retail, health care and many other sectors. Through these investments, therefore, not only do we have the largest, the most reliable and the fastest network in Australia. We also now have the smartest network in Australia. In summary, this is a very significant program of investment. The positions are strongly for the future.
And while the operating environment will no doubt be tough over the next two to three years, for the reasons that both the chairman and I have already highlighted, these investments will support our core business and open up valuable new opportunities for growth in the future. Before concluding, let me reconfirm guidance for the 2018 year. In 2018, we expect income to be in the range of 28.3 billion to 30.2 billion and EBITDA to be in the range of 10.7 billion to 11.2 billion. Guidance for EBITDA is after absorbing incremental restructuring costs of 200 to 300 million, which are associated with the increase in our productivity targets. We expect net one-off nbn DA receipts less than net costs to connect for customers to be in the range of two to $2.5 billion. We expect to spend capex in the range of 4.4 to 4.8 billion, or approximately 18% of sales. Finally, we expect free cash flow to be in the range of 4.4 to 4.9 billion. And of course, as is usually the case, the basis on which we provide guidance is detailed in the footnotes to the documents that were lodged with the ASX this morning.
So let me summarize before I hand back to the chairman. In 2017, we demonstrated strong financial performance and delivered against our guidance. We continue to grow our customer numbers and deliver strong performances in mobiles ness and productivity. We are on track in our transformation, and whilst we have more to do, we have delivered important new capabilities creating the network of the future. We made an incredibly important but difficult decision to introduce a new dividend policy. And finally, we lift our level of aspiration in relation to productivity and we will deliver more productivity and we will deliver it sooner. There is no doubt that the operating environment has become more challenging, with significant data growth, increased competition, digital disruption and the migration to the NBN over the next two to three years. Against this background, the decisions and the investments we are making are critical to ensure our success in the future. We are confident that we will not only strengthen and differentiate our core business, but they will also open up new opportunities for growth for us in the future.
The ultimate mark of success, however, will be the quality of experiences that we provide our customers and above all else, that is what underpins our strategy, guides our actions, directs our investments and defines our future. We are working to take Telstra to the next level to set a new standard for excellence, to become a world class technology company that empowers people to connect. I would like to finish by thanking the whole of the Telstra team for their hard work. I would also like to thank the chairman and the board for their support and guidance. Thank you again for your time this morning and I will now hand back to the chairman. Thank you.
JOHN MULLEN:
Great. Thank you very much, Andy. So there are four remaining items of business in front of us, and I will shortly introduce and invite questions on these items, but before I do, I'll outline the question of voting procedures for today's meeting. When you registered this morning, you would have been given a card. Yellow cards are for shareholders who may speak and vote. Blue cards offer shareholders who may speak but not vote. You will need your card to ask a question or to re-enter the meeting. We're pleased to offer shareholders who are attending the meeting in person here today a new way to lodge their vote using their mobile phone or tablet device. And if you've registered to use the new Link Vote app at the meeting today, your yellow card will have a green stripe across it as you will be logging your vote directly by using the app. If you have any questions about how to use the Link Vote app during the meeting, please speak with one of our staff located in the room here and the shareholder registration area outside wearing large Telstra voting badges who will be happy to assist you.
I will introduce each item and then invite questions from the floor. There are several microphones located in the room that side and that side. If you'd like to ask a question, please move to the reserve seating area behind one of the microphones. Please show your card to the microphone attendant and give your name. As a courtesy to all shareholders, please also state your affiliation if you are not here today in your personal capacity. The microphone attendant will invite you to the microphone when your turn comes. In the interest of all shareholders present, though, please, please ask only one question at a time. Keep your questions and comments to no more than two minutes to allow as many shareholders as possible to speak. If your question relates to director re-election or to the allocation of equity, to the CEO or remuneration that Telstra, please ask your question when we come to those items of business later in the program and please ensure that your questions are relevant to shareholders as a whole.
If we can't answer your question fully here today, we will aim to provide you with a response after the meeting. Also, if you have an individual, customer or shareholder issue, please speak with one of our customer service staff who will be able to assist you. They, too, are located in the room here and in the customer service area outside wearing Telstra shirts. There are then three items requiring a shareholder vote today. Shareholders who are using the app to lodge their votes electronically, Please follow the prompts on your device to log your vote. For shareholders voting with the yellow card, the voting boxes are on the back of your card. Please complete these boxes on your card to log your vote. We have received proxies from approximately 31,060 shareholders and direct votes from approximately 15,790 shareholders. The votes recorded for and against each item will be shown on the slide behind me at the conclusion of the discussion of that item. The four numbers displayed will include proxies received and available to be voted by the chairman of the meeting.
Telstra Share Registrar was Fran Kelly of Link Market Services Ltd will act as returning officer in relation to the poll and the results of the poll will be available later today on the ASX and on our websites. A light lunch will be served at approximately 12 noon. However, if the meeting is still underway at that time, we will not be adjourning the meeting for lunch. So I now turn to Item two on today's agenda, which is to discuss the company's financial statements and reports for the year ended 30th June 2017. Now, this item provides shareholders with the opportunity to comment on and ask questions about our financial statements, reports, as well as the business operations and management of Telstra. You may also ask questions of our auditor. If you have a question about the 2017 results or any general questions about your company, including the outcomes of our Capital Allocation Strategy Review and our new dividend policy, this is the time to ask your question. So I now invite shareholders to move to the microphone and to ask any questions you may have on this item.
I think we're just getting a question coming over here. Microphone one.
SPEAKER:
Chairman, I would like to introduce Michael Ordinaria.
MICHAEL:
Good morning, Mr Chairman. I've got a very simple question. Is there any chance that we can have quarterly updates of our financial results rather than six monthly updates?
JOHN MULLEN:
The reporting standard in Australia is six monthly, and that's what we will continue to do. However, the company does issue from time to time updates on matters of importance or where disclosure is required. So there will never be a period where we're keeping back information that is not disclosed to the market.
MICHAEL:
Some of the banks offer quarterly results. I mean, I wouldn't expect like a full annual report, but it's nearly seven months before we know what's going on at the moment with just about four months into a half year. And as far as I'm concerned, we don't get told enough. There's very few updates during the six monthly period, and I was wondering whether we can get a sales update or just some general notification every three months. It's not too hard or a difficult task.
JOHN MULLEN:
Well, the beginning of each year we issue guidance which tells the market what we expect to happen. If there's any deviation from that substantial material deviation, then we make a further announcement to the market and disclosure. So if we're not tracking, as we've said we are, then you will know. So I don't agree that there can be a period, a long period where you just don't know what's happening in the company. It's either proceeding as per our guidance or if it isn't, then we will make a disclosure to that effect to the market. Thank you. Microphone three.
SPEAKER:
Chairman, I would like to introduce (UNKNOWN) from Melbourne. Mr Chairman, I want to ask you a question if you permit me to, but one of the (INAUDIBLE) regarding the financial statements. Telstra used to be a good company but is not as good as used to be. So you never justify how you manage to get from five point plus per share to three plus at the moment. Next, the report you presented to us was more wish than a play on how to improve things which will result in financial results. And the next one is the problem with Telstra, which people they go away from here is the training of the base of Telstra. If you go to one shop and Telstra to pay a single bill takes you up to one hour. And if you have a problem like I used to have just to be alright, my bill, my phone bill took me nine months going everywhere and no one to fix it. So how can you be a good company? The same attitude in its outside. I tried to talk to two of your employees, which they told me very arrogant one of them that they are an IT and show me because I told them something regarding the communication and efficiency of Telstra, and one of them make a indecent, I would say, just to go in and that's it.
We work somewhere. The problem is with Telstra is you have no service which people like to have. If you have a problem, you get nowhere, nowhere, where to do, how to solve it. There is no plan, but looks like you are more than the central committee of the Chinese Communist Party over there. Doing what? All nicely coming to work, getting the money, but no results. And if you are keep blaming that Australia, it's a big country and it's very hard to be competitive, I don't think it is still valid today because the signals and all digital doesn't come by donkey, come by network, which you may not have it. Thank you.
JOHN MULLEN:
Thank you. It's the first time that I've been likened to a member of the Chinese politburo, but my education continues. So a number of points in your question, I think. Firstly, the share price. Look, obviously we don't control a share price. The share price is impacted by lots of factors outside our control. What we can control is the business itself day to day, and then we have to let the share market make its own evaluation as to how we're going and...
SPEAKER:
As to the future. We have a very clear strategy of what we want to do with a company, where we're going. We've got a number of big initiatives, important initiatives that we've announced today, to offset that three billion, which is causing a lot of concern, the productivity program, one and a half billion of savings, that will come from that, the strategic CapEx program should deliver another 500 million of EBITDA by FY21 and a whole lot of activity going on every day in mobiles and other areas. So I think all we can do, is management team and the board is to ensure that we have the right strategy, stick to it and measure the delivery of the company against those objectives. Your second point about service. Look, we are acutely aware and I think I tried to spend some time on that in my speech, and I know Andrew Power, chief executive officer, did the same. We are acutely aware that particularly in the consumer area, we do not yet meet expectations of where we would like to be and where our market would like to be.
In the enterprise area, where we create the experience where we we have people on hand to manage a customer's issues. We actually do extremely well. So clearly, our systems, our networks of technologies can do the job where we're dealing with our some 17 and a half million mobile customers. It is difficult to get that right every time, every day, but that we absolutely understand is the key to success. If we are gonna succeed as a company in the years to come, we have to become like these new companies. We mentioned the Amazons and Apples and Ubers where customer service is just a byword for their existence. We are absolutely committed to that. Andy and the management team spending $3 billion extra of capital to try to deliver those service improvements and digitise our network. So Sir, I hear you loud and clear. We are embarrassed. I don't like standing up in front of you knowing that there are service issues out there. We are working on them. We are making progress, but it's gonna take a bit of time yet.
As to your particular issue, if somebody didn't give you the answers that you wanted outside, please see one of the other representatives or even myself afterwards, and we will address your question. Thank you. With your permission. One quick one, you don't have to answer. How much cost a glass of water for us to have outside? How much we're gonna charge you for the glass of water? Or how much (CROSSTALK). I didn't know we don't have any water, but I'm sure that can be rectified. (INAUDIBLE)` Sorry. (INAUDIBLE) Yeah. There are a number of water stations in this room. Actually, it's just been pointed out to me. So over there. I can see one another, one over there, quite close to you. Microphone four. Chairman. I would like to introduce Scott Hunter.
SCOTT HUNTER:
Good morning. I've got a few points to make. With Telstra's financial performance, $28,000 million in income reduces to $4,000 million in profit, so 28 becomes four. Telstra has the worst share price performance in the past three months on the stock exchange, in terms of pricing calls from home or public phones to mobiles or (UNKNOWN) a $1 a minute, including an 80 cent connection fee. This is far too high. However, unlimited data fee of $30 per month, or $1 a day, is far too low. In fact, some people give their children a fine, and they just make unlimited data calls as a child mining service for $1 a day, I don't think children should be playing around with an adult communication services as a form of playtime. Seven out of every 10 people seems to be using their phones, all their waking hours, making calls or text messages or whatever. However, this doesn't seem to be converting into revenue for Telstra, particularly other companies that their entire business is based around the internet and they're making substantial profits.
Telstra doesn't seem to be getting a big enough slice of the profit. Public phone boxes seem to be disappearing and vanishing quickly. These are needed for emergency calls, and if they're not there no one can make them. Your staff don't seem to understand Telstra's fees, practices and policies. Two examples of this is, to get a home phone service reconnected, I ask the price of that at three separate Telstra shops and was given three separate quotes, $30, $50 and $80. Either two or three of them are completely wrong and they should be able to get the exact price right. And I would consider even $5 would be a substantial fee just to flick a switch and get the phone put back on when the wiring's still there. Second example is, when I was handling a (UNKNOWN) estate, the phone bill came coming out in the dead person's name, even though it had been changed half a year ago, the staff said when I rang up to complain, the staff said that they can only talk to the account holder. When I said they deceased, they said, sorry, I can't help you.
Was there anything else and hang up? Your foreign staff can't comprehend Secondary school Australian English, especially words such as pro rata or backdated? I don't know what they mean. Not only that, these staff have Australian people's jobs, and if there's 2,000 staff overseas, that means there's 2,000 Australians who never get the opportunity to work for Telstra to gain employment income that they can use on mobile phone services or whatever else often, which is about on a monthly basis, there are people ringing up claiming to be Telstra's staff. They're obviously not. They've got a foreign accent and they're trying to gain access to one's computer. This is attempted fraud on the company and should be investigated thoroughly, and there should be a number that a member of the Telstra customer can ring, and say that I've just had a call I don't believe is from your staff. Are you able to trace it? And you should be able to track down these people and get it stopped. And in terms of Foxtel, nine out of 10 people don't watch it, you own a broadcasting company and you need to broadcast programs people wanna watch, not just reruns of rerun reruns.
You can get them on the TV you don't have to pay for, just buy them from a library.
SPEAKER:
How many Foxtel's (INAUDIBLE)
SCOTT HUNTER:
Until. (APPLAUSE)
SPEAKER:
Well, Mr. Hunter, a lot of data there. I'm not quite sure what all the questions were, but let me try and take two or three of the things that you mentioned and respond to them. Firstly, the flow through from 28 billion of revenue to net profit of four, that in that order of magnitude, I don't actually see whether, I understand the criticism of that. That's quite a strong performance. That's very much in line with what we committed to the markets to deliver. Share price performance itself, I think I've already answered to the previous questionnaire. It's not in our control. What we do is manage the things that are in our control as best as we can. You mentioned about core costs being too high, I think in data costs being too low. This is an extremely competitive market. We have some very capable and able pricing teams who are continually adjusting prices to ensure the maximum return for the company balance with competitiveness in the market. And we do remain competitive. You mentioned the lack of conversion of volume to returns, and that's a very good point.
That is something I think the chief executive Andy referred to, the Netflix is of the world and the over the top, companies have benefited far more than the telecommunications providers who are actually providing the bandwidth to deliver these services. And we are continually offering more and more data and more and more services to people for the same price or only a slightly increased price. So that is a concern for the whole industry. And that's why, again, we have to put our maximum effort into reducing our cost and into improving our customer service so we can charge for the work that we carry. You mentioned there were 2,000 staff overseas. We actually have a lot more than that overseas. Remember we also have, we're in 20 countries, we have large overseas businesses and those people work in those countries running those businesses. So yes, we have some call centers offshore, but to think that we could just relocate everybody who's running an international business to Australia is just not practical.
You mentioned fraud calls. Yes, that's a concern to us. Every company goes through it. I get those calls myself so does every one of my colleagues and pretty well, everybody in an industry gets calls and phishing emails and the like. It's a constant battle for the whole world community, certainly Australian community. It's not peculiar just to Telstra, but if you are receiving things on a repetitive basis, then please do alert us. We will do our best to help. But these people are extremely adept at using millions of phone numbers that are recycled all the time. So tracking them down is actually very difficult. And lastly, you said, I think of Foxtel nine out of 10 people don't watch it. I'm not quite sure why you'd say that, there are two and a half million active users of Foxtel and it's by far the largest cable provider in Australia. So I hope that touched on the majority of your points. Thank you again for the question. Microphone three. (INAUDIBLE) I'm sorry, I can't hear. (INAUDIBLE) The question was about the deceased state.
Obviously, it's extremely embarrassing when something like that does happen. It's very rare, but yes, we do make mistakes. When that happens, we go out of our way. Obviously, if it's brought to our attention to try to address it and you'd like to give us more information on that particular matter, we can try to follow through on it. So I apologize on behalf of the company for the sort of errors. Microphone three, please. Thank you, chairman. I'd like to introduce Bala Krishna from Brisbane.
BALA KRISHNA:
Good morning Mr. Chairman and hello to your Board members. I'm 81, 82 years of age, I reside in Brisbane, but I decided to make this long trip in order, I think I feel what I need the board members to know and be aware of because half the problem is that, you don't give us Telstra bills on time. And I'll come to that later on. Is not delivered at my house, and now Telstra tells me that I'm going to get into the computer and I'm going to print it out. I mean, that's the joke. Every other company sends me bills home, you're asking me to get into my email computer and ask me to print my own statements, how? All you got to do is have a good look at myself and you think I can do all those things? No, I can't. I'm speaking on behalf of 151,76 shareholders, because that's the holding I now hold in my hand. (INAUDIBLE) holdings and I hold 151,576 shares. That's my confidence in Telstra. Telstra is a fantastic company. There are no two questions about it. I know you have your hard moments, but at the same time, I just wonder now you're talking in terms of cutting down the dividends and so on and so forth.
How much do y'all actually cut down on your, your payments? So it's good to bring that out for the change. I'm not trying to be funny, or I'm trying to pick on you, but listen, we own the company. So we also want something in return and we have the confidence. So changes are happening and we need to have a look at it. And some of the problems that I have personally have, except is that for (INAUDIBLE) chairman, I accept your exceptional people, is an exceptional company and I think you have my support all the same. As I mentioned to you, they then started asking me to pay my own bills. No, sir, I'm not going to do that. If the bill is not delivered at my post box, I'm not going to pay you, I pay it when it arrives. I got into the internet, I mentioned that several times, but nobody's paying any attention to it. Now you're asking senior citizens like myself who are 81 years of age to do my own troubleshooting and solve problems. Is that a joke? How do you expect me at, did my age go into a computer and start troubleshooting and trying to solve those problems?
I ring and ask you all for help, because I believe that's one of your functions to do that. So I think you must really look at the point where you really help some of the older people, as against the younger people who can do things like that. Now, we had a wonderful guy at the Stafford City Shopping Centre. He was a very dedicated man, he was a Telstra shop owner, and I watched there how often he helps people. He spends a lot of time, he's a dedicated Telstra supporter. And all of a sudden the shop has been closed down. And he a man who really spent a lot of his time to help Telstra customers. He's the other day, he was in tears unable to explain why that has happened, and he's now being thrown out. And so now they're still asking me to go all the way to (UNKNOWN). (UNKNOWN) is so far away, but I managed to drag myself into Brookside, there my mobile phone was not working. I make a call and as I'm speaking, get cut off. So I went and told that guy say OK. He took that. He made a call here and there, it worked.
And say no, it's working, it's fine. I said, now, listen, I won't come all this way if my phone is actually working. I've come here. He said, No, I'm sorry. I can't do anything more than that. If you want, I'll take the phone and I send it to the company. Let them investigate that. Surely, Mr Chairman, that's not what you do. It's your problem. Please try to help us too. And the dividends, I hope that there is a fair, fair look at that before somebody talks about cutting down dividends. Dividends are for all the people, not myself, something that is very important and I'm prepared. I'm not joking here. I'm giving all my dividends and all of my income to poor people who really can't have food. So I hope that you will also try to do, remember that we are all young. We make a whole heap of money and you come to an old state like myself where money is meaningless to me. I got plenty of money, and I'm honest in saying that I want to now share the money with poor people. And I feel that I really, by coming here, I sincerely feel that I hope you'll do something about what's happening about Telstra bills, about the older generation, please.
Thank you, chairman. (APPLAUSE)
SPEAKER:
Thank you. Thank you very much. Thank you for making the effort and taking the trouble to come here. We appreciate it and thank you also for the courtesy of your question. Now there are a number of points, which I hope I've noted. I will try and respond to them. Firstly, regarding your bill, it's my understanding that as a pensioner, you can request a paper bill free of charge and the company will do that. So if that's not happening for you, we have some reason it hasn't worked. Again, please see one of the Telstra staff here today and we will get that fixed for you today. That should not be an issue. (INAUDIBLE) I'm afraid I can't hear anything. And you then talked about reductions, I guess, in board and management fees. So the board fees are set benchmarked across the ASX 20 companies and they are fixed. Management fees very much move with performance. And as you will have seen, the aggregate pay of our senior management team fell by 27% this year. The other thing we're doing, is we're also seeing as we're moving to a new remuneration scheme, which the chairman of the remuneration committee will outline to you shortly, where 65% of senior management's earnings will be in shares, much higher percentage than before, and also over a longer vesting period, which really aligns, we believe, management with shareholders as go shareholders fortunes go management.
