TEL v TLS

[GR8DAY]

.....as I thought McD.......in other words "a fat lot of good"......hoow on earth are we supposed to make an informed judgement IF in fact we are being MISinformed. I guess at the end of the day (apart from being night time), it's all a big fat punt and anyones "guess" !!

[macduffy]

.....as I thought McD.......in other words "a fat lot of good"......hoow on earth are we supposed to make an informed judgement IF in fact we are being MISinformed. I guess at the end of the day (apart from being night time), it's all a big fat punt and anyones "guess" !!

Well, not really, more a matter of knowing the inadequacies of the data. TEL and TLS are particularly difficult companies to compare, IMO. For a start, there's the tax franking/imputation issue, depending on whether one pays tax in Aust or NZ - doesn't affect the PE of course but pertinent to an individual's return from the investment. The bigger issues though are the different directions that the 2 companies are taking; the regulatory hurdles; estimating future revenues; the different markets etc. Personally, too hard for me........

[blobbles]

GR8DAY - it shouldn't be too hard to work out.

Telecom has reported EPS of 54c based on the previous year. Its actual ongoing earnings are 16.8c if you look at the annual report. But the P/E ratio takes the 54c - essentially the P/E is backward looking. But as potential shareholders we need to look at the future potential SP and dividends, not the last year. We have to be forward looking and that's why you need to read into it a bit more.

Telecom is losing ground in the mobile space to 2degrees and has constantly been hammered by the government for operating as a monopoly. Its going through a lot of pain since the Chorus breakup but is still a decent earner. But it most certainly won't be earning at 54c a share next year, it will probably be in the 15-25c range. If you take a 20c EPS next year, then it comes out as a P/E ratio of around 11-12, but this could all change depending on the government and the competition in the market.

Its not really a big punt if you read their annual report, you will realise the P/E is not quite right...

[winner69]

Can anyone explain WHY the current PE difference for TLS and TEL............according to the ANZ site, 15.62 v 4.27 respectively. Are these figures correct and if so does that make Tls OVERpriced or perhaps more-so........TEl, UNDERvalued?? There is also a significant difference there in dividend returns 8.75%pa for Tel and 6.5% for Tls??

Using Google trailing normalised EPS and consensus F13 forecasts EPS these are the numbers

TLS PE of 16.1 on F12 eps and 15 on forecast eps
TEL PE of 15.2 on F12 eps and 12.7 on consensus F13 eps

So not really that much different

I would say a lot of the difference being that AU companies generaly trade at higher multiplies than NZ companies

This any help tsolve you conumbrum

[Snoopy]

1/The Sensis directory division in Australia is hemorrhaging customers and revenue. TEL have jettisoned their yellow pages at a good price.
2/ Fixed network revenues are under huge pressure at Telstra. Telecom has neatly demerged their legacy network away into Chorus, and derisked themselves at one stroke.
3/ Mobile revenues at Telstra are booming with Vodaphone regarded as a small weak player. Can't say that that Vodaphone are weak here in NZ. But it does show they are vulnerable when the competition gets their act together. And Telecom can now focus all of their management resources on mobile.

This thread has been dormant for 10 years, but time to fire it up again. The title should now be SPK vs TLS. But I hope Vince will sort that out when he returns from hibernation. A lot has happened in 10 years. But after growing apart with what was TEL shedding their fixed network arm Chorus twelve years ago, TLS has (finally) followed with their own fixed line network going to nbn, with the associated transfer payments now rounding down. Now we are left with what were the two former incumbents, still the largest telecommunications retailers in their respective countries. I feel a comparative stand off coming on.....

The population figures I have for both countries as of 2022 were 5,185,288 (New Zealand) and 26,124,814 (Australia). That is a ratio of 5.0:1 in favour of Australia. I have added a row to the table to normalise for this population mismatch where appropriate by dividing the TLS figure by 5.

