Telstra Group Limited (TLS) Earnings Call Transcript & Summary

Good morning. I'm Ross Moffat, Head of Investor Relations. And it's my pleasure to welcome you to Telstra's Virtual Investor Day for 2020. Before we commence, I would like to acknowledge on behalf of Telstra, the traditional custodians of country throughout Australia and recognize their continuing connection to land, waters and culture. We pay our respects to their elders past, present and emerging. We have a great lineup for you today. First, we'll be hearing from Andy Penn, our CEO; followed by Kim Krogh Andersen and Nikos Katinakis on 5G; Michael Ackland, on Consumer and Small Business; and to close off the first session, David Burns on Enterprise. We will then move to Q&A with those speakers and a short break. After the break, we'll have Vicki Brady, our CFO; followed by Brendon Riley on Telstra InfraCo, with a return to Vicki for wrap up. We'll then move to our final Q&A session with Andy, Vicki and Brendon. With that, I will now hand over to Andy.

Well, thanks very much, Ross, and good morning, everybody, and welcome. I hope everyone is continuing to stay safe and well. Thank you for spending the time with us today. Let me start by setting the scene for our discussion. There are really 3 things that we would like to achieve today. Firstly, we want to update you on our operational performance, the key market dynamics that we're seeing and our progress with our T22 strategy. Secondly, to provide a deep dive on some of the key aspects of our strategy, including the next steps in the creation of Telstra InfraCo and our intention to create a new corporate structure. And thirdly, we want to give you the opportunity to hear directly from the broader management team. Now as you join us today, we are almost 18 months out from the completion of our T22 program. This means that we're closer to the end than we are to the beginning. So to set the scene, I wanted to start by reminding you why T22 is so important to Telstra. Why is it so important that we finish the job? When we launched T22 in June 2018, we'd reached a tipping point, a tipping point where we knew we had to act more boldly. We could see our industry was changing rapidly, driven by technology innovation, competition and the changing expectations of customers hungry for digital experiences. And of course, we had to deal with the profound impacts of the nbn on us. Our T22 strategy was created to respond to these trends by radically simplifying and digitizing our business, by eliminating customer pain points, removing legacy systems and processes, introducing new agile ways of working and further extending our network leadership, including in 5G, reducing our cost base and, of course, establishing a stand-alone infrastructure business to drive performance and create optionality post the nbn rollout. In other words, we were preparing the company for an accelerating digital economy. And of course, little did we know that COVID would supercharge the digital economy. And online working, learning and living would suddenly become the new normal. COVID has proven that when it comes to doing things digitally, with the right incentives in place, change can be embraced quickly. In fact, in the last 9 months, the digital economy has exploded around us through activities such as telehealth, online learning, remote working and e-commerce. And through the work that we've already done with the T22 strategy, we are exceptionally well placed to respond and lead in this new environment. I cannot emphasize enough the significance and the scale of the foundational changes we have made to our digital systems and functions over the last 2 to 3 years. They're generational, and we have only just scratched the surface of the benefits that they will ultimately deliver. Telstra is Australia's largest telecommunications company, plays a central role in the digital economy. And the work that we have done through T22 gives us a winning competitive advantage. As we move into the final 18 months of T22, we're extremely well progressed. We have delivered or we are on track to deliver more than 3/4 of our strategic objectives, and the progress is visible right the way across the business. We have simplified. Consumer and Small Business in-market plans were cut from 1,800 to 20. And today, we have almost 6 million services on those plans. We have digitized. Many of the old cumbersome legacy systems are gone. And by the end of FY '20, more than 70% of Telstra Consumer and Small Business service transactions were by digital channels, up from 53% just 12 months before. We are working differently. More than 10,000 employees are now working in agile teams, where roadblocks have been removed, and products and services are able to be rolled out in weeks rather than months. Our 5G network is the best in the country. And in fact, it's among the very best 5G networks in the world. I expect us to cover more than 50% of the Australian population with our 5G network by the end of December and 75% by June 2021. As you will hear from Kim and Nikos shortly, we will leverage this investment with new products and services such as our 5G fixed wireless broadband solution. We are also working our assets more effectively. Telstra InfraCo is now fully operational as a stand-alone infrastructure business unit, controlling assets with a book value of around $11 billion. I will return to InfraCo in a moment to comment on the deep dive that we will take you through today. We've also become more efficient. Through our productivity work, we have delivered $1.8 billion of savings so far, and we remain on track to reach our target of reducing annual underlying fixed costs by $2.5 billion by FY '22, and that includes a