You mentioned then around having to do your own troubleshooting and no, you shouldn't have to do your own troubleshooting. Of course, that is our responsibility. And again, if you would see one of our representatives and explain what your particular issue is, we will do our very best to fix it now here, while you are here today. And lastly, the dividend, obviously, we absolutely understand and empathize with the concern that you have over dividend. As I try to explain in my speech, we spent a very long time researching it. We did analyse it to your question and every which way to try to land on what we thought was the best balance between shareholder returns and maintaining the financial integrity of the company. And that's why we made the decision that we did. But thank you again for your question and thank you for coming. Microphone three again, I think. Chairman, I'd like to introduce Lynne, (UNKNOWN) from Melbourne.
LYNNE:
Good morning, Mr. Chairman and Mr. CEO and members of board. I was listening to your presentation about, you know, managing Telstra, and I will try to understand perhaps the complexity of managing cooperation of telecommunication corporation, that is not easy to do so. With, as a shareholder, with prices of Telstra shares down, with dividends being cut and with the, as issues that have been brought up by other Telstra shareholders just a while ago. And also with, you know, the costs and expensive, it being very expensive to use Telstra products and services, I'm just wondering if you would seriously consider offering Telstra shareholders a discount to be able to, you know, for using the mobile and internet services because I'm sure that there's a lot of us who are here who feel that, you know, we may not be able to afford it. And I'm sure that there's a lot who are actually using the competitor's service instead of being retained as a Telstra customer. So I think that if you are able to offer some discount for Telstra shareholders, and I think that may be able to help to have a customer retention as well for Telstra.
Thank you.
SPEAKER:
Thank you for that question, too. We do not offer a discount to shareholders in general, but we do offer quite extensive discounts to pensioners. I believe some 700 and or nearly 800,000 people do benefit from discounts off our services and for those in hardship, or just simply a pensioner status. So we do make a serious effort to help those who find it difficult to use or pay for our services. Thank you. Microphone four. Thank you, Chairman. I would like to introduce Sam Bonica.
SAM BONICA:
Good morning, Mr. Chairman. My question is around the share buyback that was conducted. Today, this morning, you mentioned that it was one of the largest share buybacks in ASX history. I question the value of that because normally when a company does a share buyback, the dividend actually goes up.
SPEAKER:
So for the future, perhaps the board could consider paying out a special dividend instead and forget about share buybacks in the future. Thank you. Thank you, Mr.(UNKNOWN). This one obviously is always a topic of debate when we engage in capital management programs. Not everyone has the same view, but we do, we believe, respond to the overwhelming majority of views, which is that share buybacks are advantageous both for those who take advantage of the franking and the tax credits at the time of the actual buyback and those who don't because the number of shares obviously on issue are reduced and therefore ultimately it pushes up earnings per share and hopefully share value. So every time we do it, we analyze those different options very carefully and depends on the balance of things, franking credit balance, the ATO rulings and the like. But I do believe that on the whole off market share buybacks are the best way to proceed. Thank you. Microphone three. Chairman, I'd like to introduce Eric Platt from Melbourne.
Good morning, Mr Chairman, CEO and board members. There's been quite a bit of mention about the NBN. Unfortunately, it seems to be in a bit of a political football, and I think we've got some answers in terms of the micro-level where Telstra are trying to better manage it. Just wondering if there's a more macro type considerations out there? Question one. Do you want to give me a follow one or do you want me to answer that first? Yes, if I could. Now, it might be dirty washing from well in the past, but PCCW Hong Kong and I'm talking on the acquisition side of things. Is there any remaining involvement and secondly, have the lessons have been learned from that unfortunate venture? Thank you. OK, so thank you. Firstly, on the NBN, on the macro, as you termed it, obviously that is not in our control. The NBN is a matter of the national government of the day. What we certainly stand for and try to ensure is, as the CEO said in his speech that it's critical that broadband access at affordable prices are available to all Australians.
And we would hope that whatever the play out of the political football as you term it, whatever that ends up with that, the end result is indeed that affordable broadband access is available to all Australians. Regarding PCCW Hong Kong, I just checked with Andy, as I understand we don't have a formal shareholding, but we still do have some relationships with them. If you need more detail and you can perhaps just explain what that is. Do you have a particular concern or a particular issue? Only the fact I believe that there were lessons to be learned from that venture, and I'm wondering whether those lessons have been suitably appreciated and leveraged, leveraged to a good point. Yeah, no. Well, certainly. Obviously, big companies make lots of acquisitions and they don't always go well. But the challenge for the board, I think, is to make sure that, as you say, we certainly learn from the ones that don't go well. We try not to make the mistakes twice but equally, we do have to take risks.
In building businesses, we have to make some punts. We have, I think, some $300 million invested in venture capital startups in the United States, which we, we hope will ultimately bring some value to Telstra. We don't expect to necessarily back the next Facebook, but we would hope that some of those technologies being developed will benefit Telstra in the future. Now, a lot of those companies won't. But it's really like research and development I guess. PCCW it before, I think virtually all our time here, but that was more than research and development. That was a very major issue and certainly, I think I tried to allude to in my speech, well, we will take risks and we will buy companies if they make sense. But we're not going to buy companies that risk the future of the company. We're not going to take bets of that magnitude that we would jeopardise Telstra. Thank you. Microphone one please. Chairman, I would like to introduce Colin (UNKNOWN) area. Thank you. Good morning, Mr Chairman, everyone on the board.
If you'd allow me, I'd like to say a few words. I've been a member of Telstra since they started. I was down for the Melbourne Marathon weekend and I thought I'd try and kill two birds with one stone, come to my first Telstra meeting. I took me an hour to try and find this place being a country bumpkin but I just like to congratulate you for yourself and your board. I've got complete confidence in what you do. You might get the knocks but I just want to give you some credit for the whole lot, what Telstra does. Thank you. Thank you very much for those generous words. It is our job as a board and management to listen to the issues and the complaints and to try to deal with those things. But it's very nice to hear from time to time that we have that level of support. I can assure you, the board and management try extremely hard to deliver value for shareholders and do the right thing with the company. Thank you again. Microphone number four, please. Thank you, Chairman. I would like to introduce Roman North.
Good morning, Mr. Chairman, I spend a lot of time up in the country doing farm work, and I stay with my brother. I have a mobile phone and often I leave it in the hallway and some of the calls take two or three hours to come through. Now there's a lot of towers going up in the country, are they Telstra towers or not? It's up in the up on the Murray River. And the other question I'd like to know, he tells me that he's fixed lines going to close in a couple of years, so what kind of fine is he going to end up with from Telstra? And how is he going to be assured that he will get a call coming through to him, I don't know whether those mobile towers are working, but you know, in the future for those country people, how are they going to come? Thank you. Thank you for that question. Our mobile coverage is by far the most extensive in Australia. We cover some 99.4% of the population and nearly two and a half million square kilometres. Now, that doesn't mean we cover absolutely everybody, of course, but we certainly do cover the vast majority with over eight and a half thousand base stations across Australia.
There's a particular program with a government partnership called Blackspot Program, where we and others, but we're by far the largest participant in that program. But together with the government to put mobile towers into areas that would otherwise be uneconomic. We have a plan of, I think, some 577 new mobile base stations being rolled out under that program. So I can't tell you standing here whether that particular attire you saw was a Telstra one or not, but it's certainly more likely to be one of ours than anyone else's. We have by far the most extensive coverage across Australia as as I mentioned. You also said something about your fixed line going to be closed. I'm not quite sure what that would mean, perhaps the NBN is passing. I don't know why. I don't think we would cut off a fixed-line. It's our obligation to provide a fixed-line to every person who wants one in Australia. So again, if you'd like to see one of our staff or any of us afterwards, we can investigate that for you and answer that question for you.
Thank you. Microphone one, please. Chairman, I would like to introduce Hans Witteveen from Seymour. Thank you. Good morning, Mr. Chairman, ladies and gentlemen. I have to declare a personal interest. I'm a 58'er. That means I've worked since 1958 till retirement for PMG Telecom Telstra. I understand the report that you've made and that finances have to be used wisely, and I can see that some of this is going into new technology. What I'd like to talk about is Telstra points of presence. In the days of Frank Blount, there's a senior manager who just about cut down all the points of presence. So if you wanted to find Telstra, where do you find him? A couple of years later, the pendulum swung the other way and Doug Campbell moved to Aubery to set up countrywide. I see you're nodding here, do you remember this? What I'd like to talk to you about now is that recently I too have become a country bumpkin. I've moved from the metro area to Seymour. And here this bill, I want to support a previous speaker in how Telstra deliver service.
This also was organized from an overseas call center and they tried hard, but it was a shemozzle not to put too fine a point on it. So, OK. I went to a Telstra point of presence, except it's not a Telstra point of presence anymore. It's now a franchise I believe. But I had a problem and I stalled and joined a queue and it would be about a half-hour. At this point I probably got a bit snarly. Is this how you treat customers? Shit. All of a sudden I've got a queue jump. Yeah, a bloke came to look after my problem and found that it was in fact, a problem that he couldn't fix on the spot, but he was knowledgeable and an expert. Still alone he couldn't fix it, so I appealed to the director and the problem is in hand. In fact, contrary to someone else's experience, I shook the hand of the guy, the Mr Fix-It, who sat side here. So but, the point is that if we're are saving money by cutting out points of presence and we deal with customers by sending them overseas, and I know it sounds racist, but some of these people, their accents are worse than mine.
They're hard to understand. Then if the problem has to come back to Australia to be fixed, it's a question, are we really saving money here? And if I can fire the second bell, I'd also like to support another playful speaker on the subject of paper ills. I paid two bucks for a paper bill. It's Mickey Mouse money to me, it's Mickey Mouse money to this company. I've spoken at the previous Telstra AGM in Melbourne on the same subject. Rendering a bill is part of the operational cost of any commercial enterprise., doesn't matter what it is. And to charge a surcharge for that, even as little as two bucks, it's unconscionable. The previous chairman didn't agree with me, so be it. This one's on your neck, Mr Chairman, sorry. Thanks very much, and thank you also for your continued and long term loyalty, that's wonderful. I think I mentioned earlier the coverage we have across Australia is second to none. Does that mean that we have a point of presence everywhere where you'd like there to be one?
No, we don't but we do still have Telstra countrywide that you referred to very much active. We have area general managers, so there should be a support structure to address issues that you have wherever you are based in Australia. You also mentioned offshore. We use a mix of onshore-offshore franchises owned premises, staff, etc. and that provides flexibility to meet changing call volumes and needs across the business. But we hold all of our call centres to the same high standards of customer service, privacy and the like, the same with franchisees in the country. They held to exactly the same standard, so it shouldn't make any difference where that person is from, what language they speak, what nationality they are. We hold everybody accountable the same. The paper bill issue, yes, I know that comes up regularly. It's something we continually review. It is an industry-standard not that that helps, I'm sure with you but everybody in the industry does charge that. Clearly, in today's electronic age, there is a lot of benefit to the customer, but also to the company by transacting online electronically.
And ultimately, most businesses, I think, will end there and we would certainly like to get there, too. In the meantime, if you still require a paper bill, we will provide that paper bill. Thank you. Microphone number two. Chairman, I would like to introduce Howard Pascoe from Doncaster. Mr Chairman, CEO and fellow board members, all of us are worried about unemployment for our children or grandchildren. One area that's a huge demand at the moment is someone that's an expert in stopping your computer system from being hacked, cyber security. And it's quite interesting that you look at one of the most popular TV programs in Australia at the moment is border security. There's Border Security Australia, Border Security New Zealand, Canada, millions of Australians love border security. What I would like to see Telstra do is lead a national think tank involving all experts in all the telco companies to solve the problem of security, cyber security, hacking, fraud on a national basis so that Australia becomes a world island continent.
We secure our borders from international hacking, fraud, cyber security, we're guaranteed for all our customers. Now, who was asking for this? Government departments, defence, federal, state, local government. They're all worried about how secure their computers are. Private enterprise, the home. This fine gentleman here, just how secure is this laptop computer? What guarantee is he got that he's not been hacked in this very moment? So there's a huge opportunity for you. You can make billions out of solving the problem. We can lead the world and if you want me to give an example of how terrible it is, look at the US presidential election. The Russians hacked driven millions of computers is the allegation, influencing millions of Americans. So that gives an example of where you can go in the future. Thank you, Mr Chairman. Well, thank you for that very enthusiastic suggestion. Actually, all joking apart, you're right on the money. It is an area of huge opportunity and it's an area that Telstra I am glad to be able to say to you is leading by a long way at the moment.
We recently opened, I think two, Sydney and Melbourne are two large new cyber security centres. We work actively with government. We do actually participate, the prime minister has a task force or a small advisory group on exactly this subject of which Andy Penn sits on, participates and so, we are right across that. Cyber security is a very large part of the network applications and services offering that we make to corporates, and that is gradually filtering down more and more into smaller businesses and ultimately even the consumer. So I think it's going to be a huge, huge part of our future. You're absolutely right. Microphone four, please. Thank you, chairman, I would like to introduce Gary Atkinson from Tasmania. First of all, Mr Chairman, I'd like to congratulate you and the board and management on the performance of Telstra because I think under difficult circumstances you have done a very good job. However, we're here to, I'd like to raise the idea that Telstra still seems to me to be a public service business, that is a carryover from the old days from telecom or whatever it was then.
And you raised the prospect of a new mobile competitor coming into the market. And to me, they seemed to come along and take the low hanging fruit, if we put it that way. I live in Tasmania in the Tamar Valley, about 12 kilometres north of Launceston. I have good Telstra service there. My next-door neighbour doesn't use Telstra. If she wants to use her mobile phone, she has to walk up the backyard and stand next to the chook pen to get the service. I might add that since she got rid of the rooster, the service has improved about 50%. So what I'm suggesting is that Telstra does not promote the quality of its service. As compared to the people who only want to, you know, have a service in the middle of Sydney and Melbourne and take the big profits from those areas rather than service the people in the outer lying areas of Australia. Are you addressing those issues in a better and more vigorous manner or are you going to let these new people come in and take more of the low hanging fruit off Telstra and of course, affect our dividends and our profits in the future?
Thank you. Thank you. That's a very good question. I mean, firstly, you referred to the coverage you get and that others, even with a chook pen, don't get. So, you know, we have invested heavily in that network superiority. We will continue to invest in that network superiority in particular when TBG comes along. And that said, we understand that TBG will go after a sector of the market that will impact the market, and they will, as you said, go for low hanging fruit, which means they will probably go for the large cities to start with a low priced offering. So it will be a very different offering to Telstra. We do not intend to chase that down. We intend to continue to promote the benefits of our network and the investment we make in superior service. But we have to be realistic, there will be people who will change for a large price discount. And for that reason, we've also spent a lot of time planning the launch of Belong Mobile, which used to be a fighter brand for broadband and is now selling mobile as well.
That will be with a cost structure and a similar network coverage that Will serve a network offering that TPG offers. So we believe that with that, we can bifurcate the market. We will stay the mothership in the main premium end of the market, which is where we belong. But we will have the means to fight down below in that maybe 15, 20% of the market there will be very price sensitive. Thank you. Microphone one. Mr chairman, I would like to introduce Nina Anderson from South Melbourne.
NINA ANDERSON:
Good morning, Mr Chairman. I'm particularly interested in what you're doing in innovation. I wonder if you could share a bit more light on that and the industries you're focusing on, as well as some of the talent you brought into the organization, please?
SPEAKER:
I might ask Andy to, he'll get a much better answer than I will on this one. It's certainly an area that the board is particularly interested in. And obviously, innovation and all the development in technology is critical to our future. So if you'll allow me, I'll just ask Andy to make a few comments on that.
ANDY:
Thank you very much, Chairman and also to Mr Atkinson, and I hope he's enjoying the new small cell, which we just put into Lilydale in the time of valley, just north of Launceston. But look, turning to innovation, look, thank you. It is a very important topic. And of course, Telstra is an extraordinarily large company, and so encouraging innovation in the context of a large company is always very challenging. And it's not down to one single initiative, but we have a range of initiatives which I do believe are making an impact. And as I mentioned in my address, I was particularly proud that we were ranked number one in innovation in Australia this year in the Australian Corporate Innovation Index of the Top 50. And not only were we ranked number one, but actually our score rating was double for the next most innovative company in Australia, which was very encouraging. And so how are we achieving it? Well, firstly, we're investing through Telstra Ventures, which is a venture investing part of our business, where we have invested $300 million in more than 45 technology startups, very much aligned to telecommunications.
So they're in things such as mobile apps, mobile radio access communication, types of investment messaging systems, that sort of thing. (UNKNOWN) is our accelerator. So this is supporting companies before they even get to the point of venture capital. So this is ideas before there's a business model, and we've supported around 80 new startups again in the technology space. We've got a partnership with Pivotal. Pivotal is an American company, which was one of the founding pioneers in technology, or rather a methodology referred to as agile, which you may have heard of. We got a joint venture here with them in Sydney, where we're introducing agile based methodologies into the organisation. We have over 100 teams now that are using that methodology actively within the business. Another area of importance for us, I mentioned, is in data science and data analytics that's becoming critically important. We have around 70 data specialists in the company today. We've relaunched something called Telstra Labs recently, which is a virtual innovation and laboratory capability under Stephen Elop, one of our group executives who heads that up, that's got an IIT lab, 3D printing lab, software lab, hardware labs based here in Melbourne, but also in Sydney.
And we've also got capabilities internationally as well. So there's a lot of activity in the innovation space as well. And it's also, of course, about, as you said, attracting new people into the organisation as well. And so we're very much pushing that through our graduate programs. And so look, there's a number of initiatives that are underway. And I think, as I say, there's no single silver bullet solution to becoming a more innovative company, but through a whole range of different initiatives and investments and processes, we're really sort of starting to see the benefit of that as as demonstrated in the recognition through the award earlier this year. So I thank you.
SPEAKER:
Thank you. Well, we have no further questions at this time, so I would just remind the shareholders this is the opportunity for you to ask any general question about the business or its operations before we go on to remuneration and the final topics. It looks like we have no. We do have a question. So microphone one. Chairman, I would like to introduce Edgar Segars from Eltham.
EDGAR:
Thank you for allowing me to ask the question. The 5G network that you're going to implement, how does that compete with the NBN as it is at the moment? And if I may also ask, the black spot program, how does that look in the long-term for the so-called driverless car when you reach one of these black spots? Thank you.
SPEAKER:
OK. Well, your first part of your question, the 5G network. The 5G network is not being set up to compete with the NBN. The 5G network is being set up to deliver a whole raft of new capabilities at higher speeds than have been available before. Now, there will be always an overlap between fixed and mobile, and ironically, fixed networks are becoming more mobile and mobile are becoming more fixed as small cells get closer and closer to the home, et cetera. But the whole purpose of 5G is to offer greatly enhanced services, lower latency, a lot of the technology, you mentioned driverless cars and the like. So that will be the prime motivator and driver of investment in that. As to what happens to a driverless car in a black spot. I'm not sure I can answer that completely, but I won't be in it. I can assure you of that. Look, I mean, there's obviously a fair bit of work to be done. Driverless cars is gonna be the most dramatic transformation of the landscape. I think I read that by 2030, the United States were about 440 million cars is believe they'll drop to about 40 million cars by then.