	Spark (SPK)	Telstra (TLS)	Telstra (TLS) (population normalised)
Operational Sector	Telecommunications	Telecommunications
Total Employees	4,976	28,889	5,778
Geographic Market(s)	New Zealand	Australia
Share Price 15-05-2023	$NZ5.22	$A4.35
Market Capitalisation 15-05-2023	$NZ9.732b	$A49.92b	$A9.984b
Capitalised Dividend Valuation per share (2019 to 2023)	$NZ5.24	$A3.09
Declared earnings (FY2022)	$NZ410m	$A1,814m	$A363m
Normalised earnings (FY2022)	$NZ397m	$A1,643m	$A329m
Normalised eps (FY2022)	NZ20.9c	A14.2c
Normalised eps growth over 4 year period (FY2018 to FY2022)	+7.18%	+2.90%
Historical PER (SP@15-05-2023)(FY2022)	25.1	30.6
dps (paid during FY2022)	NZ12.5c+NZ12.5c	A5c+A6c
Earnings Payout Ratio (excluding DRP)	120%	77.5%
Gross dps (paid during FY2022)	NZ17.36c+NZ17.36c	A7.14c+A8.57c
Historical Gross Dividend Yield (using Share Price 15-05-2023)	6.63%	3.61%
Shareholder Equity (based on equity at EOFY2022)	$1,475m	$A16,837m	$A,367m
ROE (based on equity at EOFY2022)	26.9%	9.77%
Sales (FY2022)	$3,720m	$A16,837m	$A3,367m
Net Profit Margin (FY2022)	10.7%	6.98%
Total Drawn Term Debt (last balance date EOFY2022)	$1,526m	$A10,982m	$A2,196m
MDRT (Based on Drawn Term Debt at balance date EOFY2022)	3.84 years	6.05 years

At this point I was planning to have a short summary on the relative merit and demerit points of investing into Spark and Telstra. But going through the comparative columns line by line, it is apparent that Spark is outperforming Telstra in all measures. There is nothing we can learn from the Aussies, and there appears to be everything they can learn from us!

Operational metrics show how a company is performing. But for investors, the key statistic to look for is the value you get for the price you pay. Looking at both through a 'no growth' capitalised dividend lens, you would be buying SPK as a no growth prospect on the market today at fair value. OTOH the premium you are paying for TLS ($A4.35 / $A3.09 = +40%) indicates a lot of forward growth is already built into the share price.

It is rare that such a comprehensive comparison is as one sided as this. Buy Spark on share price weakness and sell TLS into any share price rally looks to be the message this table is telling us.

SNOOPY

discl: hold SPK and TLS, but a lot more of the former.

[Snoopy]

It has struck me that the annual depreciation bill on each side of the Tasman has had markedly different effects on the NPAT of Spark and Telstra. The table below shows what I mean.

Year	Telstra Profit {A}(1)	Telstra Depreciation {B}(2)	{A}/{B}	Spark Profit {C}(1)	Spark Depreciation {D}(2)	{C}/{D}
FY2018	$1,643m	$3,005m	0.5468	$358m	$263m	1.361
FY2019	$1,445m	$2,810m	0.5142	$398m	$246m	1.618
FY2020	$1,050m	$2,757m	0.3808	$386m	$233m	1.657
FY2021	$1,494m	$2,606m	0.5733	$375m	$242m	1.550
FY2022	$1,645m	$2,572m	0.6396	$397m	$234m	1.697

Notes

1/ Earnings are adjusted to reflect operational earnings and eliminate one off effects.
https://www.sharetrader.co.nz/showth...=1#post1003216
https://www.sharetrader.co.nz/showth...l=1#post997680

2/ Depreciation is depreciation of 'plant property and equipment' only.

------------------

You can see from the numbers that property plant and equipment depreciation (largely telecommunications equipment in both cases) was far higher as a proportion of profits at Telstra compared to Spark. This in line with either:

a/ Telstra having a far larger telecommunications asset base than Spark, relative to the profits generated OR
b/ Telstra being able to write off their communications assets in depreciation, far more rapidly than Spark in relative size terms

Back in FY2018 Telstra did start as a much more asset intensive business than Spark. Telstra was still in the process of exiting its legacy copper network, whereas this was job done many years before at Spark as the Chorus lines business was 'sliced off' what was then the old Telecom NZ in 2011. But what did the businesses look like at EOFY2022, when Telstra declared the migration to nbn (largely) over?

Year	Telstra Profit {A}	Telstra P,P&E (balance sheet) {B}	{A}/{B}	Spark Profit {C}	Spark P,P&E {D}	{C}/{D}
FY2022	$1,645m	$20,485m	0.0803	$397m	$1,109m	0.3580

You can see from the above that for a given amount of NPAT, Telstra is -still- a far more asset intensive business (more than four times more in fact) than Spark. This comes as a huge surprise to me. For two businesses that are essentially doing the same job, one in Australia, the other in New Zealand, Spark is doing a lot more with their asset base, in terms of earning dollars per value of equipment operated, than Telstra.

