• Announcement<\a>
  • Telstra InfraCo Announcement - Annual Report


    by Will Irving Group Executive -Telstra Wholesale

    As part of our new strategy we will be establishing Telstra InfraCo, a new standalone business unit within Telstra.

    Telstra InfraCo will be responsible for key fixed network assets and for managing our relationships with our more than 200 wholesale customers and our long-term strategic relationship with nbn co.

    It will be accountable for our copper and HFC networks; all our fibre network that is not dedicated to supporting mobiles; all ducts, pits and pipes; property including exchange buildings and data centres; and international and domestic subsea cables. These assets will be combined with Telstra Wholesale and the teams in Telstra Operations that provide services to nbn co.

    At establishment on 1 July, this new Business Unit will control assets with a book value of approximately $11 billion and have annual revenues of more than $5 billion from internal and external sources.

    Connectivity has never been more in demand and as such our infrastructure has never been more important to our customers.

    Telstra InfraCo's mission is to be the most efficient fixed telco infrastructure provider in the market. It will serve three customer segments: Wholesale in Australia; nbn co; and the broader Telstra covering Consumer and Small Business and Enterprise. It will offer the full range of wholesale products that Telstra offers today, while also focusing on improving infrastructure service delivery to benefit all our customers across nbn co, wholesale and the rest of Telstra.

    By putting our fixed assets together in a single BU we are establishing the right structure to give greater focus on this part of Telstra's business. It will also provide greater visibility to the market of the value of this business and create more optionality for the period after the nbn rollout is complete.

    Separate to Telstra InfraCo, Telstra will continue to operate an integrated mobile business, with key assets including spectrum and towers, and our Network Applications and Services business.

    Responsibility for key operational activities, like actively managing the traffic on our fibre networks, will continue to be with Telstra's Operations group, which manages it today. Indeed, while InfraCo will share responsibility for the equipment used to power services carried over the infrastructure it controls - including copper, HFC and fibre networks - all network management functions will continue to be undertaken by Telstra Operations, so that we continue to run one integrated network from a traffic and managed services perspective.


    Effective from 1 July 2018, we established a standalone infrastructure business unit, Telstra InfraCo, as part of our new T22 strategy announced on 20 June 2018.

    Our 1H19 financial statements will contain detailed segment reporting for Telstra InfraCo, the results of which will be regularly reviewed by management. The new segment will comprise:

    • Infrastructure assets reported in FY18 in our corporate areas.
    • Telstra Wholesale results disclosed in FY18 in note 2.1 to the financial statements as a separate reportable segment but excluding one-off nbn Infrastructure Ownership Payments.
    • nbn commercial works activities included in FY18 in note 2.1 to the financial statements as part of the Telstra Operations reportable segment.
    Telstra InfraCo engages in the following activities:
    • Holds our fixed network infrastructure including data centres, non-mobiles related domestic fibre, copper, HFC, international subsea cables, exchanges, poles, ducts and pipes.
    • Provides access to our fixed network infrastructure assets to other Telstra business units, wholesale customers and nbn co.
    • Provides a wide range of telecommunication products and services delivered over Telstra networks and associated support systems to other carriers, carriage service providers and internet service providers.
    • Provides nbn co with long term access to certain components of our infrastructure and certain network services under the ISA and commercial contracts.
    The table below includes pro forma segment results as if the Telstra InfraCo segment existed at the end of FY18. The table is for information purposes only and provides an example of what the FY19 segment reporting will look like in principle. However, it does not reflect any other organisational changes resulting from the T22 announcement as those changes are yet to be finalised. Our 1H19 financial statements will provide a restatement of FY18 comparatives reflecting segments as at 31 December 2018.

    Consistent with information presented for internal management reporting purposes, the result of each segment is measured based on its EBITDA contribution except for Telstra InfraCo which includes the inter-segment charges. EBITDA contribution excludes the effects of all inter-segment balances and transactions with the exception of the transactions referred to in the table. As such, only transactions external to the Telstra Group are reported for all segments except for Telstra InfraCo.

    Our approach to Telstra InfraCo segment reporting is to present its profitability as if it was a standalone business unit with no offsetting impact to the other segments to reflect how performance is managed internally.

    Year ended 30 June 2018
    Telstra       Consumer Enterprise Operation AllOther Subtot   InfraCo Eliminat Total
    customers     $14,629m $ 8,217m   $     89m $   -20m $22,915m $3,096m $    0m  $26,011m
    between InfraCo 
    and other     $     0m $     0m   $      0m $     0m $     0m $2,178m $-2,178m $     -m
    Total revenue 
    from external
    and InfraCo   $14,629m $ 8,217    $     89m $   -20m $22,915m $5,274m $-2,178m $26,011m
    Other income  $    54m $    32m   $    162m $ 2,572m $ 2,820m $  211m $     0m $ 3,031m
    Total income  $14,683m $ 8,249m   $    251m $ 2,552m $25,735m $5,485m $-2,178m $29,042m
    Share of net 
    profit from
    joint venture $     0m $     2m   $      0m $   -24m $   -22m $    0m $     0m $    22m
    EBITDA contrib$ 6,970m $ 3,216m   $ -3,066m $   501m $ 7,621m $3,407m $  -907m $10,121m
    Depreciation  $     0m $     0m   $      0m $     0m $     0m $    0m $     0m $-4,470m
    Group EBIT    $     0m $     0m   $      0m $     0m $     0m $    0m $     0m $ 5,651m
    Finance costs $     0m $     0m   $      0m $     0m $     0m $    0m $     0m $  -549m
    Group profit 
    before tax    $     0m $     0m   $      0m $     0m $     0m $    0m $     0m $ 5,102m

    Total restated FY18 segment results reconcile to note 2.1 to the financial statements. However, the following items have been adjusted:

    • Telstra InfraCo generates revenue from transactions with other business units. These inter-segment transactions relate to access charges for the use of the infrastructure assets. The access charges are charged on the assets which are allocated to Telstra InfraCo, being our fixed network infrastructure. Where such assets are shared with other business units, an allocation of the assets to Telstra InfraCo has been determined based on historical usage. These access charges are developed based on an approach that incorporates a variety of internally and externally observed inputs to reflect an arm's length basis for charging. They are regularly reviewed by management and are eliminated at Telstra Group level for statutory reporting purposes.
    • The Telstra InfraCo segment result also includes inter-segment costs recharged by the Telstra Operations segment for operations and maintenance services related to Telstra InfraCo assets. These shared operations and maintenance costs allocated to Telstra InfraCo assets are based on a usage methodology.
    • The Telstra Operations segment result includes network service delivery costs for Telstra Consumer and Small Business and Telstra Enterprise customers as well as Telstra InfraCo. The operations and maintenance costs are included in Telstra InfraCo costs, but have not been excluded from Telstra Operations.
    • The Telstra Operations segment recognises expenses in relation to the installation, maintenance and running of the HFC cable network held in Telstra InfraCo (except for operations and maintenance costs recharged by Telstra Operations to Telstra InfraCo), while a portion of the running costs of the HFC cable network is managed by the Media & Marketing operating segment (included in the All Other category).
    • The Telstra InfraCo segment result includes rental revenue from providing nbn co with long term access to ducts and pits and other components of our infrastructure under the ISA, while the associated costs are reported in the Telstra Operations segment and in the All Other category, respectively.
    • Telstra InfraCo also includes costs associated with support functions which have not been removed from other segments. We allocate these costs by utilising driver-based cost allocation methodology for our internal performance reporting.