This is a sheer efficiency of your own. You just need a car when you need it for the 50 minutes to go down to the shops or whatever. But in Australia, there are over 700 pieces of legislation that need changing before a driverless car can run on our roads. So it's gonna take a while, not just technologically, but also in terms of regulation and the like. But it's definitely gonna come and it is going to be absolutely transformational. Thank you. Microphone two. Thank you, Chairman. I would like to introduce Victoria Brown from Melbourne.
VICTORIA BROWN:
Thanks for the opportunity to talk to you, Mr Chairman and the rest of the board. I just heard a query about how Telstra practically consults with customers. Have you considered doing custom surveys as a way to understand customers issues and needs? It would seem to me that you could get some really good qualitative and quantitative data about what people's concerns and also to get opportunity to understand future customer products and services that you can provide. Maybe that would enable you to understand what the problems are at the customer interfaces in your customer shops and that may be really useful data for you. Thank you.
SPEAKER:
Thank you. Thank you. I'd respond to that with two components of an answer. And firstly, obviously, we have an extremely efficient and extensive, well-run marketing department, which spends a lot of time doing exactly that in holding focus groups with customers. Every new product that goes out to market is tested exhaustively beforehand with customers. So I think there wouldn't be many companies in Australia that do more market research across their customer bases than we do. The other really important factor to point out, of course, is that 40% of senior management teams variable compensation is based on net promoter score performance. So that some people will say that's not a financial measure. It sort of is because it's not something that can be gamed. That's external evaluation of what the interaction of a customer, the customer experience with us. So the episode, NPS, as we call it. So when you've had a telephone call with Telstra or you've been to shop you've done whatever, large number of people, so it's a very meaningful data of sample are asked how do you rate that experience?
And then in the other half of the 40%, so 20% is on the strategic NPS, as we call it, which is irrespective of what performance you may have had not had, would you recommend Telstra as a supplier? So that puts a huge, huge amount of effort and focus in management's minds. I can assure you. They're extremely targeted and oriented towards customer service to understanding what makes better customer service. I hope that answers question. Microphone three. Thank you, chairman, I would like to introduce Murray Newman.
MURRAY NEWMAN:
Good. Thank you, chairman. My query is, I think if you didn't answer, I think I've missed it, but I don't think there was a figure that you gave for any likely net profit increase for the year we're now in. I'll be pleased if you could give us some idea of that. You gave us other figures of income and sales, but I'm not too sure if you gave it as a percentage increase.
SPEAKER:
Sorry, I misheard the question. I understand it was guidance, not historically reported. No, we do not issue guidance on net profit because of the many factors that can influence a final net profit. So we limit it to the measures that you see revenue, EBITDA and cash flow.
MURRAY NEWMAN:
Alright. Thank you.
SPEAKER:
Thank you. Microphone two. Thank you, chairman. I'd like to introduce David Holland from Tasmania.
DAVID HOLLAND:
Hi there, chairman. I'd just like to say first, I think you guys are doing a pretty good job. Second, I like to watch Sky News Business with Ticky Fullerton, and you were on that show a couple of weeks ago and you said if Telstra hadn't paid a dividend for the past ten years, you would have a $15 billion war chest available. I know you've only been on the board for nine years and chairman for the past year or two. But if Telstra didn't pay a dividend, what would you've done with all that money?
SPEAKER:
Very good question. Very good. Firstly, thanks for the compliment. We appreciate that. No, the point all I was trying to make there wasn't specifically reference to Telstra. It was just that the world is changing so fast around us that it's not just the technology and the products and services that new companies offer that is a change. It's also the business model of those companies. And if you look at many of them like Amazon's and others, they do not pay a dividend because they reinvest in their growth business to grow their market share, reduce prices, enhance their product offerings. That drives strong share price appreciation and you see enormous share price, thousands of percent share price appreciation from those companies, which to those investors who backed them, obviously outweighs the lack of a dividend. I was just making the point in general across all of corporate Australia. It's not specific to Telstra. We're very much, Australia is very much a yield driven market historically with high payout ratios, and it's gonna be interesting to see how those go over the coming years.
Not just us, but the whole corporate world. That was that was all I meant. And just because we pay a very large amount of money out as a dividend, I just wanted to emphasize the magnitude of it and say, if hypothetically, which don't worry, we've never considered not paying a dividend and we won't consider not paying a dividend. But if one hadn't, if one had behaved the same way as some of those other companies, we would have a war chest of $50 billion. Now, I'm not sure we'd have done anything better with it than giving it back to you, which is why we gave it to you. But I do think it's a very important and challenging change in the corporate landscape going forward. Microphone two again. Chairman I'd like to introduce Rob Metcher from French Island.
ROB METCHER:
Mr. Chairman, board of directors. I'm retired now, but I live in an isolated community. My previous job was one of the things we had to do is transport Telstra crews onto the island as we don't have a bridge and their expertise and their forbearance was a pleasure to work with them, except for one New Zealand guy who like to refer to Greg Chappell underarm incident a little too frequently. And more serious note, a wonderful federal government with a dodgy power supply in the future. Does Telstra have any clout along with other businesses to keep them up to the mark if the incompetence and messing around leaves us without power and our communication system? Thank you.
SPEAKER:
The subject of electricity prices, it's probably not the topic that we should get too deep into here. But suffice it to say that I think our increase is here and over 100 million. We've increased cost to us because of the rise in electricity prices. So it's very much something as forefront of mind. I very much hope that successive governments will get their act together and get an energy policy finally, that that addresses these needs for the long term, and I'm confident it will happen. But I think there's a year or two of challenge before we get there. Microphone three, please. Chairman, I would like to introduce Robert Pelly.
ROBERT PELLY:
Good morning, Mr. Chairman and members of the board, I'm one of the unfortunate tier two investors who took financial advice from Peter Costello. After 12 or more years, my question, considering Telstra is one of the biggest, well, is the biggest telecommunications company in Australia, I'm just wondering, after 12 or more years, why the Telstra share price is still half of what I paid for it back in the tier two days?
SPEAKER:
Thank you. Obviously, we are extremely mindful of that. The tier two tranche, I think, was the most disadvantaged in terms of price versus the ultimate yield. And I believe that it's returned over some 17 years, only about 16%, which is far lower than the Tier one and tier three tranches produced, which were more like 175% and 87%, I think. So, again, reference to the comments we made earlier about share price. I mean, all we can do as a company is to set a business strategy that we believe will deliver the maximum value to shareholders and then make sure that management execute on that. Decisions that come down from on high, like the creation of the NDN, regulatory changes and other things, as well as the competition is something we can't control. We have to be mindful of. We have to make sure that we respond as efficiently as we can to those challenges, but we do not control them. Obviously, there are many, many factors that go into affecting the share price, not just how one is performing today, but how markets perceive that the industry and the particular player will go in the future.
Microphone one. Chairman, I would like to reintroduce Michael (UNKNOWN) from Wollen.
MICHAEL:
Mr Chairman, I'd just like to ask, where is the next Autohome business gonna come from? I was really upset that you sold that business because of such a successful business. Why did you find it necessary to sell Autohome the Chinese business? And could you also comment on how this medical software business is going? Because from what I hear, it's really struggling to make any money, the medical business. But firstly, why did you sell Autohome and if you could comment on the medical software business? Thank you.
SPEAKER:
Thank you. We sold Autohome because it was an investment in a company in another country, China, as you know, where we made an extraordinary large profit close to $2 billion of profit. And we felt it would be prudent as a company, as a board to take that profit and put it in the bank and then indeed, that facilitated the further return to shareholders. There's always the, you know, with every shareholding, there's a question do you hold on, hold on hoping it will go higher or do you wait and then sometimes see that value dissipate considerably? I don't think we'd have been thanked if the share price had gone the other way, and we lost $2 billion on the investment. So I think you can always be criticized for not picking the absolute peak of the market. But making a $2 billion profit on investment like that is pretty good and it doesn't happen every day. Where's the next one coming from? Well, I think Andy mentioned we have some 35 investments in Telstra Ventures in Silicon Valley. Will one of those becoming an Autohome?
I don't know. It's potential for that. But we do hope at the very least, they will contribute financially and strategically to the development of the company. Lastly, regarding Telstra health, look, yes, Telstra Health hasn't hit everything we expected it to do, but it's a start up business again in a new area where we're bound to make some mistakes and we have made some mistakes. But we've also made a lot of successes and Telstra Health is actually slightly sort of under the covers a bit some of the success that it has had. We administer the electronic transaction to more than 260 million scripts annually, between 22,000 GP's and nearly 5,000 pharmacies. And our patient flow and queue manager solutions are used by over 100 public hospitals, with the largest health software and technology provider already employing about 800 health professionals. And we're embarked on some very major projects like the National Cancer Screening Registry and others. So I think it's exactly what we should be doing as a company.
We should be taking risks that should pay off. Sometimes they don't. Sometimes they do. But none of them will affect the future of the company completely. We're not taking risks, as I said in my earlier speech, that jeopardize the whole company. But Telstra Health is on the way to being a very substantial and successful business. Well, we've got some clear plans, which we don't obviously publicize as to when it will make money. Very few businesses of scale make money from day one. Now, if you look at our network applications and services business at the time I've been on board, that was in a very similar situation when it started. It lost money and there was a lot of questioning. Should we be in this or should we not? Now, you look at where where it is, over $3 billion business growing at 30% annum and the margins have more than tripled since we started. So yes, we don't get everything right. And yes, it may take longer than everyone would like for something like Telstra Health to be profitable, but we're very confident it'll be.
Otherwise, we wouldn't stay in it. If it wasn't, we would cut it. Thank you. Microphone four. Thank you, chairman. I would like to introduce Francis Mallon from Cobourg.
FRANCIS COBOURG:
Thank you.
FRANCIS:
I would just like to ask one question about the rollout of the NBN. The (UNKNOWN) people who are putting these yellow structures on the footpaths because I'm one of the unfortunate people who has fallen over it. I rang Telstra and I asked them why they can't be made level with the footpath, but I didn't get much of a reply really about this. So, is it the Telstra Company that are putting these up?
JOHN P MULLEN:
Thank you Francis. Are you a long distant relative that I don't know about?
FRANCIS:
No, I really don't know. I spell my name the same way and everything, but we originated from Manchester, so I don't know.
JOHN P MULLEN:
I reckon not. But, anyway, look, I'm not a specialist in the operations there, Andy just tells me the orange covers like you're referring to are probably actually temporary pit covers, which are protecting a damaged (UNKNOWN) somewhere where remediation is needed. I don't think that would be the NBN, the NBN is responsible for putting obviously their own infrastructure and not Telstra. So, I'm pretty sure that is what it would be. And I hope you don't fall over any more. Thank you. (UNKNOWN), again, please.
SPEAKER:
Yes chairman. I would like to introduce Frederick Cornelius from Essendon.
FREDRICK CORNELIUS:
Good morning, chairman and CEO and board members. Just on service, I'm experiencing an increasing number of my download speeds decreasing and also a lot of dropouts. I must say your support staff are very good, they bend over backwards to try and help you and they do a fantastic job. Sometimes, it is a bit difficult with accents, but they really do try very hard. The other aspect also is Telstra doesn't inform you as a customer when they put new plans out. Sometimes there could be advantages to the old plan that you have. For instance, now you mentioned something on pensioner discounts, I have no idea what they are. And if they are, where would you find them and could you extend it to foxtail?
JOHN P MULLEN:
Regarding the first part of your question, downloads speeds, I don't know what service were they or ADSL, so what the service is.
FREDRICK CORNELIUS:
ADSL2, yeah.
JOHN P MULLEN:
Say? ADSL2?
FREDRICK CORNELIUS:
Yeah.
JOHN P MULLEN:
Right. Well, there's no reason why you should be experiencing problems and lower download speeds. In fact, we've invested quite heavily over the last six, 12 months on improving ADSL performance. So, again, without knowing the specifics of your particular issue, there are staff here who can address anything that's outstanding that hasn't been resolved by the people that you spoke to previously. Regarding being kept informed of new plans, we do promote them pretty widely. Our website in particular lists all of those sort of services and concessions that you can obtain. So, I would suggest you perhaps go there, or, again, give us a ring and ask if you've got any particular area that you're interested in where we can try and answer that for you.
FREDRICK CORNELIUS:
I understand that, but the daily(UNKNOWN) and busy lifestyle, you don't think of getting on, finding out what are the new plans, your life just goes by so quick.
JOHN P MULLEN:
Well, it does. And obviously the landscape is changing extremely rapidly all the time. We do proactively contact customers where we see that they're on a plan that is not the right one for them or is costing them too much. Whatever we do proactively on a large scale contact customers to tell them that. But most of the communication, inevitably, as it's all changing so fast, is on the website.
FREDRICK CORNELIUS:
Notification of different events with tickets and what have you, 99% of them, which I never go to, so why couldn't they send out a message saying that, you know, we've got new plans, have a look at them.
JOHN P MULLEN:
Well, literally the plans are changing daily and weekly. The marketing team and product teams are developing new pricing, new plans on a constant basis. It would be impractical to email every customer or potential customer, let alone send a physical letter to everyone. So, I would encourage you to go online and/or ring our customer service. Thank you.
FREDRICK CORNELIUS:
Thank you.
JOHN P MULLEN:
Right. I have no more questions here. So, last chance for everybody before we go on to the other items. Great. OK. Well, thank you very much for those very thorough, engaging questions. We've now finished our discussion on this item, and I now turn to ITEM 3a on today's agenda, which is to consider the re-election of Peter Hearl. So, Peter's details are set out in the notice of meeting, and I would just add that we note that Peter retired from the Board of Treasury Wine Estates, effective 31st of August 2017. Peter has been a non-executive director since August 2014. He's a very valuable member of the board with excellent experience and an important role as chairman of the remuneration committee and a member of our nomination committee. Peter is a very experienced company director with substantial international experience as a senior executive in fast moving consumer goods sector, including of Yum Brands and PepsiCo. The board, other than Peter, recommends his re-election. So I'll now take any questions you may have regarding Peter's re-election.
Looks like there are no questions. Thank you, so we will now vote.
SPEAKER:
(INAUDIBLE)
JOHN P MULLEN:
We do? We have one on the way. Sorry.
SPEAKER:
Chairman, I'd like to reintroduce Maurice Newman.
JOHN P MULLEN:
Thank you, Mr. Newman.
MAURICE NEWMAN:
Thank you. My query is quite a general one. I note that at the board there are only two people who really, I think, technical who have been trained as an engineer. And I find this rather surprising because you've mentioned quite frequently through the morning that you are a technical organisation, you are an engineering type organisation, but you only have two directors who I think could lay claim to being that. I was wondering why that is and if you had any board vacancies, whether in the future, that you would put some people with engineering training under the board. Thank you.
JOHN P MULLEN:
Thank you. That's a very valid question indeed. We are very conscious of that. We did have up until recent retirements two others. We had John Ziegler and Geoff Cousins, both of whom had specific telco experience, and we had Catherine Livingston, who was an expert in pretty well everything. So, we had adequate representation, I think, at that time. I am though very mindful and we are currently looking to try to boost the board's strength with specific technical knowledge, as you have said. So, it's a very good point, sir.
MAURICE NEWMAN:
Good. Thank you.
JOHN P MULLEN:
(UNKNOWN) three again.
SPEAKER:
Chairman, I'll be introducing Noel Levi.
NOEL LEVI:
Mr. Chairman. And I've just got one comment to make about the re-election of this director. I am not happy with the remuneration scheme, it's too generous. There's quite a few other comments I'd like to make, but not now. But I'll be voting against you because you are the chairman of the remuneration committee. And typically, these AGMs comments from the floor seem to be ignored. So, I decided in the future maybe make a comment, but fought against all of those people who are on the remuneration boards and maybe in that way they may take some notice. Thank you, Mr. Chairman.
JOHN P MULLEN:
OK, thank you. Look, we will be covering remuneration in more detail when the chairman of the remuneration committee speaks shortly, but let me since you've asked a question, let me try to respond to it now. Firstly, we do listen and I can assure you that both the remuneration committee and the board take the issue of remuneration extremely seriously. We scour the world for best practice within Australia and elsewhere. We benchmark against other ASX 20 companies, and we're constantly mindful of the balance between attracting the best talent, but also meeting shareholder concerns and expectations over excess remuneration. One of the reasons that we are changing the remuneration policy that you will hear from my colleague Peter in a minute is that we want to get further alignment of remuneration of management with shareholders. And to that end, as I said earlier, we're moving to 65 percent of their income will come in shares, which very much aligns them, we think, to shareholder interests as well.
So, directors fees, we obviously get external advice to benchmark ourselves. We don't seek to be the highest, we don't seek to be the lowest, but we seek to be broadly in line with other large corporates of our size. So, again, I would just emphasise we do take the issue of rem extremely seriously. It probably has more prominence in the company now than almost any other component of our business. So, thank you. OK, I think we have no further questions on Peter's re-election, so we will now vote on this item. The proxy and direct voting position is being shown on the slide behind me. As indicated in (UNKNOWN) meeting, I intend to vote all available proxies on this item in favour of Peter's re-election. So, please complete your vote now for ITEM 3a. With that, I will now turn to ITEM 3b, I will step down from the chair and invite Nora Scheinkestel, Chairman of your Audit and Risk Committee, to chair the meeting for this item.
NORA SCHEINKESTEL:
Thank you, John. Good morning, shareholders. ITEM 3b is to consider the re-election of John Mullen. John's details are set out in the notice of meeting. He joined the board in 2008 and has been chairman of your board since April 2016. He's chairman of the Nomination Committee and was previously chairman of the Remuneration Committee for five years until 2016. John has over two decades experience in senior executive roles with different multinationals in the transportation and logistics sector, including most recently as managing director and CEO of Asciano Limited from 2011 till 2016. The board, other than John Mullen, recommends his re-election. I will now take any questions you may have in relation to John's re-election. Yes. Microphone four, thank you.
SPEAKER:
Thank you. I would like to introduce Scott Hunter.
SCOTT HUNTER:
Yes, the two people up for re-election share nine other directorships or job appointments. Page 32 to 33 of the annual report shows that the 10 current directors have 43 other positions between them. Including the Telstra directorships, 10 people have 53 jobs. This is not in line with the statistical average of employment in Australia, where most people have one job. Also, in a country where two million people have no job at all. As there are only 168 hours in a week, and no one could work that whole amount anyway, are these staff not overcommitted? And in terms of a dispute over the phone bill, say, with one of the other companies that they have directorships for, whose side do they take or do they take no side at all, which would make Telstra have to make a decision about that with one person less?
NORA SCHEINKESTEL:
Thank you for your question. Sir, maybe starting with the last part. Certainly at Telstra, both from our internal policies, but also under the Corporations Act, there are quite strict rules that govern any conflicts of interest. So, if any of us have any conflict of interest in relation to a matter that's for decision before the board, then we will excuse ourselves from that item, we won't receive material on it. So, any conflict of interest that would arise relating to your other commitments or involvements are dealt with quite strictly, and we take that aspect of it very seriously. In respect to John's workload specifically, he has involvement with two other companies, Toll, which is a private, unlisted company, which he chairs and he's a member of the Brookfield Infrastructure Board. And in addition, he has involvement with a number of not for profit organisations. As chairman of the Audit Committee, I actually undertook John's review as part of our board review process earlier this year and spoke both to management and my fellow directors.