Telstra is a little vague on their depreciation schedules, claiming "the expected benefit of communication assets is 25 years" (AR2022 p108).
Spark meanwhile tells us that "links and cables have a design life of 10-50 years" and "Network Transport has a design life of 3-15 years." (AR2022 p102). Squint and you can say that Telstra and Spark are telling us much the same thing. So it looks like /a/ is the answer to explaining the profit efficiency differential.

The figures are clear on what has happened. But explaining why the two companies have such differing capital requirements is a whole other question. Any ideas?

SNOOPY

[Snoopy]

I now want to go back prior to the existence of Chorus in New Zealand and nbn in Australia. This was the last time the then Telecom NZ was comparable to Telstra.

Year	Telstra Profit {A}(1)	Telstra Depreciation {B}(2)	{B}/{A}	Spark Profit {C}(1)	Spark Depreciation {D}(2)	{D}/{A}
FY2010 (prior to fixed network de-merger)	$3,940m	$4,345m	1.103	$382m	$757m	1.982
FY2022 (after fixed network de-merger)	$1,645m	$2,572m	1.563	$397m	$234m	0.5894

Notes

1/ Earnings are adjusted to reflect operational earnings and eliminate one off effects.
https://www.sharetrader.co.nz/showth...=1#post1003216
https://www.sharetrader.co.nz/showth...l=1#post997680

2/ Depreciation is depreciation of plant property and equipment only.

The above table is interesting, Looking at both companies in isolation, the table shows that back in FY2010, depreciation at Spark (or Telecom NZ as it was then - when it still incorporated what were to become the Chorus assets) was a much larger proportion of profit than twelve years later. But at Telstra (which had not transferred any assets to nbn in FY2010), depreciation has increased to a much larger proportion of profit by FY2022, even as the fixed line network assets have been transferred! This is what I would expect for Telecom NZ/Spark, but not what I would have expected for Telstra. We do know that a larger asset base will, in dollar terms, always give rise to a larger depreciation expense. How can this stark divergence in depreciation trend be explained?

One explanation could be that competition is a lot more intense in Australia. That means for the investment required to be a serious market player, Telstra just can't charge as much per customer for their services as the likes of Spark can in New Zealand. Another possible explanation is that Telstra are more 'future focussed', building out in advance the assets that will be required to capture future profit streams. By comparison Spark could be more 'today focussed' in their profit outlook. Which will prove the better path to adaptation going forwards I am not sure. But for better, or for worse, the figures are showing the earnings transformation over the period from FY2010 to FY2022 for Spark has been further reaching than at Telstra. Nevertheless you can also argue that, Telecom/Spark had more reason to transform, given the relatively low returns on their asset base back in FY2010.

Now fast forward twelve years to FY2022. The depreciation expense for both companies has shrunk in dollar terms. That is consistent, with Telstra drip feeding their old fixed line monopoly network to nbn. Whereas in the case of Telecom NZ (later Spark) it all went to Chorus in one hit. But look at now much the depreciation expense shrank in proportion. At Spark we are down to 2/3 of what it was twelve years earlier. But at Telstra depreciation has dropped to only 1/3 of what it was. We know that Spark is not depreciating their assets faster than Telstra (see post 166). So it must be that Spark have less assets to depreciate.

I wonder what evidence there is for Telstra over-investing for their future?

SNOOPY

[Snoopy]

I wonder what evidence there is for Telstra over-investing for their future?

Strictly this is the opposite end of the depreciation story. A record of the money spent buying new items to replace the depreciated ones. But there is a strong correlation between the two when you are operating in a mature market. The following is a table of 'communications assets acquired' for both Spark/Telecom and Telstra between 2010 and 2022

