TLS

[Snoopy]

What is Telstra and what are their chosen markets?

The name "Telstra" is derived from the words 'Telecom' and 'Australia' (TEL from Telecom and STRA from Australia). Telstra traces its roots back to 1901 at the time of Australian Federation. The Postmaster General's Department of the time was established by the Federal Australian Government to manage all domestic telephone, telegraph and postal services. Subsequently it merged with the Overseas Telecommunications Commission formed in 1946 to manage international telecommunications services.

Telstra first became a publicly listed company in November 1997. Telstra was progressively privatised (33.3% 1997, 16.6% 1999, 33.3% 2006, with 17% transferred to the 'Future Fund'. Today Telstra is still Australia's leading telecommunications company, serving a diverse range of customers: small business. large enterprise, government organisations and -of course- ordinary consumers. The 'product ranges' covered by Telstra include:

i/ Mobile: Prepaid and postpaid mobile services, handset sales, mobile broadband, internet of things (IoT), and wholesale services providing Mobile Virtual Network Operations (MVNO) to third party mobile market players.

ii/ Fixed (Consumer & Small Business): Telstra is in a process, (close to completion) of handing control of their legacy copper network, and some early technology fibre, over to 'the nbn', a state owned and controlled 'National Broadband Network'. In instances where the former Telstra fixed network overlaps the nbn fibre network, the older network may be retired or alternatively integrated into the new nbn 'parent network'. Meanwhile the fixed network contains legacy voice and broadband. But it also includes income from online business apps and services, gaming services (exclusive Australian access to the Xbox All Access on line gaming platform), pay television (Foxtel subscriptions- including Kayo sport) and SVOD (subscription video on demand- including Kayo 'one off' Sporting Events).

iii/ Fixed Enterprise: Data and connectivity and traditional calling applications are the base products. In addition Network Added Services (NAS) for these larger business and government customers are available. NAS includes cloud applications, equipment sales, professional services (including infrastructure builds and digital transformation projects) and managed services. Security services, as an over-layer above other applications, are a 'growth area'.

iv/ Fixed - Active Wholesale: Largely data and connectivity to third party retail players on the legacy Telstra network, prior to that part of the network transitioning to nbn.

v/ International: Providing international services (including legacy international toll calls) with international assets, and now including Digicell's South Pacific business (Acquired July 2022). Digicell Pacific is a leading provider of communications services across Papua New Guinea (PNG), Fiji, Nauru, Samoa, Tonga, and Vanuatu. The international division also owns Telstra's share of the different sub-sea intercontinental telecommunications cables that connect Telstra to the rest of the world.

vi/ InfraCo fixed: This business unit involves the design, construction, operation, maintenance, and the relocating and rationalising/decommissioning of passive infrastructure assets: Legacy copper line assets (but with some HFC (Hybrid Fibre Co-axial) older technology fibre thrown in too), ducts, pits tunnels, poles and certain fixed network sites (including data-centres). It also contains ongoing income related to the 'DA' ('Definitive Agreement' with nbn). One off DA income includes receipts for disconnecting customers from the legacy Telstra network, and one off receipts from customers connecting to the nbn network. To counter that reducing income stream, recurring DA income from nbn includes payment to access Telstra owned ducts, racks and fibre. One important category of infrastructure hardware -not under the wing of InfraCo- are the mobile network towers.

vii/ Amplitel: This is a special purpose infrastructure vehicle, now only 51% owned by Telstra, that constructs, maintains and upgrades for new services (like 5G) -what was formerly the 'fully owned in house'- Telstra mobile tower network.

viii/ Other: This includes 'Telstra Health' (digital health infrastructure for health providers, and software solutions for the same), 'Telstra Energy' (a retailer of electricity bought from third parties, in what looks like a mechanism to offer 'one party utility billing' for customers who want that) and 'Telstra Purple' (offering adjacent technology for existing Telstra network capability). One product from 'Telstra Purple' called "Branch Offload" will use a range of technologies, including Telstra’s 5G and fixed connectivity, Microsoft Azure (a cloud computing platform) Stack Edge (Microsoft Azures cloud storage gateway) for edge computing (Note 'edge computing' is a term used for processing time sensitive data), Secure Edge (provides users with consistent and secure access), SD-WAN (Software Defined Wide Area Network) and service orchestration. And all of this is delivered as a managed service from 'Telstra Purple'.

ix/ Equity Investment Telstra is joint owner (35%), together with Newscorp (65%) of NXE Australia, trading as Foxtel, a pay TV operator. Foxtel operates using cable television, satellite television, and IPTV (Internet television) operator. What does the name mean? "Fox" represents News Corporation's 'Fox Network Television' and "Tel" representing Telstra. Foxtel transmits its cable service via Telstra hybrid fibre-coaxial (HFC) cable into the Brisbane, Sydney, Melbourne, Adelaide and Perth metropolitan areas, along with the Gold Coast. Foxtel's satellite service covers the rest of Australia. Foxtel on Mobile launched on Telstra's Next G Network in late 2006. Netflix is the market leader in pay TV in Australia (December 2019 figures, Roy Morgan) with 11.9 million subscribers. At the same date Foxtel had 5.5million subscribers. Third in this market is Australian-owned Subscription TV service Stan, which is now accessible by more than 3.3 million Australians. Stan is a fully owned subsidiary of the Nine Entertainment company.