And one of the aspects that we talked about was certainly his commitment, and people commented that his involvement, his availability, his accessibility was exceptional. So, from the board's perspective, we're very comfortable about his workload and his level of commitment to the organisation. Thank you for your question. As there seem to be no other questions, then we've finalised discussion of this item. The proxy and direct voting position is now being shown on the slide behind me. As indicated in the notice of meeting, I intend to vote all available proxies on this item in favour of John's re-election. So, could you now please complete your vote for ITEM 3b? And as we've now finalised this item, I'll hand back the chair to John.
JOHN P MULLEN:
Thank you very much, Nora. I now turn then to items four and five on today's agenda. We'll deal with both of these two remuneration related items together as they relate firstly to the grant of performance rights and restricted shares to the Chief Executive Officer Andrew Penn under the new Telstra fiscal year 18 Executive Variable Remuneration Plan or EVP, and Telstra's 2017 remuneration report, which addresses both the remuneration outcomes for 2017 and the new EVP, which is a key part of senior executive remuneration for the future. I'd now like to invite Peter Hearl, chairman of the Remuneration Committee, to provide some introductory comments about this year's remuneration report. Our remuneration outcomes for fiscal year 17 and our executive variable remuneration plan. Peter will also take questions from the floor on these two items. Peter. Just need to mention. For those interested, lunch is being served outside now.
PETER HEARL:
I might go out. (LAUGHTER) Thank you, John. Good morning, fellow shareholders, I firstly would like to provide you with an overview of our remuneration outcomes for FY17, as explained in our remuneration report. Before then, looking ahead to 2018 and the introduction of the new Executive Variable Incentive Plan, or EVP. Our remuneration report provides a comprehensive overview of our performance and remuneration outcomes for financial year 2017, as well as a summary of our governance practices. Through our remuneration report we seek to enable you, our shareholders, and other interested stakeholders to understand the links between remuneration, company's strategy and Telstra's performance and the framework we have in place to provide effective governance over remuneration at Telstra. During FY17, there were no fixed remuneration increases and no changes to the short term incentive and long term incentive opportunities, as a percentage of fixed remuneration for our senior executives. The senior executive remuneration mix has remained the same since 2013.
Our remuneration policy is designed to link financial rewards directly to employee performance and contributions and company performance. And the financial year 2017 remuneration outcomes for senior executives are totally consistent with this. Looking at the short term incentive outcomes, as you have heard this morning, 2017 was a year of solid progress for the company, a year where we delivered on our guidance to the market and made progress in improving customer service. The outcomes under the FY17 STI plans therefore reflect the performance of the business, with senior executives receiving on average 41.3% of the maximum available opportunity. This reflects Telstra's performance on the free cash flow, EBITDAR, episodic and strategic MPS performance measures. We did not achieve our total income measure, resulting in no payment on this component. The Board exercised discretion in determining the outcomes of the financial measures to ensure there were no windfall gains or losses due to the timing of the NBN rollout, spectrum purchases and material acquisitions and divestments.
The board also considered and adjusted for restructuring costs to ensure management did not receive any windfall gains. While the aggregate effect of these adjustments on the FY17 STI results was a positive adjustment, overall, the resulting impact on FY17 senior executive STI plan payments was negligible at less than one half of 1%. Turning to the long term incentive outcomes, as we did not perform against our relative total shareholder return and free cash flow return on investment targets, senior executives received no remuneration under the FY15 LTI plan. When assessing performance under the FY LTI plan the board did not make any adjustments and therefore did not provide any relief for the effects of our strategic investment program. This is the program that we announced in August last year, which involves an additional investment of up to $3 billion over three years on our networks for the future and for digitisation of our business. The reason the board did not make any adjustments was because the FY15 LTI plan was already in place when the Strategic Investment Program was announced.
CHAIRMAN PETER HEARL:
This principle will also be applied to the FY16 LTI plan, which will be tested at the end of June 2018. For the NY17 LTI plan, when the free cash flow ROI measure is tested at the end of financial year 19, any reward will reflect the Board's assessment of management's performance in delivering against the Strategic Investment Plan. This will include both the costs and the benefits of the program over the performance period. Turning to non-executive director remuneration, there were no changes to non-executive director or committee fees during FY17. In FY17, Telstra conducted a review of its fees for non-executive director roles relative to other major companies in the ASX 20. The results of that review found the fees for the role of the remuneration committee chair and remuneration committee members, which has remained the same since August 2010, had not kept up with market rates for similar companies. The fees for these roles at other companies had changed as a result of their increased responsibilities on governance and accountability to shareholders.
Effective July 1, 2017, the board has increased the fee for the role of the Remuneration Committee Chair by $6,000 to $56,000 and for remuneration committee members by $3,000 to $28,000. No other changes were made to non-executive director or committee fees. Looking ahead to 2018, we've implemented a new simpler remuneration structure for our senior executives in the form of the Executive Variable Plan, or EVP. As we mentioned earlier, the proposed allocation of equity to the CEO under Item 4 is based on this EVP. The EVP is developed, has been developed following a review of our remuneration structures for the CEO and for our group executives, including our long term incentive plan structure, which was complex. It combines our existing STI and LTI arrangements into a simplified single incentive plan. Importantly, there's been no change to either the target or the maximum opportunity that the CEO or senior executive can earn under the plan. The new EVP is designed to continue to drive performance against customer experience and financial metrics, which create long term shareholder value, and rewards management in a way that provides a much better link to executive performance and alignment to shareholders through longer-term equity rewards.
This is achieved by a more significant proportion of the reward tested against the relative total shareholder return of a comparative group, which in future will comprise the ASX 100, excluding all the resource companies. The EVP extends the overall plan to five years from the current four, which further aligns executive rewards to shareholder interests. Consistent with our strategy to deliver brilliant customer experiences, NPS continues to be a significant component of the plan. The NPS system tells us how our customers perceive Telstra, and we believe this measure is the most effective indicator of our progress in delivering on this aspect of our strategy. Finally, we understand the importance to our shareholders of continuing to enhance the insight we provide on the link between remuneration and executive and company performance. As we introduce the EVP, we are committed to continuing to focus on the transparency with which we explain how remuneration outcomes are determined in future remuneration reports.
The board, other than Andrew Penn, recommends shareholders vote in favour of item 4, the allocation of equity to the CEO under the EVP. The board also recommends that shareholders vote in favour of item 5, the adoption of the remuneration report. I will now take any questions you may have on either items 4 or 5.
SPEAKER:
Chairman, I'd like to introduce Bilek to you from Melbourne.
BILEK:
Hi.
CHAIRMAN PETER HEARL:
Good morning.
BILEK:
Hello. You can listen to me?
CHAIRMAN PETER HEARL:
Yes, yes. I said good morning.
BILEK:
Anyway, I want to congratulate you. If you run for the federal election, you would win with this speech because it came out very nice around a very unclear situation. Anyway, the question is when is Telstra and any other companies will change their culture of remuneration and incentives? I work for 40 plus years in a private company. Never I was paid because I did something special, because they pay me to do the job. And you are paid and you have remuneration to do what is required to do. And why do you need extra and extra and extra? For what? Because you still have the old concept. Yes, if I have to do something to do my work, I need more remuneration, I need a different remuneration. I don't think it's a valid reason you... I would say if I was in power, I would chop your remuneration for the performance you have. So what do you need extra for? You explain to me, but not generic answers. I want specific answers. Yes, this gentleman needs more remuneration, more money because he did something.
But what does he do for doing his job?
CHAIRMAN PETER HEARL:
Well, firstly, thank you for your question. I want to emphasize that the board and the remuneration committee takes its governance and oversight of Telstra's remuneration policies and philosophies very seriously. We compete in a global market, in a very competitive global market, for the best possible CEO and group executives that we can get. And our whole philosophy is designed to, 1, support the strategy that we've put in place and to reinforce our culture and values. Secondly, to link financial rewards directly to employee contributions and company performance. And third, and importantly, to provide competitive remuneration to attract, retain and motivate highly skilled employees. I'd also emphasize, in terms of fixed remuneration, we use the midpoint of the ASX 20 as our benchmark or bellwether in terms of setting a fixed remuneration. So we believe that we, to get the best and brightest people that we've got, have to get to deliver on our strategies. We have to be competitive in remuneration, and that's exactly what we've done.
As I said, we take our role as oversight of the Remco philosophy and policies very, very seriously. And thank you for your question. Microphone 2.
SPEAKER:
Thank you, chairman. I have Liz Richards from Sydney.
CHAIRMAN PETER HEARL:
Thank you.
LIZ RICHARDS:
Thank you, Mr Hearl. Mr Hearl. I'm actually a treasurer of a village with 250 people, and I have to explain things financially to them at times. What distresses me is your use of TLAs and SLAs. You know what they are? Three letter acronyms and six-letter acronyms. You say FY.
CHAIRMAN PETER HEARL:
Financial Year.
LIZ RICHARDS:
I know it's Financial Year, but it takes the same time as saying FY. And you need to explain to anyone here who's grey head what some of these TLAs and SLAs are. You need to say the full words. Thank you.
CHAIRMAN PETER HEARL:
Thank you very much for that feedback, and I'll make sure that, if I'm standing here next year, I will comply.
LIZ RICHARDS:
(INAUDIBLE) is today as well.
CHAIRMAN PETER HEARL:
Are there any other questions, ladies and gentlemen? Yes, we have one here, and we've got one on microphone 2, first, I think, then 4.
SPEAKER:
Thank you, chairman. I'd like to reintroduce David Holland.
DAVID HOLLAND:
Hi there, Peter.
CHAIRMAN PETER HEARL:
David, how are you?
DAVID HOLLAND:
Pretty good. Just about ready to go outside and eat up, hopefully.
CHAIRMAN PETER HEARL:
You're not alone.
DAVID HOLLAND:
Thanks. The old man had a saying. He said if you pay peanuts, you get monkeys. And I reckon that saying holds true. So I reckon you're doing a good job as well. Yeah, that's about it. Thanks.
CHAIRMAN PETER HEARL:
Thank you, David. Microphone 4.
SPEAKER:
Thank you, chairman. I would like to introduce Scott Hunter.
SCOTT HUNTER:
The salary component that's paid in cash, or however it's paid, 2.3 million, that works out as a daily rate of $6,000 a day each day, every day. And I don't consider that to be peanuts. I consider the short term and long term incentive of earning $6,000 a day in a job. It's that one gets to keep it, and that should be motivation in itself. A number of people I know, if they were getting that, they'd be running into work to get there on time, not upsetting anybody, doing the job properly and then sticking their hand out for the $6,000 a day. And I don't see why you have to give any further incentive than that. I mean, why don't you just put the money in just a cash component instead of something that can increase to up to 5 million, which would be 15,000 a day, which is a pretty good salary.
CHAIRMAN PETER HEARL:
Thank you for your question. We believe that having a mix of cash restricted stock and performance shares is an appropriate way to attract, retain and motivate world-class executives. And we think what we've done with the EVP does just that. In terms of the FY17 remuneration, the REM policy, as I said earlier, is designed to link financial rewards directly to employee contributions and company performance. The CEO's remuneration, the outcome for the last year, is consistent with that philosophy. We delivered solid STI results and made progress against our strategies. In terms of the LTI outcome, which covers both the relative total shareholder return and the free cash flow return on investment, we did not deliver on our targets. So Andy received no remuneration under the FY15 LTI plan. And as a group, our key management personnel received 27% less cash equivalent remuneration in FY17 versus FY16, and Andy's remuneration on that basis was down 23%. I thank you for your question. Microphone 3.
SPEAKER:
Thank you, chairman. I'd like to reintroduce Noel Levy of Wollongong.
CHAIRMAN PETER HEARL:
Morning, Noel.
NOEL LEVY:
Good morning, Mr Chairman. First of all, with this new system you've got, it's a bit confusing, you know, working out which is STIs and which are LTIs. But based on what I've got here, for the short term incentive, you get 35% cash, 26% restricted shares. Is that correct of the total remuneration? And then for the long term incentive, it's 39% performance rates.
CHAIRMAN PETER HEARL:
Well, it's all part of the single incentive program.
NOEL LEVY:
But it's confusing. All the other companies...you are the first company that I've cut shares in. Put those two things together, and basically, it's making it more difficult for me, anyway, to decipher exactly what the STIs are and the LTIs. So can you answer the question, first of all? Am I correct in assuming that the total remuneration of the incentive schemes is 35% cash, 26% restricted shares for the STI and 39% of performance rates for the LTI.
CHAIRMAN PETER HEARL:
That's correct.
NOEL LEVY:
Well, if that's correct, it means the short term incentives, they're getting 61% and they're only getting 39% for the long term. Now, it's good having these long term being four or five years, but it doesn't encourage them to make long term decisions. They're getting 61% for the short term decisions. So it's in their interest to make decisions which are going to benefit in the short term.
CHAIRMAN PETER HEARL:
Well, as I said earlier, it's a single incentive program where 65% of the reward is in the form of either restricted stock or performance stock. The performance shares are, in fact, subject to a second hurdle at the end of four or five years for the FY18 EVP. And they're also subject to the first hurdle of achieving the performance results against the performance year, the first year of the performance plan.
NOEL LEVY:
Another question. On Page 7 where it says Plan terms and Conditions, the CEO's target is 200% of his fixed remuneration. And I'll turn over the page, top of the next page, CEO opportunity. It says the maximum opportunity is 400% of his fixed remuneration. So this means that allocation of equity methodology, when it comes in there, it said this fixture remuneration is 2.39 million. So 200% of that is 4.7 million. But in fact, it's twice that amount. It's 400%, not 200%. It is possible (UNKNOWN) have, which is closer to 10 million. (CROSSTALK) is fixed annual remuneration added to that, it's coming up towards 12 million. It's over the top.
CHAIRMAN PETER HEARL:
Well, the point I'd make as I did in my address is that the size of the opportunity, whether it's at target or maximum, is unchanged from the existing STI and LTI plans. The reality is that we've put more of the incentive into the form of equity, either restricted stock or performance shares. And we believe that much more tightly aligns with the interests of shareholders. And it's done over a longer timeframe, which, again, reinforces the alignment with shareholder interests.
NOEL LEVY:
The last comment and the last complaint is this, that relative TSR. That really doesn't align shareholders with the executives because they can still cash their incentives if they perform better than the ASX 100, minus the mining shares. So the share price could go down or dividends could go down. There could still get the remuneration, but we'd be losing our money.
CHAIRMAN PETER HEARL:
Well, there have to be in the top 50th percentile. The other point I make is that 80% of our shareholder base are domestic shareholders. And as such, we believe that the ASX 100 is much more relevant in considering the competition we face for investor capital. We also sought feedback extensively from major investors and proxies as we design the EVP. And the overwhelming feedback we got from those folk was that the ASX 100, excluding resources, is a much more relevant measure of shareholder return for Telstra.
NOEL LEVY:
Thanks, Mr Chairman.
CHAIRMAN PETER HEARL:
Thank you. There being no further questions at this time, I'm gonna hand back to the Chair. Thank you.
CHAIR:
Great. Thank you very much, Peter. Shareholders, I am now about to finalize discussions of Item 4 and 5 and conclude the meeting. So if you have any final questions on these two items or any other questions that you'd like to ask about your company that are relevant to shareholders as a whole, please, move to a microphone now. I take it as not. So thank you, shareholders. We've not finalized discussions of items 4 and 5 in the proxy and direct voting position on these two items is being shown in the slides behind me. As indicated in the notice of meeting, I intend to vote all available proxies in favour of Item 4, the grant to the CEO, and in favour of Item 5, the adoption of the remuneration report. Please, complete your vote now for these two items. Shareholders, that concludes our discussion of all items on today's agenda. If you haven't already done so, please, complete your voting now. Attendants are carrying ballot boxes throughout the room and ballot boxes are also located near the exits.
The poll will remain open for a further 15 minutes to enable shareholders to cast their votes, and the results of the poll will be available later today and can be obtained by visiting the ASX or our websites. All items of business having been considered, I now declare the meeting closed, subject to finalisation of the poll. Thank you and thanks to all of those who viewed the AGM online. Thank you for your attendance today, and I now invite you to join us for lunch in the foyer area. Thank you.
2016
The 2016 AGM of Telstra Corporation Limited was held from 9:30am (Sydney time) on Tuesday 11 October 2016 at the Grand Ballroom, Four Points by Sheraton (Darling Harbour), 161 Sussex Street, Sydney NSW.
2016 AGM recording
Video content description
Recording of the 2016 AGM held on Tuesday 11 October 2016 at the Four Points by Sheraton (Darling Harbour), Sydney.Â
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JOHN MULLEN:
Good morning, ladies and gentlemen. My name is John Mullen, and my honor to be the new chairman of your company. So on behalf of my fellow directors, it's also my pleasure to welcome you all this morning to Telstra's 2016 Annual General Meeting. And I also extend a very warm welcome to the many shareholders joining us today online. I would like to begin by acknowledging the traditional owners of the land on which we're meeting the Gadigal people of the Eora nation and pay my respects to the elders past and present. We have a quorum today and I therefore declare the meeting open. Can somebody lift the volume, please? I apparently can't be heard. The notice of meeting was distributed earlier, setting out the business and the resolutions to be considered at this meeting, and I will obviously take that notice as read. There are five items of business on today's agenda; Presentation's firstly by myself and or Chief Executive Officer Andy Penn. Secondly, discussion about 2016 financial statements and reports.
Thirdly, consideration of the election and re-election of directors, consideration of the proposed grant of performance rights to the Chief Executive Officer and consideration of the remuneration report. Voting on items three to five will be conducted by a poll and that poll is now open. If you do need to leave the meeting early for any reason, you can vote by completing your voting card and place it in one of the ballot boxes near the exits. I'd now like to introduce my colleagues who are here with me today. Firstly, joining us today from our auditors Ernst and Young is Steve Ferguson is available to answer any questions you may have on the conduct to the audit or on the auditor's report. This will be Steve's final AGM as Telstra's auditor, and I would really like to acknowledge his great service to the company over the past six years. He will be succeeded by Andrew Price, also from Ernst and Young for the 2017 financial year. Then with me here, also on the stage are Andrew Penn, our Chief Executive Officer, Damien Coleman, our company secretary, Warwick Bray, our chief financial officer and my fellow directors on the board.
Shareholders will also be aware this year director Nora Kessel is standing for re-election and Craig Dunn and Jane Hemstritch, who joined the board earlier this year are standing for election. And I will shortly invite those directors standing for election and re-election to introduce themselves individually. But before I do that, I would first like to acknowledge the contribution of Chin Hu Lim, who's notified the board that he intends to retire as a director of Telstra at the conclusion of today's meeting. Chin Hu has been a director since 2013 and a member of the board's nomination committee from earlier this year. Chin Hu has made a very valuable contribution and on behalf of the board, I would like to express our sincere thanks and wish him well for the future. I would not just like to break for two seconds to ask Mr Lim to address the meeting.
CHIN HU LIM:
Good morning. I would like to thank all our shareholders who are present here today for giving me the opportunity to serve you as your director in the last few years. I've been from John Mullen, the chairman, about two months ago that I don't intend to stand for re-election in today's AGM. Now, some of you who know me would know that I'm actually based in Singapore, not in Australia. And for personal family reasons, I've decided to travel less and spend more time with my family in Singapore. It has been a real privilege to serve as your director, and I've had the privilege of working with some of the brightest talent in the industry, both with Andy Penn and his current management team and before that, David Toddy before he retired. I've enjoyed the many hours of discussion we have had on Telstra's key opportunities, as well as some of the challenges that a company faces. I have no doubt Telstra will move into greater heights and continue to create value for you as our shareholders. I'll be watching the company with keen interest, even as I retire.