Financial Year	Spark Communications Assets Acquired	Divergence from Average (1)	Data Centre Capex	Mobile Network Equipment CAPEX	Telstra Communications Assets Acquired	(Telstra Communications Assets Acquired)/5	Divergence from Average (2)
2010	$600m	NM	Unknown	Unknown	$2,326m	$465m	-11.2%
2011	$598m	NM	Unknown	Unknown	$2,167m	$433m	-17.3%
2012	$267m	NM	Unknown	Unknown	$2,293m	$459m	-12.5%
2013	$136m	-19.0%	Unknown	Unknown	$2,645m	$529m	+0.19%
2014	$272m	+61.9%	Unknown	$130m	$2,584m	$517m	-1.40%
2015	$159m	-5.36%	$61m	$93m	$2,322m	$464m	-11.4%
2016	$162m	-3.57%	$34m	$77m	$2,913m	$583m	+11.2%
2017	$148m	-11.9%	$42m	$102m	$3,647m	$729m	+39.2%
2018	$153m	-8.93%	$39m	$115m	$3,536m	$707m	+35.0%
2019	$146m	-13.1%	$36m	$118m	$3,004m	$601m	+14.7%
2020	$166m	-1.19%	$24m	$116m	$2,467m	$493m	-5.8%
2021	$167m	-0.60%	$20m	$106m	$2,084m	$417m	-20.5%
2022	$166m	-1.19%	$15m	$125m	$2,098m	$419m	-20.1%

Notes

1/ Average telecommunications equipment brought into service at Telecom/Spark of $168m has been calculated by taking the data-set to cover years FY2013 to FY2022. Earlier years have been omitted from the average calculation as Chorus was still part of the business in those years.
2/ Average telecommunications equipment brought into service at Telstra of $2,620m has been calculated by taking the data-set to cover years FY2010 to FY2022.
3/ I have divided certain Telstra information by 5 to align it population wise with the population of New Zealand.
4/ The financial year for both companies ends on 30th June.
5/ Dollar amounts are in NZD for Telecom/Spark and AUD for Telstra.
6/ 'Network Assets' include property plant and equipment assets, but not spectrum.

----------------

The first thing readers will notice from this table is that there is a lot more detailed information available from Spark than Telstra. I don't know why. Slacker reporting requirements across the Tasman? Two columns of particular comparative interest is the 'annual spend on new equipment at Spark', verses the comparable figure divided by five at Telstra. Dividing by five, equalises the spend by population. The total spend at Telstra is more (no surprise there as Australia is a much larger country.) But what is surprising is that when I adjust for population the Australian spend is still more - by a lot (e.g.$166m vs $419m).

I have marked the peak spending years for each company in red. If both companies were updating the latest technology at pace, you might expect that these spending peaks would co-incide in the same year. But they don't. Why not? What sort of telecommunications equipment was being updated in those lumpy spending years? That is the question that I want to address next.

SNOOPY

[Snoopy]

I have marked the peak spending years for each company in red. If both companies were updating the latest technology at pace, you might expect that these spending peaks would coincide in the same year. But they don't. Why not? What sort of telecommunications equipment was being updated in those lumpy spending years? That is the question that I want to address next.

The peak Property Plant and Equipment investment year at Spark was FY2014. This was the year Spark rebranded from the old 'Telecom NZ' to the new 'Spark' identity. Here are the two 'biggest things' they were spending their capital investment budget on.

1/ 4G Mobile

When talking about the spectrum acquired (remember that 'spectrum acquired' is a different asset class -intangible spectrum licences- different to PP&E we are discussing here) in that year (AR2014 p12) Spark said this:
"Securing this key strategic long term asset gives us the competitive advantage of being the only mobile network operator with four lots of 700MHz spectrum and will be critical to the performance and economics of nationwide 4G mobile."

AR2014 p30 goes on to say:
"In FY2014 we delivered a brand new LTE (Long Term Evolution) / 4G mobile network to all major centres and towns throughout New Zealand. as well as improved coverage and capacity in our existing mobile network (3G XT)."

Spark doesn't specify how their PPE spending is split between the two generations of mobile networks. But I am willing to bet that since FY2014 was the year Spark introduced 4G to the main centres, this is where most of that $130m mobile network asset spend over FY2014 went. I am reading the above two quotes to say that FY2014 was the 'beach head year' for 4G, and the spectrum acquired ensured its future expansion. The first 5G mobile network customers signed on in September 2019 (FY2020). So what was Spark doing spending $159m+$162m+$148m+$153m+$146m=$768m in mobile network assets between the launch of 4G and the launch of 5G? A principal advantage of 4G over 3G is a much faster download speed for video. This drives user behaviour, which in turn requires more hardware in the network, - even as the underlying operating technology behind the service does not change. In fact VoLTE, or voice capability over the 4G network, was only activated during FY2020. 'Build it and they will come' is one tech investment philosophy. Yet in the case of 4G mobile it looks like 'Build it and they will come and then you will have to keep building' is a more accurate description of what it takes to run a modern day mobile network. Total spend over those 4G headline years was $768m+$130m= $898m. Some of that spend would have been supporting 3G. So in round figures (a guess), I would suggest that Spark's 4G 'hardware spend' over six years amounted to $750m.
'
2/ Data Centres

The second technical area where Spark was spending a lot of money on equipment was 'cloud computing'. In August 2013 (FY2014) Telecom's (Spark's) Gen-i (now Spark Digital) business unit opened a new $10.5m Tier 3 (1) data centre in Christchurch, complementing the 14 existing Spark data centres that were created under the now superseded Gen-i brand. This total of 14 did not include 6 'Revera' data centres.