further $400 million in productivity this year. In fact, our progress so far on productivity, along with the digital investments that we have made, sets us up for what's beyond T22. And importantly, we believe we can deliver strong productivity in FY '23 and beyond. Notwithstanding the significant progress, I know though that it is not sufficient if we don't also deliver a strong financial performance for our shareholders too. While the impacts of competition and COVID mean we will not achieve our original ROIC goal in our original time frame, our level of aspiration should not be interpreted as being kept at ROIC of 7% over time. Now Vicki is going to speak about this later. But without stealing her thunder too much, I do want you to hear from me that we are absolutely focused on getting our underlying EBITDA into the $7.5 billion to $8.5 billion range post the nbn that we have spoken about before. We are also upgrading our ROIC target in FY '23 to around 8%, given that, that is the ROIC which is consistent with EBITDA towards the lower end of that range. Importantly, we can now see the point in FY '23 when the nbn migration will be fully complete and its impact finally wash through our financial results. This will be a historic moment because the net cost to Telstra of this has been huge, around $3.5 billion in recurring annual EBITDA when it is complete. But with this largely behind us, as you will hear from Vicki, we expect profit to return to growth from FY '22. Ultimately, transforming Telstra and preparing and positioning it for the future post the rollout of the nbn has been what T22 is all about. We've made massive progress. But, of course, there's still more work to do, and that brings me to today's agenda. Today, we want to take you through a deep dive on some of our key priorities for the remainder of the program. 18 months out from the end of T22, we are very clear about what we need to deliver. So let me start with Telstra InfraCo. In the last 2 years, we have done a lot of work to set up InfraCo as a stand-alone business, managing the vast majority of our infrastructure assets. It was created for 3 reasons: firstly, to provide greater transparency of Telstra's infrastructure assets; secondly, to improve the efficiency of how we manage those assets; and of course, thirdly, to provide optionality in an evolving industry. Today, we are announcing the next step, not just in Telstra InfraCo's establishment, but in the future operations of Telstra overall. Vicki and Brendon will take you through this detail shortly. But today, we are announcing an important milestone in our T22 strategy. In fact, an important moment in Telstra's long history, a proposed restructure of our business into 3 separate entities, under a parent company, Telstra Group. The 3 entities will be InfraCo Fixed, InfraCo Towers and a third entity, ServeCo. ServeCo is not a new brand name, I should say. We're just using that as a reference today for the purpose of differentiating this entity, which is focused on products and services and customer support from the infrastructure business. But InfraCo Fixed will own and operate our passive physical infrastructure assets, the ducts, the pipes, fiber, data centers, subsea cables and exchanges, all of which underpin our fixed telecommunications network. InfraCo Towers will own and operate our passive physical mobile tower assets, which we will look to monetize over time, given the demand and compelling valuations for this type of high-quality infrastructure. And ServeCo will focus on how we create innovative products and services, support customers and deliver the best possible customer experience, including maintaining our significant network leadership. ServeCo will own the active parts of our network, things like software-defined networking, that allows us to operate our network in a very dynamic way. It's important to understand that we are being very careful to retain key elements of our network in ServeCo. These include things like the radio access network equipment on our mobile towers, our spectrum holdings, and the electronics, the life of the fiber in our fixed network, because all of these underpin our strategic advantage and differentiation. Now we spoke about the key drivers for the establishment of InfraCo when we launched our T22 strategy in June 2018. The challenges and disruptions that we have seen over the last 6 to 12 months have only reinforced these. Firstly, the increasing value of infrastructure assets globally; secondly, the importance of the digital economy, not only to business, but to the whole of Australia and its economic recovery; and thirdly, the dependence of the digital economy on telecommunications as the underlying platform that supports it. Because as our collective fortunes become increasingly digitized, our proposed new corporate structure reflects this new world and will help us build a foundation for it, one that is in the interest of our shareholders, our employees, our customers and ultimately, one that benefits the country overall. Any restructure is a complex process, and this is undoubtedly our biggest and most complex since privatization. It will take time to work through the many commercial, regulatory and operational issues. And we are very conscious of the many stakeholders who will have an interest in these changes. And that is why we have announced our intentions today because we wanted to do so ahead of implementation, so we can undertake a comprehensive consultation program to detail the many benefits that this structure delivers to our stakeholders but also hear their input as well. Now elsewhere in the business, beyond InfraCo, it is also important that we finish the T22 job. For our consumer customers, we