And finally, thank you again for giving me the opportunity to serve you, and I wish all of you and Telstra the very best. Thank you.
JOHN MULLEN:
Thanks very much, Chin Hu. And again, our very best wishes to you for the future. So I'd now like to invite the director standing for election to introduce themselves, starting with Craig Dunn.
CRAIG DUNN:
Alright. Thank you, chairman and good morning, ladies and gentlemen. It's been a great honor for me to be invited to join the Telstra board and act as your representative. And I like to take the opportunity to say a few words this morning. Telstra, of course, occupies a very special place in the history of our great country. It makes a very substantial and enduring contribution to all the communities it serves, and I know that it will continue to do so into the future. I'm very conscious of the important role our board plays in the governance and stewardship of any company and believe my background and career enable me to contribute effectively to this role. I've held senior executive positions in other large Australian companies, including in finance strategy and as CEO, and I've lived and worked overseas in both Europe and Asia. In more recent years, I've taken a very strong interest in technology and the digital revolution and act as chair of Australia's leading fintech incubator here in Sydney.
I believe my background gives me valuable insights and experience into the opportunities and challenges likely to face the board of a large, complex and nationally significant company like Telstra. So I'd like to thank you for listening to me. Thank you for your support, and I look forward to continuing to add as much as I can as your shareholder representative. Thank you.
JANE HEMSTRITCH:
Good morning, fellow shareholders. I feel very privileged to have been asked to serve on both the Telstra board of directors and as a member of the Board Remuneration Committee and stand for election today. As a Telstra board director, I will bring to the table two main things. Firstly, my experience as a senior executive in a large global technology organisation, during which time I was responsible for 12 Asia-Pacific countries, including China, Japan and India, and over 30,000 personnel. Secondly, I'll bring my experience of over a decade as a director of other major Australian companies, allowing me to bring to Telstra some insights into governance, best practice and the ways in which other companies are implementing major change initiatives and tackling new technologies. With respect to my committee, I chair remuneration committees and other organization. And while Telstra has many unique characteristics and circumstances, in some ways faces similar challenges to other large ASX companies and insights, I think from other places can inform some of Telstra's choices.
I look forward to being part of the team that's the Telstra board of directors, and I ask for your support for my election as a director, and I'd be pleased to work on behalf of all shareholders during the next phase of the company's development. Thank you.
NORA SCHEINKESTEL:
Good morning, ladies and gentlemen. My name is Nora Scheinkestel, and this is the third time I'm standing for re-election, having joined the board in 2010. During my time as a director of Telstra, I've chaired the Audit and Risk Committee since 2012 and I've chaired the due diligence committees for the two NBN transactions and the two buybacks, which we've done over recent years. Telstra, like the whole Australian economy, is experiencing a dynamic and fast changing environment, and your board and management team are focused on being agile and responsive to our customers needs and demands, as they too continue to change. With some 25 years of experience as a non-executive director, having served in almost every sector of the economy, I've been part of leadership teams needing to fundamentally transform their business, respond to deep shifts in customer expectations and to meet increasing regulatory hurdles. While the disruption that's occurring is certainly presenting challenges, it's also offering us tremendous opportunities.
We won't always get it right, but responding quickly and learning from our missteps is key to being able to delight our customers, deliver value to you our shareholders and also meet the requirements of our broader stakeholder group. That's why at the Audit and Risk Committee, we're currently working with our management team to redesign our risk management practices so that we're better equipped to respond when issues arise. Should you choose to re-elect me, I believe my experience will allow me to make a valuable contribution to our leadership team as we face into what is a very exciting time. Thank you.
JOHN MULLEN:
Thank you, Nora, Craig and Jane, and I would like to thank all of my directors for their contribution, for their support and their commitment during the last year. Now, before addressing progress over the last 12 months, I'd just like to say a few quick words about the board and the governance framework of Telstra. Our board's role is to provide a robust structure through which our business objectives are set. The performance of our management team is monitored, the risks that we face are managed and shareholders interests are protected. We seek at all times to ensure that the board has an appropriate mix of skills, diversity, experience and expertise to enable it to effectively fulfill its responsibilities to help your company navigate the opportunities and the challenges that we face. Now, in this regard, there were a couple of changes to the board during the last year. In particular, shareholders would be aware that in February this year, Catherine Livingstone announced that she would be retiring as chairman and as a director, and she ceased to hold office as chairman and director in April.
While unfortunately, Catherine is unable to join us here today, can I say that Catherine has been an exceptional chairman and her contribution to Telstra through times of great change has been absolutely enormous. She was a director for nearly 16 years and chairman for the past seven. During that time, Catherine has helped ensure that Telstra is very well placed to capitalise on the enormous opportunities of the digital age, and that your company continues to build the expertise, the capability and the customer focus that we need if we're going to succeed in the future. Through so many fora, she has shown her passion for technology, her passion for science, reform and innovation. And in so doing, she's earned the deep respect of stakeholders around the world. So on behalf of the Telstra board, the leadership team and I'm sure many shareholders here today, I would like to express our sincere thanks to Catherine for her great contribution to the company and to extend to her our best wishes for the future.
So I now have the honor and the privilege of succeeding Catherine in the role of chairman, very large shoes to fill indeed. But my focus and that of all my colleagues on the board is to maintain the exciting strategic course that we've jointly set and help take the company to new levels of performance in the future. So let me just make a few comments now about Telstra's performance in the 2016 financial year. 2016 was a year of increasing external change. But despite that, we were pleased to deliver another solid outcome for shareholders growing revenue and EBITDA on a guidance basis and again providing consistent shareholder returns. Net profit after tax from continuing and discontinued operations was up 35.9% to $5.8 billion, including the 1.8 billion that we realised from the sale of Autohome shares. Earnings per share for the year rose to 31.6 cents per share on a continuing basis, and the board declared a final dividend for the year of 15.5 cents per share, which takes the total dividend for the year to 31 cents, which is up 1.6% on the last financial year.
And while the results are solid, there's no doubt the competitive intensity has increased across all our segments and products as a piece of technology and innovation continue to accelerate and the rollout in particular of the NBN network, progressed. 2016 was a year where ongoing advances in technology and constant innovation continue to reshape the telecommunications and technology markets in which Telstra operates. 2016 saw more and more people, and more and more businesses, both large and small, take advantage of the exciting, empowering possibilities of new connective technologies. I think it's safe to say today there's virtually no technology innovation that does not fundamentally rely on a network and collectively, Telstra's networks are Australia's best. Thank you. We believe it, too. So to give you a sense for the scope of Telstra's operations, on average, 55 million calls and 365 million data connections are made over our network every day, connecting friends, connecting families, connecting businesses and essential services around Australia and for that matter, increasingly in the world.
And to give you a sense for the demand that we're seeing, a single 4G wireless broadband modem on the network today can deliver more than the total combined network throughput of 10 years ago and data traffic on our wireless network continues to double every two years. I'm not sure that anyone predicted this level of change or the speed of such change even a few years ago. Customers are expecting more and more capacity at a lower and lower price, and I cannot think of many other large established businesses in Australia, where usage of its core products and services are increasing at such a pace. It is for this reason that we were very disappointed to let customers down through the network interruptions we experienced in the second half of this financial year. We are deeply sorry for the impact of this had on our customers, and Andy Penn will take you through the steps that we're taking to mitigate the risk of this happening again in the future, particularly as reliance on smart devices grows and grows.
This said, there is nothing, and I repeat absolutely nothing inherently wrong with Telstra's core networks. An assessment of Telstra's networks by independent global experts has told us that we have world class network infrastructure, but we need to keep investing to stay ahead of demand by simplifying our products and platforms, retiring old technology and legacy systems that slow down and complicate how customers are served and by investing in materially greater capacity, growth and speed. We anticipate that demand for our services will only continue to grow. And so to meet this demand and to extend our network leadership, in August this year, we committed to invest up to an extra $3 billion over three years on a far reaching network of the future and digitization program. Now, Telstra has always sought to be a leader, and Telstra has demonstrated this many times. The launch of the next G 3G service in 2006 established Telstra as a clear market leader and saw distance ourselves from the competition.
Today, though, the competition has narrowed that gap somewhat. While we still have the best set of networks in Australia, it is time for us to distance ourselves again. This wave of new investment will digitise many of our core legacy processes to deliver significant customer benefits, reinforce our market differentiation over the longer term, and usher in a range of business benefits, including capital efficiency, reduced operating costs and increased revenue. It is a really exciting and transformational programme by which Andy Penn will provide a bit more detail in his presentation to you shortly. So let me now make some additional comments about the three pillars of Telstra's strategy, which are to focus on improving the customer experience, to drive value and growth from our core business and to build pathways towards future sustainable long term growth. Improving customer advocacy remains the most important priority, and the new investment that we'll be making will be in very large part focused on this critical initiative.
I think it's fair to say that over recent years we've been successful in our customer advocacy program in that there is not a single employee in Telstra today who does not now understand the importance of the customer. However, we also have to admit that we still do not always give our employees the tools they need at their fingertips to fix the customer's problem. The new investment that I've mentioned will seek to address this through the digitisation of legacy platforms and to enable our employees to deliver an exceptional customer experience that will differentiate us again from our customers. Second pillar of the strategy is driving value and growth from our core business, which is built around our networks. Over the past year, we've invested $4 billion in capital expenditure into our fixed and mobile networks, and we've now achieved 98% population coverage with 4G and we're on track to reach 99% population coverage by June 2017 if the regulatory settings for such investment remain favourable.
Our Telstra Air Wi-Fi network now has over 650,000 hotspots nationally, including over 4,500 public hotspots and over 1.1 million customers activated to use the Telstra Air Network. In relation to the National Broadband Network, Telstra is Australia's leading provider of services on the NBN with a market share of 50%, and we are seeing continuing strong demand from customers as this rollout scales up. We're also helping NBN Co with the rollout of the NBN network through a number of commercial agreements, including a $1.6 billion contract signed in April to provide planning, design, construction and construction management services within the Telstra HFC footprint until the expected end of the NBN network built in 2020. Now, of course, the NBN network will have one off and recurring impacts on our earnings. The shareholders will recall while the definitive agreements that we have signed with NBN Co and the government partially compensate us for the effect of the NBN network. The impact of the NBN goes well beyond those agreements through the impact of transitioning costs and ongoing operational access costs.
Overall, the forecast net effect on our business is a reduction of some two to $3 billion EBITDA per annum at the conclusion of the NBN network build. So our task is to offset these impacts over the next few years through a number of strategic initiatives, including driving value and growth from our core business, by reducing our fixed costs, enhancing share through digitisation, simplification and process improvements and building new growth businesses. So this is perhaps an appropriate moment to mention that, as we all know, Telstra operates in a complex regulatory environment. The formation of NBN Co highlighted this that while the NBN Co relationship is now strong and transparent, we still face other regulatory risks on a regular basis. One of these is the current declaration inquiry into domestic mobile roaming by the ACCC. And for those of you not aware, the declaration of domestic mobile roaming would essentially allow our competitors to utilise the Telstra network in areas where we have invested and provide coverage and where they have not.
Since privatisation, Telstra has spent many billions of shareholders dollars on building one of the world's largest and best networks. Customers in the cities and in the bush value the extra coverage very highly, and it's one of the main reasons why they buy our mobile services. One of our competitors is seeking regulation to close this competitive gap by cheaply riding on our network to avoid spending their own capital. Simplistically, this is the equivalent of an airline, say, wanting to provide services in regional Australia and instead of investing in his own airplanes to make seats available, it pushes for regulation to force another airline to reserve half the seats on its plans for its own customers. One can understand why some competitors would lobby for this. It would be a free Christmas present for them. But just as in the airline example, Telstra has carefully invested billions of dollars over many years building the best networks, and we do not think it is right that others be given a free ride on those networks.
If the ACCC decides to declare mobile roaming, they would absolutely be at the expense of you, the Telstra shareholders. It would also be very bad for Australians that live and work in regional areas is clearly why would anyone invest in maintaining or upgrading their regional networks when they can hitch a ride on someone else's network, and there's no longer any competitive differentiation from greater network coverage? It is a big issue. Your board and management are carefully explaining these effects to the ACCC. An increasing number of regional stakeholders and policymakers are also making their concerns with a proposal clear. And we remain very hopeful that sense will prevail, that we will keep your shareholders informed on any material developments. This leads me to our third strategic pillar, building new growth businesses, which is about realizing new opportunities that can leverage Telstra's core assets and strengths. In this, we are working on innovations that create new opportunities and possibilities in areas, including digital media, E-health, applications services, and software.
The successful integration of Pacnet over the past 15 months means that Telstra is now a leader in international connectivity with one of the largest submarine cable networks in the Asia Pacific region. Our joint ventures in China, through Telstra PBS, and Indonesia, through Telecom Telstra, both enjoyed strong demand for services this year. We also signed a memorandum of understanding with the Shanghai Institute of Medical Quality to make Telstra's health hospital data tools available in China. And network applications and services business has seen double digit growth each year for the last few years, and now generates annual revenues in excess of $2.7 billion. Telstra Health is now one of Australia's leading providers of eHealth solutions, and in May was selected by the government to deliver the National Cancer Screening Register under a five year contract. This year, we also announced the sale of most of our stake in Chinese online car sales site, Autohome, for what was a $1.8 billion profit on sale.
Autohome has been a incredibly successful investment for Telstra. And we remain very proud of the role that we played in rapid growth since we first invested back in 2008. We believe the time was right for us to realize significant value for shareholders. We do, however, retain a 6.5% interest and a board seat. Let me now make some comments on Telstra's ongoing work in the community. We are continually seeking to identify ways that can use our technology, skills and scale to operate more responsibly, better serve vulnerable customers and help safeguard the environment to create long term value for our company and the communities in which we operate. For example, this year, we helped more than 1 million vulnerable customers stay connected. We reached more than 59,000 people through our digital literacy programs, which includes tech savvy seniors, Telstra Digital ambassadors, and our cyber safety awareness programs. And we also provided $175 million of value through our social and community investment programs, which includes sponsorship and disaster relief, employee volunteering and giving, and our customer and community digital inclusion programs.
Under the federal government mobile blackspots program, we are deploying 429 new 3G, 4G base stations over three years to improve mobile coverage for over 400 communities across Australia. Last month, we activated the 60th mobile base station under this program. I'll turn now to our capital management strategy, which continues to be underpinned by a clear focus on maximizing returns to shareholders and maintaining financial strength and retaining financial flexibility. On the back of our results, we announced that we would return that to approximately $1.5 billion of capital to shareholders, comprising a 1.25 billion of market share buyback, which has recently been completed and a further 250 million on market share buyback. These buybacks are being funded from Telstra surplus cash and continued strong free cash flow generation, including that from the recent sale of Autohome shares. The advantage of a buyback program over a special dividend is that earnings per share is expected to increase to all shareholders as are then less shares on issue.
In addition, shareholders can now also elect to participate in our dividend reinvestment plan, which were reintroduced in response to earlier shareholder feedback. So, in conclusion then, 2016 was a good year for Telstra. A good year for its shareholders. It's been a year of increased change and competition. So, a year that has seen challenges from the outages to regulatory imposts and capacity growth. But despite these challenges, we delivered on our financial and other objectives for the year, and Telstra definitely remains Australia's best telecommunications and technology company. Indeed, we continue to be held in the highest regard around the world. I would like to take this opportunity to sincerely thank Andy Penn, his senior executives and the entire 33,000 strong Telstra team for their efforts in delivering the many achievements that I have described this morning. Looking forward, there's no doubt connected digital technologies will continue to drive change. And increasingly, we will see most people and most things connected through smart technologies, smart devices, and smart networks.
We can't even imagine what the world will look like in another 10 years. The challenge for Telstra is to harness the fantastic people, fantastic assets, and great opportunities that we have, stay ahead of our competition, and realize our vision to become a world class technology company that empowers people to connect. And I'm very confident that is exactly what we will do. With that, I will now hand over to your chief executive officer, Andy Penn, to comment on our operations for the year in more detail. (APPLAUSE)
ANDY PENN:
Well, thank you very much, Chairman, and good morning, everybody. Thank you for taking the time to be with us here this morning. As our shareholders, we value the opportunity to see so many of you and to hear your thoughts and to address your questions. I'd like to cover three things in my presentation to you this morning. Firstly, I will provide an overview of how the company has performed in 2016. Secondly, as many of you will be aware, and as the Chairman has already alluded to, we did have some network service interruptions in the first half of the calendar year. And so I will address what we're doing to rectify those. I will also discuss our responses to the issues and our work to ensure we continue to have the best networks in the country. Thirdly, I will comment on our announcement with our full year results to make a significant investment in our core business, a program that will transform customer experience and position Telstra strongly for the future. As we see, the rate and pace of technology innovation accelerating and the continued growth of data on our networks.
I will conclude by confirming our guidance. I would like to start though with an overview of 2016. Because 2016 was a year of strong performance for Telstra in what was an increasingly competitive market. We delivered against their guidance in our three key measures of income, EBIT and free cash flow. Net Profit After Tax from continuing and discontinued operations was up 35.9% to $5.8 billion. Importantly, given the competitive dynamics, we continue to attract new customers. We added 560,000 net new domestic retail mobile services and 235,000 net new domestic retail fixed broadband services. We also saw another 322,000 customers taking one of our bundled offerings. On the NBN, we added 289,000 net new customers, including our 500,000th customer on the NBN since the rollout started. This in fact coincided with NBN zone announcement of its 1,000,000th connected home. So, we're very pleased with our share in this critically important market. In fact, the monthly connection volumes of NBN for Telstra have doubled since February of this year.
That means that Telstra is now connecting one new customer to NBN services every minute. During the year, we also signed a number of significant contracts with NBN to both build and maintain their network. These contracts are worth over 1.6 billion over the next few years. Encouragingly, global enterprise services continue to grow strongly with income up 11.5%. And we're particularly pleased with our performance internationally with GS with revenues up 55.5% following the successful integration of Pacnet. Our fixed broadband business perform strongly with good customer wins leading to solid revenue growth. And we saw particularly strong performance from our challenger brand, Belong, which is now in its third year since launch. In mobile, there is no doubt that the market has been very competitive. Despite this, we have performed well growing EBITDA and our margins, even though underlying revenue remained flat. Mobile's performance in the business sector was strong and reflected the increasing use of mobile technologies to drive new solutions for industries, mobile workers and connected devices.
This year, we upgraded more than 2,000 network sites to 4GX, we achieved 98% population coverage for 4G and our customers experienced a 25% increase in the average download speed of their 4G devices On Air network. We also launched Australia's first voice over LTE, or VoLTE service, with more than 1 million customers now having access to high definition calling over 4G. And, of course, 5G is the next generation of wireless technology. And we are actively engaged in setting new international 5G standards, and getting ourselves ready to bring this technology to Australia. Only three weeks ago, and in partnership with Ericsson, we completed a successful real world trial of 5G in our Global Operations Center in Melbourne. The test saw download speeds greater than 20 gigabits per second and confirmed that 5G will be a quantum leap in terms of speed, latency, and overall capacity and capability. And we intend to be at the forefront of this technology in Australia. 2016 was also an important year for our media business.
We signed long term agreements for the exclusive mobile digital rights for the AFL, the NRL and Netball, Australia's biggest broadcast and grassroots sports. These agreements underpin the huge and growing popularity of watching live sport on a mobile device, smartphones and tablets. Already, more than 750,000 of our mobile customers are enjoying premium sport and music content experiences through their Telstra Mobile plans. We're also using our media assets to enhance the value for our fixed line services. And customers now have more than 400,000 Telstra TVs in Australian homes in less than one year since launch. During the year, we took the next step in the evolution of our brand in line with our vision to become a world class technology company that empowers people to connect. We launched a new brand in July, and we are extremely pleased with the way in which it has been received. The financial results included a $1.8 billion profit on the sale of the majority of our shareholding in Autohome.