On 7th May 2013 (FY2013) Spark purchased a company called 'Revera' for $85m. 'Revera' was a data centre provider, specialised in servicing large corporate clients and the government. Revera operated data centres in Auckland and Wellington (the latter built in Upper Hutt for $40m in 2012). In July 2014 (FY2015) Spark spent $17m on a company called Appserv. Appserv offers a suite of services through its purpose built data centre in Auckland, serving a wide range of customers across major sectors. Appserv had been growing consistently for the previous 14 years. Appserv concentrates primarily on serving small and medium sized business customers via cloud desktop-as-a-service solutions. All of these brands are now merged under the umbrella of another acquisition CCL (was Computer Concepts Limited). CCL, a South Island headquartered company, was acquired for $50m by Spark in December 2015 (FY2016). In the same year, Spark made a significant investment in a new data centre in Christchurch (Perimeter Road), and completed an expansion of Spark’s Dunedin data centre (total cost of $34m (see post 168)). Before FY2015, there was not enough detail in the Spark report to know exactly what they spent internally (as opposed to buying add on companies) on data centres. But from FY2015 to FY2022 the total internal spend was (ref post 168): $61m+$34m+$42m+$39m+$36m+$34m+$20m+$15m= $281m.

The (Spark) Data Centres Customer Handbook, dated November 2022, on page 8 lists the current data centre site addresses as: Auckland CBD, Papakura, Takanini (these 3 in greater Auckland), Hamilton Tauranga, Wellington CBD, Christchurch Airport and Dunedin. That list doesn't cover the 15 data centres Spark talked about in FY2014, let alone any data centres acquired through acquisition. It could be that some of the smaller data centres have been amalgamated since FY2014. Or it could be that the definition of data centre has changed to a purpose built site, rather than a few racks in a building leased from Chorus. Either way it doesn't change total money documented as invested in data centres to be: $10.5m+$85m+$17m+$50m+$281m=$444m.


Notes
1/ A tier 3 data centre has multiple paths for power and cooling and systems in place to update and maintain it without taking it offline. It has an expected uptime of 99.982% (1.6 hours of downtime annually).

Conclusion

Sparks big expenditure items to see them into their 'retail era', I estimate totalled: $444m+$750m= $1,200m (round figures)

SNOOPY

[Snoopy]

I have marked the peak spending years for each company in red. If both companies were updating the latest technology at pace, you might expect that these spending peaks would coincide in the same year. But they don't. Why not? What sort of telecommunications equipment was being updated in those lumpy spending years? That is the question that I want to address next.

The peak Property Plant and Equipment spending years at Telstra were FY2017 and FY2018. What was it they were spending their investment capital on over that time?

1/ Beefing up 4G mobile: 'Faster speeds in more places' was the mantra. 88.9% (AR2017p26) of the Australian population now (as of EOFY2017) were given access to double the download speed of standard 4G, the so called 4GX standard, covering 99.2% of the Australian population by EOFY2018 (AR2018 p9). This figure was revised up to 98.6% by EOFY2018 (p9 EOFY2018). In capital CBDs more than 100 sites across five capitals were now capable of delivering highest possible download speeds of 1GBps (but more typically 5Mbps to 300Mbps). As an aside, 83% (AR2017 p26) of ADSL customers (fixed line legacy) were then (EOFY2017) able to get speeds that support a 'quality video experience'. (AR2017 p10).