Although not drastically changed from a year ago, (apart from adding 'Digicel Pacific' to the Telstra family), I feel a slightly more colourful descriptive picture, one that captures where Telstra is heading rather than dwelling on where Telstra has come from (see quoted text above) is required for FY2023.

The heart of Telstra's business today is mobile. Telstra offer Australia's largest mobile network, with a range covering 1million more square kilometres than their nearest competitor (PR2023 slide 29). By EOFY2023, mobile coverage was more than 2.72 million square kilometres, an 80,000sq km increase over the last two years. Telstra are committed to delivering an additional 100,000sq km of of mobile coverage by EOFY2025.

Mobile remains central to growth and continues to perform strongly (note that Digicel Pacific, detailed below, and also a mobile business is reported on in the international arm of Telstra, which is not part of the 'mobile' product revenue category being discussed here) . Over FY2023, mobile was the highest earning product range in terms of 'dollar sales' ($10.258b, AR2023 p23). Equally importantly, it had the highest product category growth rate (+8.3%). This included growth from the IoT (Internet of Things) in particular and other value added applications. A key focus for Telstra is the quality, scale, speed and resilience of their mobile network. Telstra were early to the 5G party, and achieved their population target coverage to meet 86% of Australians over FY2023. 41% of Telstra's total mobile traffic is now on 5G. '5G standalone technology' has been enabled. This innovation allows for software defined features like 'network slicing'. 'Network slicing' allows the network to be carved up into separate secure slices, and support lower latency for customers with different requirements,
Furthermore 5G 'edge-computing' (allows cloud data storage closer to the source of the data, and so saving bandwidth elsewhere in the network) supports data being put into hardware at the 'edge' of the Telstra network, closer to the customer. Wholesale mobile revenue was up markedly (+14.6%), driven both by an increase in average revenue per user (ARPU) but also by Mobile Virtual Network Operators (MVNOs). MVNOs refers to a mobile retailer selling a mobile phone product under their own brand name, while all the operational functions are carried out by Telstra, silently in the background. The benefit to Telstra from this kind of arrangement is being able to attract customers from an alternative retail front, where Telstra themselves do not have a strong presence.

Telstra also announced agreements with LEO (Low Earth Orbit) satellite providers:
a/ 'Oneweb' to shift to satellite-based backhaul for Telstra's remote mobile base stations AND
b/ 'Starlink', to enhance services to consumer customers in regional and remote Australia.

The 'National Broadband Network' (nbn) is the default wholesale fibre network operator in Australia (nbn have a legislated monopoly in supplying fibre to the home and fibre to the cabinet, much like Chorus does in NZ). Yet Telstra own 250,000km of optical fibre cable of their own (mainly deployed in back-haul duties) in Australia. Good progress is being made over upgrading the back-haul connections between major centres. Telstra have begun laying ultra high capacity low latency cable - for marketing to hyper-scale customers. Such prospects need reliable 'ultra high bandwidth' between capital cities, and connections to international submarine cables. Customers like Amazon with their AWS data centres, and Microsoft with their Azure data-centres spring to mind. Telstra acknowledges that partnering with these hyper-scalers, rather than directly competing with them, could mean that Telstra becomes dis-intermediated from the final end line customer (an investment risk for shareholders). Nevertheless the rise in Cloud applications revenue (a sub section of the Fixed-Enterprise product mix) of 11.5% was driven by partner cloud associated products.

Digicel Pacific, acquired in FY2023 for $2.621b, is Telstra's largest ever acquisition. Revenue booked from Digicel was $718m over FY2023. The Digicel acquisition was completed on 13th July 2022, barely two weeks into the FY2023 financial year. Digicel Pacific is the biggest mobile operator in the South Pacific spanning six countries - Papua New Guinea, Fiji, Samoa, Tonga, Vanuatu and Nauru. However, despite the touted scale of the Digicel acquisition, total Telstra operating revenue for the year of $23.245b (Digicel makes up just 3.1% of that) puts the acquisition into perspective.

The separation of the Telstra infrastructure into a separate division (InfraCo) and the partial; sell down (51% stake maintained) of the mobile tower business (Amplitel), have highlighted the earning potential of what was formerly thought of as just a 'cost centre' within the company. Contracts from external users are being sought and signed. Today, it is InfraCo that operates the Amplitel assets.

Information of Telstra's competitors , which I have chosen not to update from last year may be found in the linked post below
https://www.sharetrader.co.nz/showth...l=1#post999995

General summary: Telstra is the former default telecommunications operator in Australia. They have retained strong positions in all the retail markets they contest.

Conclusion: PASS TEST

SNOOPY