This transaction realized significant value for shareholders. Autohome has been incredibly successful investment for Telstra. And our decision to sell the majority of our shares reflects the opportunity to underpin the next phase of its growth through a strategic partnership between Autohome and the Ping An Insurance Group in China. We retain a 6.5% shareholding Autohome and a seat on the board of the company. The results this year also included a $246 million impairment of Ooyala, reflecting the changing dynamics in the intelligent video market and the business performance. Overall, earnings per share for the year was up 37.4% to 47.4 cents per share, or 31.6 cents per share on a continuing basis. As the chairman mentioned earlier, the board declared a fully frank dividend for 2016, a 15.5 cents per share, taking the total dividend for the year to 31 cents per share up 1.6% on the last financial year. Despite the strong results, we were disappointed that our advocacy result, which is we measure via the Net Promoter Score, declined four points.
What this means is that we did not deliver to the extent that we should on all occasions for our customers. And as a consequence of this, the portion of executive remuneration which is attributable to our customer results was not paid. There are a number of factors which influenced this, including the network service interruptions that we experienced in the second half of the financial year. Telstra is networks include approximately 230,000 kilometers of optical fiber cabling, 170,000 routers and switches, over 8,500 mobile network sites and more than 5,000 exchanges. And, of course, with this level of complexity and the volume of data and traffic on our network, it is true to say that occasionally issues do occur. However these interruptions had a wider impact and is acceptable. And we have apologized for that. Our energy since have been firmly focused on an extensive network review with input from international and independent experts to address these issues. As a result, in June we announced a $250 million program of investment of initiatives from within our current capital budgets.
This include a $250 million investment in mobiles to improve recovery times and network monitoring. $100 million investment in our core network to improve resilience and reliability, and a further $100 million investment to increase ADSL capacity to respond to the significant growth in customer demand from increased video streaming. Well progress with this program and have already substantially improved their mobile network recovery times. And in parallel, of course, we have continued to build our network capabilities. Now this work is critical because all of us are relying more and more on smart devices, smart technologies, and fast connectivity every single day. In 2013, mobile banking in Australia represented 24% of all banking transactions. In less than two years, that number has nearly doubled to 38%. Mobile video consumption has increased eight fold since 2011, with twice as many people watching four times as much video on a mobile device. At the recent Rio Olympic Games, the seven Telstra Olympic App simultaneously streamed 36 channels.
And over the two weeks of the games, the app was downloaded 1.5 million times and there were more than 37 million live streams of coverage. We're also seeing the same dynamic with the AFL and the NRL. Just over a week ago at the AFL Grand Final, 1.8 5 million minutes of action was watched on the official AFL App, up 134% on the previous year. And, of course, it was a similar story at the NRL Grand Final the following day where 1.1 million minutes were watched up 107% Oon the previous year. Now, if we've seen this much change in the last five years, just imagine what 2020 will look like as the rate and pace of technology innovation accelerates. Over the next five years our network traffic will grow enormously, driven by an explosion of media, digitization, and the use of cloud computing. Now, we've thought deeply about what this means for our business, what this means for our customers, and what our network needs to look like. We've thought deeply about how we will differentiate Telstra from others in this market.
Telstra has a history of making investments ahead of the curve to create strategic differentiation. And the time is right to do that again now. In August of this year, we committed to invest up to $3 billion in additional capital over the next three years, lifting our CapEx to sales ratio to 18%. We will be investing in our network in a way that delivers customer experiences, reduces our time to market, increases flexibility and reduces costs. This means we will be able to do things faster with lower latency, and offer products and services that can move seamlessly between fixed and wireless networks. And network will be smart, adaptable and scalable. That is the world of the future. And that is the world that we're investing in so that our customers can enjoy brilliantly connected experiences. Now, these investments are going to be made in three key areas. Firstly, in building the network of the future. The foundation of the program. Secondly, in accelerating the digitization of our business.
And thirdly, in improving our customers experience. Let me comment briefly on each of these areas in turn. We will also be discussing the program in more detail at our upcoming investor day next month. To deliver the future network experiences, we will use software defined networking architecture to build a more programmable, flexible and resilient network that we can scale easier and at lower cost. We will build the foundation for the next generation of wireless services 5G. In the very near term, we will further improve the service levels on our ADSL fixed broadband network to deliver faster speeds to more of our customers. from a mobile perspective, we will further enhance depth and breadth of the network. In metro areas, this will mean greater in building coverage in homes and in offices. We will also extend 4G coverage in regional areas, provided the regulatory settings remain conducive to investment. And in that regard, you've already heard our concerns from the chairman with regards to the ACCC's inquiry into domestic roaming.
Australia has one of the best mobile industries in the world. Despite our dispersed population, approximately 99.3% of the population enjoys mobile coverage today. And that is because to win in a highly competitive market, Telstra, your company, has disproportionately invested in regional areas to cement our place as the number one network for coverage and quality in Australia. This competitive dynamic that has benefited people in regional Australia would be put at risk if roaming were to proceed. For example, we are very pleased to be actively participating in round two of the government's mobile blackspots program. However, future rounds of this program would be seriously threatened by roaming. Now, of course, the principle advocate for mobile roaming is a foreign company that has chosen not to invest to the extent that Telstra has. A foreign company that is actually very capable of investing and a foreign company that has argued against roaming in other markets where it suits it to do so.
We are hopeful for the benefit of all Australians, particularly for you as shareholders, that this foreign companies regulatory campaign will not be successful. Thank you. The second area where we are investing is in digital enablement of our sales service and product experiences. The focus here includes purging complexity from our legacy systems and creating a world where customers can interact with Telstra on their terms. We are accelerating move of apps and services to the cloud, and overhauling systems such as billing and order to activate. We expect these changes will deliver customers a fundamentally better experience when they interact with Telstra, as well as create financial benefits for all shareholders. Underpinning these initiatives will be adaptable digital IT core architecture that will deliver a single access point to our underlying systems and move away from the complex systems environment that we have today. Ultimately, all of these investments are focused on delivering better customer experiences.
Customers will experience new rich communication services with capabilities such as voiceover LTE, integrated messaging, and video. Sporting events and other media will be greatly enhanced through the use of broadcast services and video streaming based on LTE Broadcast technology. The program will also open up a world of augmented reality, autonomous driving and robotics. For our business customers, new opportunities in productivity. Business insight will be offered as industries such as agriculture, banking, healthcare, logistics, and transportation services are all enhanced by the billions of sensors and connected devices that are arriving with the Internet of Things. Similarly, applications in areas such as drone technology and remote healthcare diagnostic will explode over the next four years. For business and enterprise customers both domestically and internationally, we will invest in our enterprise technologies and capabilities, particularly in cloud, in collaboration and in managed security.
ANDREW PENN:
And finally, we will also be investing to deliver greater reliability, greater resilience and greater security for all of our customers, as the growth in data volumes across our networks continues. In summary, this is a very significant program of investment that will position Telstra strongly for the future. Before closing, let me reconfirm our guidance for the year. In 2017, we expect to deliver mid to high single digit income growth and low to mid digit EBITDA growth. We expect CapEx, excluding externally funded CapEx to be approximately 18% of sales, and we expect free cash flow to be in the range of 3.5 to $4 billion. Our guidance assumes wholesale product price stability, and excludes any proceeds on the sale of businesses. It also excludes mergers and acquisitions and purchase of spectrum. The guidance also assumes that the NBN rollout will be in accordance with NBN's own 2016 corporate plan. The 2017 guidance excludes the $246 billion Ooyala impairment in 2016, and also excludes restructuring costs in 2017 of 300 to $500 million.
Finally, a 2017 income and EBITDA growth on a reported and guidance basis will be impacted by the wholesale pricing decisions that were implemented in 2016. There will therefore be a full 12 month impact from the mobile terminating access services and final access to termination decisions. In conclusion, I would like to thank the whole of the Telstra management team for their dedication, hard work, and the willingness to step up to the challenges this year. I would also like to thank the chairman and the whole of the board for their support and guidance. This is an exciting time for Telstra, we see a great future for your company, as accelerating technology innovation drives a world of rapid change and new opportunities. We need to take advantage of these opportunities at the same time as addressing the very considerable challenge of the two to $3 billion negative impact on our EBITDA from the migration to NBN. The ultimate mark of our success will be the quality of the experiences that we provide for our customers.
Because above all else, this is what underpins our strategy, guides our actions, and will define our future. We're working to take Telstra to the next level, to set a new standard of excellence to become a world class technology company that empowers people to connect. Thank you again for your time this morning. And I would now like to hand back to the Chairman. Thank you.
JOHN MULLEN:
Great. Thank you very much, Andy. So, we have four remaining items of business today. And I will shortly introduce and invite questions on these items. But before I do, I just need to outline the question and voting procedures for today's meeting briefly. When you registered this morning, you would have been given a card. Yellow cards are for shareholders who may speak and vote, blue cards are for those shareholders who may speak but not vote. And you will need your card to ask a question or to re-enter the meeting. I will introduce each item separately, and then invite questions from the floor. There are several microphones located in the room. If you'd like to ask a question, please move to the reserved seating area behind one of the microphones. Please show your car to the microphone attendant and give your name. As a courtesy to all shareholders, please also state your affiliation if you're not here today in your personal capacity, and the microphone attendant will then invite you to the microphone when your turn comes.
Just a bit of housekeeping in the interests of all shareholders though please only ask one question at a time. Do try to keep your questions and comments to no more than a minute or two to allow as many shareholders as possible to speak. If your question relates to Director election, the grant of performance rights to the CEO or to remuneration at Telstra, please ask your question when we come to that item of business. And please ensure that your questions are relevant to shareholders as a whole. If we can't answer your question fully here today, then we will aim to provide you with a response after the meeting. Similarly, if you have an individual customer or shareholder issue, please speak with one of our customer service staff here who will be able to assist you. They are located both in the room here, and in the customer service area outside wearing Telstra shirts. There are three items requiring a shareholder vote today. For shareholders with a yellow card, the voting boxes are on the back of your card.
We have received proxies from approximately 27,500 shareholders and direct votes from approximately 12,700 shareholders. The votes recorded four, and against each item will be shown on the slide behind me at the conclusion of the discussion of that item. The four numbers displayed will include proxies received and available to be voted by the chairman of the meeting. Telstra share registrar is Fran Kelly of Link Market Services Limited will act as returning officer in relation to the poll. The results of the poll will be available later today on both the ASX and our websites. Finally, a light lunch will be served at approximately 12:00. However, if the meeting is still underway at that time, we will not adjourning the meeting for lunch. So, I turn to item two on today's agenda, which is to discuss the company's financial statements and reports for the year ended 30 June, 2016. This item provides shareholders with the opportunity to comment on and ask questions about our financial statements and reports as well as the business operations and management of Telstra.
You may also ask questions of our auditor. As I mentioned earlier, there will be opportunity to ask questions on Director election, the CEO performance rights grant and remuneration when we come to those items a little later in the meeting. However, if you have a question about our last year's results or any general questions about your company, this is the time to ask your question. Just before we do go to the floor though, I would like to call on our auditor to address two questions we received which both related to whether the auditor was satisfied with Telstra's internal controls. So, that ends, I would just now like to invite Steve Ferguson our auditor, to the microphone to respond to these questions.
STEVE FERGUSON:
Thank you, Chairman. We received two questions. The first of those, that aside all internal controls to the satisfaction of the auditor. And the second question, is the auditor happy with the Telstra's internal controls. As part of our normal procedures, we identify and test the internal controls that are relevant to the external audit of the financial report. In our view, the internal controls that we identified and tested were at the level we would expect for a top 10 Australian listed corporate. Thank you, Chairman
JOHN MULLEN:
Thank you, Mr Ferguson. I would also add that from Telstra perspective, a comment on the reassurance that the board seeks on the system of internal control as part of his process to approve the company's financial statements each half year. To the end, the CEO and the CFO, provide a declaration required by the Corporations Act and the ASX Corporate Governance Principles and recommendation. That declaration gives a confirmation relating to the proper maintenance of the company's financial records and compliance with the accounting standards in the preparation of these financial statements. This includes a personal declaration from the CEO and the CFO that their opinion has been formed on the basis of a sound system of risk management and internal control, which is operating effectively. As outlined in our 2016 Corporate Governance statement, this declaration has been provided by the CEO and the CFO in respect to the financial statements for the 2016 financial year. So, I would now like to invite shareholders to move to microphone to ask any questions that you may have on this item.
Shareholders as I mentioned, this is the part of the meeting where you have the opportunity to ask any general questions, about the business operations and management of Telstra as well as the questions about our 2016 financial reports and results. The other items you'll have an opportunity to talk about when we get to them. It looks like we have some sort of a technical problem too. So, have we got any questions on any of the other ones? No? Yep, we do. Can we go to microphone three then?
SPEAKER:
Mr Chairman, I'd like to introduce John Hillman of Yagoona.
JOHN HILLMAN:
Mr Chairman, and indeed the CEO, thank you for your presentations. My question relates to a very serious matter raised by both of you. And that is, to put it in my terms, a totally unjustified attempted ride on shareholders assets by an overseas controlled company. Now, shareholders might like to have a pin, and something to write on for this. Mr Chairman, you and the CEO presented some good facts to us about what could happen if the government, in my view very foolishly, allows this raid on Telstra infrastructure to take place. So, my question is probably a rhetorical question, and it's just as much to every shareholder as to yourselves. And whilst you haven't gone this far, I will, Mr Chairman, would it not be very, very wise for every single shareholder and their friends and their family to contact not only their local, Lower House member of parliament but every senator in their state, and tell them that we would be horrified, and we would demonstrate that horror in the appropriate way as electors, if the government allowed a raid on Telstra's assets?
Now, I'm a shareholder from the float. And I'm sure there's a lot of people doesn't matter whether it's from the float or the bottom few days ago or whatever. Our assets are seriously under threat from this. And so, I'll repeat my question. And I guess, Mr Chairman you can't go as far as I can being the head of the company and the CEO can't go this far. So, in a sense, it's a rhetorical question. Would it not be very wise. Indeed, would it be foolish if we did not contact our lower house members and every single senator? And indeed, we can tell it to our state MPs as well, because they're all part of the same parties. So, I guess that's a rhetorical question. But I would strongly urge every person in this room to do just that, because that's what the government will listen to when we are trying to protect our assets and our future income stream. Thank you.
JOHN MULLEN:
Thank you, Mr Hillman. I think one just brief precision, it is not actually the government that is doing this it is the ACCC who is considering. They are different, the ACCC that is actually considering this declaration. So obviously, we feel strongly about it. As we've we've already said, it's an individual choice of any shareholder or other stakeholder as to whether they want to get involved in the debate or not. But certainly, if you do feel strongly, we would suggest that you make your views known to the ACCC as and when they call for submissions on the paper that they will issue shortly. Thank you. The next microphone, microphone two.
SPEAKER:
Chairman, I would like to introduce Robert Robson from Melbourne.
ROBERT ROBSON:
Mr Chairman, I'm greatly encouraged based on your record for shareholders as managing director of Asciano, and hope you can emulate that performance as Chairman of Telstra. And also, by the comment of your ex chairman at Asciano who said you were one of the great hardest working executives he'd ever met.
JOHN MULLEN:
Well, that makes me feel very good. Thank you very much.
ROBERT ROBSON:
But my question sir is, when I look at the annual report, I see that revenue is up about one and a half percent profit is actually down when you take away the extra ordinary or the abnormal sale, and your operating cash flow is marginally down and pretty flat. And you paid a dividend of 31 cents out earnings of 31 and a half cents. Do you see the way this trend, that this will be reversed in the future and the dividend policy will be maintained?
JOHN MULLEN:
I think it's safe to say that everybody would recognize that market conditions are difficult, they are more difficult than they have been for a long time in this industry. And we expect that the levels of competition and disruption to continue. That said, I think if you look at the track record of Telstra, it's got an amazingly strong performance of offsetting similar trends in the past. And, you know, we've seen a continual decline in fixed line revenues now, which are some of the most profitable revenues the company had that's been going on for many years. Census was another big profit contributor. We sold assets, CSL and others. So, despite all of those, the management team have done a very good job, I think of maintaining earnings. We're facing another similar challenge now, the decline of fixed line continues. We now have the effect of the NBN. If we mentioned in speeches, which over a number of years is going to have a two to $3 billion impact. So clearly, all the focus now of the management and the board is to ensure that once again, we overcome that new hurdle, and we keep our earnings level or growing, so that we can indeed continue to improve our dividend.
I can't predict what the dividend will be in the future, but it's certainly a firm principle of the company that we wish to see it grow. Thank you. Next microphone, one.
SPEAKER:
Thank you, Chairman. I have a question from Kevin Daly of Kensington in New South Wales.
KEVIN DALY:
Yes, Mr Chairman. About a fortnight ago, there was a statewide blackout in South Australia. I'm wondering if you could report to shareholders how Telstra's networks withstood the blackout and the aftermath.
JOHN MULLEN:
Well, as you know, the the blackout was caused by energy. But of course, that obviously impacted Telstra directly as well. The battery life of our towers when there's only a few hours, Andy. So, once once the energy supply goes longer than that, then those towers come down. But Telstra mobilized a huge emergency workforce to counteract all those impacts, and particularly focusing on the emergency services, making sure they had priority use of mobile towers that were being installed for that purpose. So, I think it's safe to say that Telstra came out probably one of the best of the various providers in recovering from that incident.
KEVIN DALY:
I was expecting a bit more quantitative detail on that. How many mobile towers were out and for how long?
JOHN MULLEN:
I'll have to ask Andy to answer that one.
ANDREW PENN:
In South Australia, our two main exchanges continued working through the whole of the period. And because we were able to switch the backup through diesel generators, that's where we provide that backup. And we were also in direct contact with the Premier's office in South Australia, and provide a lot of support. There are about 300 mobile towers which were variously sort of impacted one way or another through the period, as the Chairman said. I mean, obviously, the mobile towers rely on power. And then, we have obviously backup battery power, and then we're able to bring in what we call COW's, which is cells on on wheels. But they were about variously about for up to 300 mobile towers. But ultimately, we were able to restore services pretty quickly as soon as the power was available. And as the Chairman said, the state government was very appreciative of our support to them and of all emergency services responses we were really able to stand up and give them the support, as we were similarly in Victoria on Friday when Victoria experienced some high winds, which also impacted power supplies.
KEVIN DALY:
Thank you.
JOHN MULLEN:
Thank you, Mr Daly. Next microphone three.
SPEAKER:
Thank you, Mr Chairman. I'd like to introduce William Bill of Eastwood.
JOHN MULLEN:
Mr Bill.
WILLIAM BILL:
Yes. Good morning, Chairman. First of all, I'd like to thank a board member that's no longer here. And that was (UNKNOWN). I got to know him after one of the annual general meetings, and he was the most customer focused managing director or CEO I've ever met. And I do appreciate knowing him. And some of the things you've done for me is extremely appreciated. Now, I'd also like now, I'll go on after that. I'd also like to thank you for writing off my bill of $1.16. I have not been a shareholder for some time or a customer some time, but I kept getting a bill for $1.16. And I ignored it. And you finally written it off. I thank you for that. One of the other things that people get annoyed with Telstra is I have a mobile phone at the time and I'm only brought up this time, and three or four days after warranty it went, there was a fault in it, oh sorry, what sir? It's out of warranty. That does not go down well with a customer. And I've gone from other companies and even knows, you go overseas and a lot of people don't like our overseas when you ring up without a problem.