This 'beefing up of networks' is all about fulfilling demand for video. "Telstra Live Pass" let customers watch every AFL, NRL and National Netball game live fast and data free (1.45 million subscribers already, with 1.2m of those getting access as part of their mobile subscription plan (AR2017 p24)). Meanwhile "Telstra TV" became a content aggregator covering big names like 'Netflix', 'Stan' and 'Foxtel Now'. Telstra were the first to bring on the LTE-broadcast (LTE-b) technology to market to support this. (AR2018 p9). LTE-b technology enables real time data to be broadcast to all users on a cell site, instead of requiring all users to have a separate stream. This minimises the network load of popular, bandwidth-intensive real-time video content,

Future uses of 4G being trialled over FY2017 included V2X (vehicle to everything) and V2I (vehicle to infrastructure) technology. Telstra saw driver-less vehicles becoming mainstream (AR2017 p15). Telstra expected their mobile network capacity would have to increase five fold between FY2017 and FY2022 (AR2017 p18). This would accommodate four times the number of devices (AR2018 p8). Telstra committed $1.5b of their $3b additional investment overbuild' that ran from FY2017 to FY2019 to the 'networks of the future' build program (AR2017 p18). This figure included some preparatory spend to set up 5G (AR2018 p5).

It is all very well planning to have the best 4G network out there, but how would you measure this? Telstra were ranked number 1 on the 'Netflix Speed Index' in July 2018 for both mobile and fixed (AR2018 p5). (The Netflix ISP Speed Index is a measure of prime time Netflix performance on particular delivery channels).

By EOFY2018 (AR2018 p5) $1.5b had been spent, and 500 new and 1,100 upgraded mobile sites had been switched on and around 400 small cells activated. (Small cells provide additional network capacity or mobile device coverage to a small geographic area. They operate at lower power than a traditional mobile phone base station and use smaller equipment). 800 new base stations were eventually funded via the Federal Government's Mobile Black Spot Program (AR2019 p5). Going forward a co-investment program is in place to fund regional infrastructure in areas that have high community value but would otherwise be uneconomical to build.

1b/ Preparation for 'The Internet of Things' (IoT) was made by activating 'Cat M1' across the 4GX (higher speed and bandwidth 4G) coverage footprint. The alternative Narrowband IoT (sending small volumes of data at very low power levels) now covered major Australian cities and many regional towns (AR2018 p5). Narrowband applications include moisture sensors and livestock tracking. Meanwhile 'Cat M1' is when more data. like 100kbps, is required. An example is health tracking applications. Telstra claims to be one of the first carriers in the world to offer both of these IoT technologies (AR2018 p9).

Telstra have expanded Wi-Fi calling to millions of compatible mobile devices, by increasing the number of WiFi hot spots. Over 2017 'TelstraAir' switched on their one millionth Australian location.

By EOFY2019, the Telstra mobile network had expanded to cover 2.5 million square kilometres (PR2019 slide 15).

2/ Inter City Fibre Highway Telstra talk about supporting others data-centres, rather than building their own. Over FY2018 (AR2018 p8) Telstra completed the next stage of the upgrade of the transmission network by deploying high capacity next generation optical Transport technology between five Australian cities: Perth, Adelaide, Melbourne, Sydney, and Brisbane. The distance by road between these centres is: 2690km, 730km, 880km, and 910km, for a total of 5,210km. An equivalent geographic coverage in New Zealand would seek to link cities: Auckland, Wellington, Christchurch, Dunedin and Invercargill. The distance by road between those centres is: 640km, 440km, 360km and 200km, for a total of 1,640km. From the comparative distance, creating a fibre highway linking the main centres of Australia would be a much more expensive exercise than doing the same effective job in New Zealand

3/ Telstra Smart Modem This connects a user to the internet faster through the mobile network without having to wait for fixed services to connect. If there is an interruption to the broadband service, the gateway will automatically switch over to a mobile connection within minutes (AR2018 p9).

4/ Subsea international cable network expanding Telstra have committed to building a new subsea cable between Singapore, Indonesia and Australia (with partners AARnet, Google, Indosat Ooredoo and Singtel) (AR2017 p13)

Adding Everything Up

Total capital expenditure over FY2017, FY2018 and FY2019 was $4.6b, $4.7b and $4.1b respectively (PR2019 slide 29). I believe these total was largely spent on the four categories of expenditure above. Note that these totals do not include expenditure on spectrum or externally funded capex (not 100% certain what this means, possibly the joint venture undersea cables and/or government grants to fill mobile network black spots?). Much of the latter spend was on updating new digital platforms. My thinking is that much of this money has gone into software which will be amortised rather than depreciated. For this reason I am approximating the detailed hardware upgrades expenditure to be the money spent over FY2017 and FY2018 only, a total of: $4.6b+$4.7b=$9.3b.

Divide this figure by 5, to equalise for the population between Australia and New Zealand, and this is equivalent to a an NZ market is $1,900m.

SNOOPY