And this company I had a problem, I kept going at it. It's not a Telstra as I said. But in the end, I rang up sales. And I said, I'm gonna keep ringing of sales until I put me through an Australian person in that company. They finally put me through an Australian person and the Australian solved it were overseas couldn't. It really annoys a lot of people, the overseas call centers. And I don't know what you can do about that? Thank you.
JOHN MULLEN:
Well, let me respond in two parts to that. Firstly, we are acutely aware as management and board, that customer service generally can be improved in the company. We're actually spending the next couple of days in a strategy session between management and board addressing exactly that. We recognize that we have to do better, and that's one of the reasons why the extra two to $3 billion has been spent that Andy mentioned. So, we are going to really, really focus on trying to improve that. The call center question, look, we, like many companies maintain a mix of local Telstra staff, local agencies and overseas partners to manage customer calls and service needs. And that provides us flexibility in how we meet the changing call volumes that run across the business. But everyone is held to the same standard and quality. So, if you didn't get the answer you wanted from an overseas call center, it's not because that call center is allowed to operate at any lower standards, that call center obviously, did not meet your expectations, and they should have done.
But it's not a question of whether that person is based in Sydney, Melbourne, Manila or anywhere else. So, we absolutely aim for the same standard of response from everyone. Thank you. Next microphone two. I think, one. Sorry, one.
SPEAKER:
Thank you, Chairman. I have a question for (UNKNOWN) from Sydney. The Chairman, I'm afraid this is the light relief. First of all, I'd like Telstra to remain Australian because I think privacy is a very important thing and we're being more and more invaded wherever we go on the internet, and you don't have to give your name and you get six other people contacting you. But my question, this is it. It is, what is the future of the landline? You sorta hear that you, this is being lied to the house or you need the landline to have the internet or whatever it is picking. It never gets a message. And I've got everything, I've got, you name it it's there. I don't know how to work it, but I can answer the phone. But that's my question. Thanks. I know it's silly, but yeah. Thanks.
JOHN MULLEN:
Well, I would. I would answer that. I think Simplistically, the old fixed landline to a telephone just for voice is obviously disappearing and that will continue to disappear. But we think that there will be an ongoing need for high-volume data-fixed lines as households use more and more devices, and need more and more bandwidth, particularly where your equipment is fixed. Conversely, if you do most of your interactions on the internet or whatever on your mobile device, then clearly faster and faster wireless speeds will be important as Andy mentioned, 5G, et cetera. So, we see a world where both exist. So, the NBN's large pipe giving you a large amount of volume to the home will be needed, but increasingly so will mobile. Thank you. Next question from number two is it? Yeah.
MODERATOR:
Thank you, chairman, I have Stuart Brew from Adelaide.
STUART BREW:
Good morning, Mr Chairman. Well, my question, I suppose, is I started off with that Telstra has seen infinite wisdom this year. Decided it wouldn't send me an annual report, so I thought that wasn't a big deal. I'll get the answers to the questions I need and pick an annual report up here. On my arrival, of course, I was then told that they didn't have any here. So, bear with me when I go through these questions if they are in the annual report. So, all I had is the meeting, which has got two pages of the company's results for the whole year. Anyhow, under our business, and then there's our customers, what interests me is we've got down here, we got on average 55 million calls and 356 million data connections are made over the network each day. So, my interests would be what percentage of the whole is that so we can get some idea of the size of Telstra's actual work if you like and then it goes on actually saying 72% of Australia's small and medium businesses, SMB's are Telstra customers, which is obviously very, very good.
But it makes no mention of the big business customers, the BBS's as I would name them. How many of those that we wrote, what percentage of those? And there's one more under our values, which always interests me. I'll go to the last one where it says, find your courage. That, to me, worries me a bit. If this is part of our values, does that mean that if you come up with a really good idea, you've got to be courageous to go to your boss and say, 'Look, look, do this or is it some bullying?' I mean, this is a bit of a light-hearted thing, but it stands out find your courage as part of our values. And I suppose one final thing.
JOHN MULLEN:
I have to write this down. Hold on.
STUART BREW:
The final one is on disability and people with a disadvantaged background, and I worked that you employ 1.61% of the workforce have a disability. But as I noted in the paper today, the government has got 21.8%. So, although it may be employing 533 people with disability is good, we probably could do better anyway. So, they are my question.
JOHN MULLEN:
OK, let me have a shot at those then. Firstly, those volume statistics, that is, the total network that is being used. So, that is 100% of the network activity on a daily basis.
STUART BREW:
The question really was what about all your competitors?
JOHN MULLEN:
Oh, the whole market?
STUART BREW:
Yeah, that was my question. Well, presuming that you have (CROSS-TALK).
ANDREW PENN:
Maybe if I can sort of just respond. So, in terms of market share, typically, I mean, that tends to be measured by third party organizations. But if you look more sort of generally, Telstra's market share would be approximately 50% in the retail sector, which is obviously where the vast majority of those calls and data transmissions would originate on. So, you can assume that the total market is approximately double those numbers. And then in relation while I've had the mic, maybe chairman if that's OK, in relation to your question in relation to big business, we do business with pretty much most large companies in Australia, but our market share in the big business sector of the market would be at least the same scale as that of small medium business as well.
JOHN MULLEN:
Does that answer those parts of the question? Then the next one was, I think about courage.
STUART BREW:
Yes.
JOHN MULLEN:
So, look, I think what that's designed, it says we want people to speak up. We want our employers to put their views forward and challenge the established order. We want people to be innovative. And sometimes companies can be a bit stifling of that and cannot prevent good ideas filtering up from below. So, we make a real effort to ensure that we have an open and transparent environment where everybody can have a say and gets listened to. And I think last part of your question was on disability.
STUART BREW:
Yes.
JOHN MULLEN:
Yes. So, again, we are extremely focused on complete diversity across our workforce of everything, gender, race, all the other things and disability. And I think we've done probably better than most large companies in the disability programs that we have, but we can always do more and we will definitely be attempting to do that in the future.
STUART BREW:
Thank you very much, Mr Chairman.
JOHN MULLEN:
Thank you. Next, from microphone number one.
MODERATOR:
Thank you, chairman, I have a question from John (UNKNOWN) Meli of Wollongong.
JOHN MELI:
Thank you, Mr Chairman. John from a previous field. Good to see you as chair of Telstra. I should say that my experiences with Telstra over the years and I've been with Telstra since I've probably could talk have been nothing but exemplary, whether it's been overseas or local call centres. So, we all suffer frustrations, but that's part of life. One of the things though in relation to the ACCC review - the Telstra share price of just over $5 is probably where it was when we had three famous amigos coming to this country. Thankfully, none of the board members are still on the board 'cause that's a story in itself, and that's history. But it's been languishing and it's been moving sideways for something like about ten odd years. The ACCC review probably has a tendency to further erode that. I suppose the question is if the decision goes against Telstra, is Telstra, where what the potential impact would be and probably more of a comment, I would urge that Telstra board to fight it all the way through wherever it may be 'cause it is our funds, our money, our investment that the ACCC is playing with.
And equally, though, I would also probably a little bit more on a firmer note, say that as the comment was, well, it's up to shareholders to respond in whatever way they see fit. I actually look at it a little bit deeper and think that it's up to Telstra to provide a framework for the Telstra shareholders, 1.2 million shareholders to actually make sure in whatever way that we participate so that the ACCC is aware of the displeasure of the Telstra shareholders. I think there has to be a firmer position from the board and from Telstra to marshal its shareholders to respond to the ACCC decision. But in short, are we aware what the impact would be if the decision goes against Telstra?
JOHN MULLEN:
Yes, we are. Obviously, the challenge with giving you an answer on that is we don't know how the decision could go against us. Is it total roaming? Is it partially? Is it some areas? Is it some technologies, et cetera? There is no single answer to that. But obviously management have modeled all of the possible options and we're very aware of those. Secondly, we are taking this very seriously and we are responding strongly about it. And you can be assured that both board and management will leave no stone unturned in trying to address it. Thirdly, I think for individual's responses, I don't think it's up to the company's place to actually provide that for you. I think we can certainly provide you with whatever information you want so you can understand the issue properly. But ultimately, I think it's up to you to formulate a view and to make that heard by submitting to the ACCC, and we can certainly explain how that process works for you if that makes it easier. Thank you. Next, the microphone two.
MODERATOR:
Thank you, chairman, I have John Hutchison from Sydney.
JOHN HUTCHISON:
In a future question, I reveal that when I was with Telecom, everything was great. It was run by my mate, Ken Douglas. With Telstra has been an absolute disaster, but that's not for this question. It will be for a later question. I specialize in investment analysis, and look for the situation of the return on investment over time. First of income, fully franked dividends, and asset growth in the company's assets in the background. Now Telstra has a good reputation in terms of the income size. But what's the situation or how can you reveal to us that there's an asset growth in the background so that the cost of living will be competed with in five to ten years? I'm not talking about the share price, the gamble price. I'm talking about what setting in the account, in the bank, in assets that if the company was wound up, we would get a satisfactory thing. So, what is the situation with asset growth and how are those revealed in the balance sheet?
JOHN MULLEN:
I'm not sure I totally understand your question, but if it's how do we see that the growth and value of our business, and that is obviously disclosed in the balance sheet of the company. And that depends very much on our earnings growth and how much profit we make each year, which ultimately the residual ends up on the balance sheet. And we also, of course, try to increase our dividend along the way. But that is all transparent.
JOHN HUTCHISON:
What I'm really saying is, are you spending all the money that we make year-by-year or are you keeping something in the bank behind us?
JOHN MULLEN:
Well, we're paying a percentage of our annual profit in dividend is very high in this company. It has traditionally been in the 90%, which we continue to do. We also make sure that any investments that we make exceed our current return on invested capital and also EPS accretive, earnings per share accretive so that we are adding value when we spend money, not diminishing value. Does that answer your question?
JOHN HUTCHISON:
Let me say yes. The 10% doesn't impress me that you're keeping behind.
JOHN MULLEN:
Sorry, I missed that one, the 10%.
JOHN HUTCHISON:
The 90% going out in dividends. (INAUDIBLE)
JOHN MULLEN:
Yes, and as you know, we had 4.4 billion dollars of surplus cash flow at the end of 2016, which is why we returned some of that to shareholders. And we've done that previously and we'll do it again.
JOHN HUTCHISON:
Is it going to be enough in five years time?
JOHN MULLEN:
We very much hope so. That's what we are all here to do is to continue to deliver earnings growth so that our dividend can be maintained or increased during that period. I can't predict where we'll be in five years, but I can assure you that's what we're all working to achieve. If you could speak to the microphone, maybe so other shareholders can hear what you're saying.
JOHN HUTCHISON:
I'm saying as an investment analysis, you've got to be able to have have a go at predicting what the situation is in five years time. I mean, I can tell you in some industry what it's going to be in five years time. You want to be able... You won't get at 100% right, but you'll get it in the right direction.
JOHN MULLEN:
Of course, and that is what board and management spend their time focusing on ensuring that a strategic five-year plan looking forward does deliver ongoing growth. We mentioned earlier that we're going to lose some two or $3 billion of current earnings through the arrival of the NBN. So, management are going to have to find ways of recovering that to get us back to where we need to be and that we intend to do.
JOHN HUTCHISON:
Thanks for your answer.
JOHN MULLEN:
Thank you. Next, microphone number one.
MODERATOR:
Thank you, chairman, I have a question from Anthony Grima of Maroubra.
ANTHONY GRIMA:
Mr Chairman, thank you for taking my question. Recently, we have seen a fee for monthly billing statements, and since August, a fee of $1 was introduced for not paying the bills electronically. I accept that there is a cost of postage to print and send statements. However, Mr Chairman, what is the cost of your clients printing their own statements, calling to one of your branches and paying their bills in cash.
JOHN MULLEN:
I know this is always a vexatious question. But we are moving more and more to an online world. And I think as Andy said earlier, banking is no different from 24 to 38% where all have been transacted online. Ultimately, I think that's where we have to get to. And there is an increasing cost to companies of maintaining older paper in-person-type transactions. The charges are very minimal, but we would like to work with shareholders and customers and everyone who interacts with us to move more and more to a digital interaction in the future.
ANTHONY GRIMA:
What about if people can't or haven't had any credit cards or don't believe in credit cards?
JOHN MULLEN:
Well, the option is still there. We're not taking it away. There's just a a small charge imposed for that facility.
ANTHONY GRIMA:
And again, the client is coming to your offices and paying you in cash, what is the cost involved in that?
JOHN MULLEN:
It's still obviously more than an online interaction, and that's where we're trying to ultimately get to, where we don't need to have personal contact, not just because it saves money, but because it's actually more efficient and delivers a faster, more efficient response for the person paying the bill as well. But for those who don't want to do that, we still maintain the physical capacity.
ANTHONY GRIMA:
Thank you.
JOHN MULLEN:
Thank you. Next question, microphone number two, please.
MODERATOR:
Thank you, chairman, I have Peter Starr from Sydney.
PETER STARR:
Yes, good morning, John. And good morning, ladies and gentlemen, fellow shareholders. I'm here representing a number of shareholders. And the first thing I like to say is David Thodey asked me to send his apologies. He's in the Gold Coast this morning delivering a speech. Those who aren't aware, he's now the chairman of the CSIRO. To you, Mr Limb, David asked me to say, do you enjoy more time with your family? And you've done a great service. John, to reiterate another gentleman who spoke, you've done great work at Asciano. I hope you do the same here.
JOHN MULLEN:
Thank you.
PETER STARR:
On behalf of the shareholders I represent, we also believe that Elizabeth Fisher from the Australian Shareholders Association is here and I want to address the ACCC issue in a few minutes. I'd also like to say on behalf of the shareholders I represent, we'd like to pay our enormous respect and hard working to Miss Catherine Livingstone, who did step down. Catherine, I know you'll be listening. We wish you all the best in your future endeavors. You did exemplary service for this company, and the guidance and the due diligence you paid and brought to the board was outstanding. So, we wish you all the best. I guess it's remarkable that we have Andy Penn there. David was the one who hired you and you're doing a remarkable job. Even though we had some outages, you didn't bury your head in the sand and we didn't have to be dragged before a Senate inquiry like the banks. So, that's to your credit, Andy. Yes, thank you. In relation to the issue, the company, I named the company in case you don't know its Vodafone folks.
I don't want to spend money here. But they're listed under Hutchison and their shares are worth one cent. Our shares are worth over $5. There's a big difference. They want to coat tail on to us. And you people will all pay the price. Well, let me tell you, it's a very simple exercise right to the ACCC right to Rod Sims, you'll all have a chance. It's a simple, very exercise. You people are all shareholders. This will affect you if it goes through. I can't strongly tell you anything different. It is really, really serious. It's a free ride if they get that and all of us will pay the price for that, and it's wrong, absolutely wrong. I'd like to go further, it's criminal, just wrong, absolutely wrong. I'm outrageous about it. It's just totally wrong and the shareholders I represent, we will absolutely be making representations and I would encourage Elizabeth Fisher, who's here from the Australian Shareholders Association, to make representations to on the shareholders she represents. Finally, John, welcome aboard.
I'm sure you do a great job. Nora, it was nice to hear you speak too. I've known you for a long while, and Warwick doing well there, so thank you.
JOHN MULLEN:
Thank you, Peter. Thank you for the kind sentiments for David and Catherine. We'll make sure those are passed on, I think with respect to the (UNKNOWN). I think we've probably said what has to be said. And obviously we appreciate your support and anyone who is willing to write to the ACCC about it obviously would add value. Thank you. Next, microphone three.
MODERATOR:
Thank you, Mr Chairman, I have another question from William Bell from Eastwood.
WILLIAM BELL:
Good morning, again chairman. Now, this time, I'm going to go on DOT, and for anyone who doesn't know what DOT is, it's Digital Office Technology. It is something that Telstra really got wrong. And I will tell you why. First of all, one of our phones went down at the place I work at. We had to get a technician out to change the modem. Again, we had a couple of months or quite a long time later. We had another phone go down. I rang up Telstra and I got on to a service place in Townsville. It was very helpful. Talked to him for about half an hour. Then he said, I'll get back to you and then three and a half hours later. I give in. I can't fix this. Telstra introduced a system where they didn't know what they were doing. Not doing enough research on a product. What happens is with DOT, if you virtually have just a standard phone and a modem, fine, it will work perfect. But once you put it on a server, the DHCP on a server, what happens is if they reset a phone, you cannot get it back. Because basically, what Telstra are the DHCP is off, we'll reinitialize that on the router.
Once they do that, they knock all the email off the company. And they cannot get the phone back only because I got to know David Thodey, basically, I got a senior technician from Telstra, our IT from External IT come in. Two hours, it took them to work out how to do it on the server. And then once they're done on the server, I can now reset any phone in the business, a factory reset and get that phone working again without Telstra. I don't know if Telstra has been able to call every call centre and explain what happens when DHCP is on the server compared to a modem. It is totally different. And you can knock out two phones and yet they cannot get it back only because of David and what they've done, we got these phones working and hopefully and I don't know if Andrew can answer this. Hopefully, the DHCP problem can be fixed. With the phone (UNKNOWN) and also when you come out, it's got 'Oh, I want to add a name.' So, you go into your directory, 'Oh, I want, Chris. Oh, 111, I've now got city.
I showed the technician, Oh, it's on a server. I go into and have a look at the IP address. I log in to the phone, put the name, put the phone number, put the mobile phone and click on. And I've finished.
SPEAKER:
The technician had never seen that. Something I could do better than a technician, which is very unusual, I gather, but I did it. The other thing was (UNKNOWN). Basically if you get it right, you can do the whole phone system. And you can log on to any phone in the office, six phones, I can log into any phone and actually put a new number in every single phone in the office from one computer, and that is something technology wise that Telstra should be pushing. Thank you very much.
CHAIRMAN:
Right. Look, obviously, I'm not aware of the individual details of the problem that you had, and there are people here who, separately from this, can actually talk to you in more detail about that. What I would say though is that we are very aware that these sort of frustrations are the things that cause customer angst. Our networks are the best. They are good, but sometimes accessing them, on boarding them, bills, whatever it is of the areas and the sort of problems that you've mentioned are the things that frustrate people. That is very much the effort that Andy and the team are now making with this extra expenditure to address those and make a digital interaction with the company so that you can fix things yourself, or we can fix them online without having to send technicians out for three hours.
SPEAKER:
That's correct. The thing is, where was the research done to find out, I've got this product that I can use in these many fields. Where was research done to say yes, I've now got all these problems and I can know what to do?
ANDREW PENN:
Look, I mean, the only thing I would sort of say, in addition to the chairman's, to Mr. Bell is, look, DOT is very successful product for us. You're absolutely right, there were some teething problems when the product was first launched and this is one of the dilemmas that we always face because technology is moving at such a rapid pace that we are keen to bring the best of technology to our customers where we can. But as we just heard from Mr. Bell, its a complex business environment, and getting that absolutely right in every customer's circumstance is something that we don't get right every time, but we are very focused on it. We've invested a lot of money in DOT, and DOT is actually going really well now. So I can only apologize to Mr. Bell for your particular experience. And if there were any residual matters, please do speak to one of our people here and we will follow that up. But we will continue to be investing, as the chairman said, in trying to improve the digitized interaction that our customers have with Telstra in a world where this technology innovation is rapidly growing.
SPEAKER:
Thank you (UNKNOWN). Next, microphone number two. Thank you, chairman. I have Ian Willis from Brisbane.
IAN WILLIS:
Morning chairman, directors, fellow shareholders, my name's Ian Willis, I'm a shareholder down from Brisbane. Couple of little things, we've largely sold out (UNKNOWN). There was an announcement last year regarding a possible tie up with a group in the Philippines that seems to have disappeared into the cloud. We're now a large player in a mature pond, Australia. There are a lot of small add on bolt on programs that Mr (UNKNOWN) talked about. But are these programs going to generate sufficient income to recover that 2 to $3 billion we'll lose when the NBN rollout is finished. On Page four of the annual report, there's productivity improvements. Productivity improvements can go to a certain degree, but if you cut back and cut back and cut back, ultimately, then you're going to have system failures. And is there any program of large scale growth in the future?
CHAIRMAN:
Yes, right. Let me address those, in turn. Firstly, the investment in (UNKNOWN), that's been an extremely successful investment for us from a stake of only cost the company a few hundred million dollars originally. We were able to sell it that business for $2.1 billion which we think represents exceptional shareholder return, and we felt that we should capitalize on that opportunity as it arose. And management worked very hard to get that sale across the line. We have retained a residual six and a half percent in the company and the board seat, so we are still involved, and that residual stake is still worth a lot of money. On the Philippines, that was a normal business process of investment. Management saw an opportunity to invest in a mobile market where there were two incumbent players, both offering very poor levels of service and very basic technology, but quite a high margin of returns that those companies were making in that market and it looked like an attractive opportunity. However, the more that management team went into looking at the risks involved, (INAUDIBLE) have to read the papers about some of the stuff going on in the Philippines today, ultimately, management concluded that they would not recommend going further with that investment.
Even though on paper it looked good, the risk was too high and so the board obviously supported that. I think that's the normal process that should go on in the company to come up with ideas. You debate them, you look at the risk profile and you say yes or no. Now, neither of those mean that we've in any way lost any appetite for growth to the country. I think you've seen our investment in (UNKNOWN). Recently in Asia we're now the leading cable owner in Asia, and I think that will continue. We have to be selective about what we invest in. We need to invest in things we know. Either the geographies we know or in products we know. We're very unlikely to go and invest in some completely different business in another part of the world. I think that would be taking too high a risk with shareholders funds. But clearly, we see that two to three billion gap and we have strategies both internally. So, the majority of the $3 billion extra that we're going to spend is on improving our core products and our core business.
Exactly the sort of problems that the gentleman over there was mentioning. 'Cause if we get those right, we think we can gain more market share, we can command better pricing and there's a big return from that. At the same time, we'll still be looking at the international opportunities, particularly in Asia.
IAN WILLIS:
Thank you.
CHAIRMAN:
Thank you. Next microphone number three.
SPEAKER:
Thank you, Mr. Speaker, I have Yvonne Chen of Bellevue.
YVONNE CHEN:
Morning Chairman and the board. I'm a shareholder as well as a customer of Telstra. I got a comment and a question. First of all, my comment is, since I took up the internet few years ago, I have very good service from your tech support as well as the sales staff overseas as well as in Australia. So therefore, I have no problem with service. Second is my question. I have a frustration, a constant frustration of getting oversea scamming calls. Is there a way to actually stop those call despite whether we are unlisted numbers or actually just listed numbers. I have tried the government, no avail, and I thought perhaps I shouldn't give up and I try Telstra as well. So please enlighten me chairman.
CHAIRMAN:
Thank you very much Miss Chen. Firstly, on your kind words about the tech support. It's good to hear that. And it's in no way an excuse but we have 17 million mobile customers. The great majority of them get very good service but do we have some failures? Yes, of course we do, and we have some frustrations and even one is too many. But the great majority of Telstra customers get a very good service or we wouldn't be where we are, but thank you very much for that comment. Regarding scam calls, et cetera, I'm afraid it's a plague of society, generally. I mean I get them almost nightly as well as most people I would think in this room. And as fast as barriers and controls are established to try to stop it, so these people find other ways around it. And particularly, I think, the phishing emails and things which (INAUDIBLE) do more damage when people click on attachments to emails and that if they download malware and all sorts of nasty things or even wipe out your computer. I can really sympathize with those who've experienced that.
So, there's nothing particularly that we can do if somebody calls you, but you should hang up straightaway if you're not sure who the person is on the other end of the phone, and you can also report the call to the ACCC who will do their best to try to follow up and understand where those calls are coming from. Some of them are systemic, so there are literally thousands of these calls coming from one source and the authorities can do something about that. But when it's an individual call to an individual person, it's very difficult. So, I'm putting out the answer you want to hear, but I think we just have to be very vigilant all of us in society today.
YVONNE CHEN:
With our technology, surely we can do something.
CHAIRMAN:
Well, the problem is, if someone wants to ring you, how can we tell technology wise whether it's me saying hello or it's somebody trying to do harm? I mean, unless you know where that call is coming from, so we can block numbers. If you want a silent number, we can do that as well. So, those opportunities are there. But if someone has your phone number, it's very difficult to actually know what they're gonna call you about.
YVONNE CHEN:
They even call and say they're from Telstra and they have certain information that's actually quite related to Telstra. And I thought, well, Telstra shouldn't be calling me.
CHAIRMAN:
Yeah. Well, the banks have it even worse, I think. Obviously the same reason people calling bank customers pretending to be people other than who they really are. I think we just have to be really, really vigilant and be suspicious. and if you hang up on a friend every now and again, that's probably not a bad thing. Yeah. Thank you. Number two. Yeah. Microphone two.
SPEAKER:
Thank you, chairman, I have George Sinclair from Bronte.
GEORGE SINCLAIR:
If either John or Andrew could please comment on whether Telstra has any plans in terms of the current ownership or investment in Foxtel and the increased competition, I guess in the video streaming market and also the on demand services.
CHAIRMAN:
Yeah. Well, Foxtel is a very important investment for us and we are in continual discussions with other shareholders about the future of Foxtel. At this stage, that hasn't reached any particular conclusion but there are a number of potential options open which are being discussed by both sides, both shareholders. And we remain very very vigilant about the future of that industry and make sure that we maximize value for our shareholders in the long run. There's no immediate answer to it, but we are very mindful of the changes going on in the dynamics of that industry.
GEORGE SINCLAIR:
And it continues to be profitable?
CHAIRMAN:
To be profitable? Yes it does.
GEORGE SINCLAIR:
Thank you.
CHAIRMAN:
Thank you. Microphone four.
SPEAKER:
Thank you, chairman. I'd like to introduce Adrian Evans from Traralgon, Victoria.
ADRIAN EVANS:
I'm not sure who to direct my question to. Many of you here, this room at this meeting would not be aware that Traralgon is only a small regional town in Victoria of about 25,000 people. So, we're not huge and lots of people don't have an idea of where we are. However, I happen to work for a very, very small business whose accountant in his, I guess you could say in his (UNKNOWN) I guess, suggested that we switch the accounting system I use to do all my financial data to pass on to the accountant via the Internet. Now, I was a bit skeptical of this but I thought, OK, I'll go with what my boss wants because that's what his accountant wants. And when I'm paid a fee of $45 an hour and I sit there for 15 minutes out of every hour, sometimes even longer, because I'm in the middle of recording a transaction or figuring out how to print out my superannuation report so that I can file that with the ATL, it actually starts becoming a very costly process. Now, I'm not the only one in Traralgon who's had these problems.
Because I was speaking to my daughter the other day and she actually rang me and she said, "Mum, I've had the internet on at home with Telstra for two months. The first two weeks I had it connected, it didn't work at all. It was on sporadically for about two weeks. It's been on and off since. I've just been on the phone with Telstra for the last hour and a half, I've still got no internet. Can I come up to your place and connect to your Wi-Fi?" I said I'm just sitting here. I'm the only one here. Nobody else here in the house, but I don't have Telstra internet, I've actually got Southern France. I said to her, "Come up, use the internet." So, she sat there, and over a period of 45 minutes did all the stuff she had to do. So, what I actually as, I guess you could say as a customer because my boss uses Telstra, as well as our daughter who's a Telstra customer would like to know is, what's going on with the internet service we have in Traralgon? Why is it so unreliable? When can we actually look forward to something that is much more reliable?
Because from my own point of view, sitting there twiddling my thumbs for 15 minutes and sometimes longer on every hour is something that I know from my bosses point of view is not a very effective use of my time. Thank you.
CHAIRMAN:
Firstly, I didn't fully understand whether the challenges you had in your own business were because of the financial system that you were using or whether it was the internet speed and connection or both.
ADRIAN EVANS:
It's the fact that the internet drops out. I'll be in the middle of trying to print a report and it just drops out. And I will sit there for, like I said... I've sat there for up to an hour to try to get it back connected again. And then I'll just say to my boss, "I'm going for a walk, I'll come back. It might be a back on by then."
CHAIRMAN:
Yeah. Well, obviously that shouldn't happen. If you do have a little bit of time today, we have people in here and outside when we go out after who can try and address your issue now while you are here. So, I commit to you that we will do our very best to resolve that. Obviously, I don't know the cause of it, and I don't think anybody here would right now, but it shouldn't happen, and you have our commitment that we will get it fixed.
ANDREW PENN:
Maybe I could add. I do know where Traralgon is. I was there in June and I'm not aware of any specific issues relative Traralgon, but Jenny West, who's Aboriginal general manager here, if she just stands up, she will come and see you after the formal proceedings and talk to you specifically about your issue and what we can do about that, but I apologize.
ADRIAN EVANS:
But the other issue, I guess, is that somebody waiting on a phone line for an hour and a half for somebody to come back and address the issue, is that because Telstra has closed so many call centres here and instead send them overseas? You have to look at a balancing issue, I think, where is how long do you actually keep your customer on a hold line for before you answer their call?
CHAIRMAN:
I can only agree. Again, I would reiterate my commitment. We will try to address this for you today while you are here. It should not happen. Thank you. Microphone one, please.
SPEAKER:
Thank you, chairman, I have a question from Christina Wu of Strathfield.
CHRISTINA WU:
Thank you, Mr. Chairman and members of the board. I only have one question. I have been a Telstra shareholders from the beginning since Telstra listed, and I'd like to know why, in spite of your good performance, increased market share and you know, we've had very good performance over the years. Why hasn't THE share price performed? Why hasn't the Telstra share price performed? It's been very disappointing. Particularly in the last few months it has gone backwards, particularly with the share buyback and so on.
CHAIRMAN:
Look, it's not trying to avoid the question, but it's very hard to comment on specific share price movement of any stock on the ASX. There are a wide range of factors that influence share prices. All we can do is what is in our control, which is to try to deliver the best possible performance from our company. And then we would hope that ultimately the share price will reflect that. And that is very much what we're trying to do.
CHRISTINA WU:
Is it also your interaction with the analyst as well? Perhaps you should have greater interaction with financial analysts.
CHAIRMAN:
We have very extensive interaction with financial analysts and institutional shareholders. I do that personally as chairman once or twice a year. I've just completed doing that, seeing some 26 of our biggest customers together with our investors, together with our investor relations staff, and depend on the management team to a much more extensive one twice a year after each half year's results. So, we are very very much interacting with all of that (UNKNOWN) of the investment base on a regular basis.
CHRISTINA WU:
OK.
CHAIRMAN:
Thank you. Next microphone. One again, I think so.
SPEAKER:
Thank you, Chairman, I have a question from (UNKNOWN) of Beecroft. Thank you, Mr... (CLEARS THROAT). Excuse me. Thank you, Mr. Chairman. I'm just wondering about the $11 billion that Telstra was supposed to receive in respect of the NBN, whether it's all been received or when it's going to be received. And also how is it traded in the books of account?
CHAIRMAN:
The 11 billion is the net present value of all of the revenue streams that were coming over a longer period from the NBN, and that's comprised of one off payments. It's comprised of connection payments, it's comprised of ongoing payments for the use of our ducts and other infrastructure. So, each of those as we receive payments during the course of the year and I think in 2016 it was some 760 million, something like that, we received directly from NBN, that will continue to accelerate over the next two or three years through to about 2020 and then it will start to decline again and just go to the recurring revenues that we get from the use of our ducts and other equipment. And then on top of that, we've got other one off deals like the 1.6 billion HFC contract that Andy mentioned earlier that wasn't considered at the time when we derived that 11 billion net present value.
SPEAKER:
So it's treated as revenue?
CHAIRMAN:
Its treated as revenue. Yes.
SPEAKER:
Thank you.
ANDREW PENN:
And chairman, we do provide a separate disclosure of all of the NBN payments in our investor relations material. So if you go to the website and you access the Investor Relations presentation for the full year results, you will see the schedule, a page in there, that itemizes the NBN payments.
SPEAKER:
Thank you.
CHAIRMAN:
Thank you. And next, microphone three.
SPEAKER:
Thank you, Mr. Chairman, I have Eric Chen of Kempsey.
ERIC CHEN:
Good morning, chairman and the board. I'm rather disappointed to hear from you that with the advancement in technology and you intend to invest so much more in future technology, and yet at the same time you were telling us just now that you cannot stop the scamming calls from overseas. I thought you would have that kind of technology by now to detect they are coming from overseas and they are scam. Because we know they're all scamming people. The minute I pick up the phone, I hear it, I can hear this very fuzzy, poor quality call coming through, and I know there is a scam call. And indeed is always worked out that way that they are scamming. Now, since you cannot stop them, Telstra cannot stop them from coming through and you advice just to put down your phone, I think that's probably the second best solution. Maybe, but the better solution would be to play along with them, play ignorance. Just asks them what they want. How to go or what they want or what they want you to do. Like in the instance where they say, (UNKNOWN) having some bucks coming through in one hour, you just turn on your computer and they'll tell you to doing certain things, just play along with them.
If you can spend 15 minutes with them and everyone in Australia do that.
SPEAKER:
I think you will kill the industry within three months. So why can't we do that? Instead of telling people to put down the call, It only takes them five minutes. They don't have to employ any more people. If they have to spend 15 minutes or 10 minutes with every single scam call, you kill them in three months. So I think Australia should be doing this first.
MULLEN:
That sounds like very interesting advice. (LAUGHTER) Look, firstly, I'd say it's not that things aren't being done, we're involved in and we can tell you there's a huge amount of work that goes on with the authorities trying to stop this. Particularly around, not so much calls that just annoy you or whatever, but around these phishing attempts and people who are after money from your bank account. And so there's an enormous amount of work going on. What I'm saying is; it's very difficult, very difficult thing to address. Many of us can tell a call. I mean, I can usually tell, you can usually tell, but they tend to often target the vulnerable, the elderly, that people who are not so quick to recognize that it's a scam call. So that's why we would advise if you're unsure, just hang up. Don't go there. But, and I wouldn't want to give the impression that we're just sitting here saying sorry, there's nothing we can do. The authorities are extremely aware of it and we interact with them all the time on trying to improve and stop these sort of things.
If it gets really bad, then you apply for a silent number. And hopefully, that gets rid of; virtually all of it. Can we expect phone number one?
SPEAKER:
Thank you, Chairman. I have a question from Robert Caterson from Engadine. Thank you, Chairman and CEO and the board. My question is with customer service within Telstra at the present time. It's quite easy to go online and buy something from Peter's of Kensington or an airline ticket or something, you know, quite plain and simple. But to deal with your telecommunications requirements, at the present time, is damn well difficult to deal with Telstra at the present time. We've heard a number of people in this audience today express their frustration with the level of customer interaction we have. Now, this is the front door of this business. If you can spend billions of dollars in creating a world-class technology situation for our customers, but you cannot spend a few 100 million, I don't know how much it will cost to create a customer-friendly customer interface for this business. You are lost because at the present time, with my experience, I had to walk out of a Telstra shop. And I was very upset because I'm a Telstra shareholder, I've been a Telstra employee and they're very uncomfortable.
I had to go down the road to a competitor to buy a new mobile phone recently. With the level of frustration, I've had with Telstra and other people. Now, you fobbed off another person in this audience, in terms of the billing charges, right? Now, David Thodey got rid of a lot of those mosquito-like billing charges that have reappeared on our bills. Now, I know you're trying to contain costs and I know that you're confronting a challenge from Australia Post in increasing their postage charges. But if that creates a level of frustration with our customers, then obviously you're leaving the door open, even by a few, you know, percentage in market share, but that's going to lose us money. Secondly, with these natural disasters, even locally, if we have bad weather, there isn't enough reaction time now within our exchange networks to keep our mobile phone services and our landlines. Now, the amount of business this company will lose, because we're not actually reactive, proactive towards dealing with these natural disasters; and I've raised this at a previous forum, and these situations have not been addressed.
Now I need the board's commitment to spend as much money as I need to improve our customer interface.
MULLEN:
Thank you for that comment. On the first part of your, statement, I can only agree. We all share, everybody here along this table, we share your concern that our customer service is not where it should be. We have spent billions of dollars as you said, on networks, and that has produced Australia's best networks. We now need to replicate that with the customer experience. And the expenditure that Andy Penn mentioned earlier, the $3 billion, is going primarily into exactly that. It is simplifying our systems, simplifying products, eliminating old legacy platforms that create complexities and inability to allow you to interact quickly, digitally, as you should be able to. So that is you have our absolute commitment to your question. That is exactly what we're going to do over the next three years. We're going to spend that money wisely. But we're going to spend it aggressively on improving the customer experience.
SPEAKER:
At the end of the day, you need people to listen to you.
MULLEN:
Of course. Absolutely. To your last point about disasters, I think that may be a little bit unfair. I think Telstra's response to natural disasters has actually been pretty exemplary. And particularly as Andy mentioned earlier, in South Australia, we were lauded for the efforts and the speed with which we did get operations back up running. And that's repeated, there's hardly a week that goes by without some sort of disaster event somewhere in Australia. And even if it's very localized, and Telstra, I think, is actually quite good at that.
SPEAKER:
So you can guarantee me that exchanges won't go down. That we've got the reactivity within our exchanges, that the phone system won't go down?
MULLEN:
We have a degree of control at the Telstra board, but I cannot control meteorological events that adverse Australia
SPEAKER:
I know the meteorological events. But they should be triggered within our exchanges and turn on generators, to turn on batteries, straightaway.
MULLEN:
But I think on the flippancy aside, I think Andy did mention earlier that the response in South Australia included actually bringing in mobile towers If you want a better word...
SPEAKER:
I realized that was catastrophic. But, you know, locally, we need to be guaranteed that if we have some sort of local event, I won't get a response from a phone operator saying, 'Oh, it might be back on in a week's time.'
MULLEN:
Well, seriously, again, I would...
SPEAKER:
(INAUDIBLE) person from overseas.
MULLEN:
I don't know how many actually events these guys would know. But I would say there is not a single week or even practically a day where something doesn't happen. Some building site, some backhoe operator cuts the cable, you know that stuff happens all the time, or you have rain or you have floods. And I think Telstra has actually got a very good track record of addressing that quickly. And putting more and more backups in place. Can we say we'll guarantee never to have it? No, we can't. But I think we're certainly doing our best. And we're doing a lot better than we did previously.
SPEAKER:
But getting back to customer service. The last situation I had, I had to make three phone calls to get a problem resolved. Problem resolved. Now, other customers are in the same situation. As I said, I can order something from Peter's of Kensington and I can get an airline ticket online, but dealing with your telecommunications is a different kettle of fish.
MULLEN:
Yes, you're right. And it should be digital. And it will be. That is absolutely where we are heading.
SPEAKER:
And if I gotta call for a person, I need to get somebody that will listen and will solve the problem straight away.
MULLEN:
Yes, and part of it, Of course, as we said earlier, as well is; it's not that the person's not listening. It's that we haven't n