need to finish radically simplifying our product offerings, eliminating customer pain points and creating all-digital experiences. We've already made great progress. As I mentioned a moment ago, more than 70% of our total service transactions are now through digital channels. That equates to almost 5 million transactions per month. Customers are using digital channels to make payments, download bills, update their credit card details, and 95% of these transactions are now completed in digital. Digital sales have also dramatically increased over the last 2 years, up 6% -- up from 6% to 33% in October. Simple sales experiences such as plan changes are now more than 55% via digital, driven through new one-click processes. Finishing this radical simplification and digitization is a large and complex piece of work, and Michael Ackland is going to take you through that shortly. But with so much change happening simultaneously for our customers, it is inevitable that we will see some issues, but we will address them as quickly as possible. And ultimately, I know we will end up providing a better, more seamless customer experience. Now I mentioned earlier that T22 will not stand for anything if it does not lead to an improved outcome for our shareholders, and we are confident that it will. But similarly, it must lead to a transformed experience for our customers, and we are now starting to see these benefits accelerating. Turning now to our fixed business. The nbn headwinds that we have faced are tracking as we had expected. And the T22 changes that we are making will, I believe, enable us to improve our fixed EBITDA. In fact, as you'll hear from Vicki, we are targeting a mid-teens nbn resale margin in FY '23. For our business customers, we need to complete the transformation of our Enterprise business, including with initiatives such as Adaptive Networks to enable Australian companies to manage their connectivity needs and respond more quickly to changing dynamics. David will talk more about this shortly, but we expect to bring Enterprise business back to growth in FY '22 at the aggregate level for both revenue and EBITDA. In networks, as with our rollout of 3G and 4G before, Telstra is the clear market leader in 5G already. And this reinforces that Telstra has and will retain, by far, the best mobile network in Australia. Vicki will talk more about the detail of our outlook shortly, but we are confident that our leadership in 5G will enable us to achieve second half FY '21 ARPU and EBITDA growth in mobile. In productivity, cost reductions are expected to come under further product -- come from further product rationalization, platform simplification, increased customer self-service and incremental direct and indirect labor reductions. And finally, as well as restoring growth in our core businesses, we intend to build on the strong performance we have achieved in Telstra Health. This business has built a really impressive ecosystem of digital services that can help with anything from a simple consultation with the GP via a telehealth platform, to delivering paperless prescriptions, to helping create new integrated capabilities in health care and aged care at a national level. It hit breakeven in the month of May this year, and we expect a positive EBITDA contribution from the business in FY '21, with revenue growth in excess of 25%. Now we know that not all of the investments Telstra has made in the past have gone well, but we have learned from our experience. Our measured approach now means that Telstra Health is incredibly well positioned and performing well, and I believe it will be a very strong contributor to the value of Telstra in the coming years. I also wanted to take this moment to share with you that we are exploring the opportunity to resell energy to our consumer customers. These plans are at an early stage, but we're about to apply for the necessary licenses, and you will, therefore, become aware of them in the coming weeks. Now we are one of the largest consumers of electricity in the country. We have been heavily involved in the sector by underwriting renewable generation via PPAs, providing firming power capacity during times of extreme demand or grid instability, and neutralizing the emissions from our total operations. We already underwrite projects that generate enough renewable energy to power about 100,000 homes. And we provide standby power that enables more renewable energy to be absorbed into the energy grid. We also deploy machine learning and IoT to change the way that we use energy. We have a very experienced energy team. All of these things help us affordably access more renewable energy, and we also help some of our larger customers do exactly the same. Now we are exploring bringing all of this experience to the table with a consumer offer, leveraging our strong in-home position with our customers, the investments that we have made in the digitization of our customer systems and our Telstra Loyalty Plus program. We plan to do so with a simple, affordable solution at a low cost for us. And we will do it with the same measured and conservative approach that we have applied to Health over the last few years. I want to finish my remarks this morning by coming back to the digital economy and the importance of getting the policy and regulatory settings right for Australia's future. To its credit, the Federal Government has shown its commitment to the huge task of digitizing our economy with a recent announcement in the budget. Only last month, the Prime Minister reiterated his commitment to this goal when he spoke of upgrading the circuit boards of our economy and using the gains we have made this year as a springboard to become a leader. What is important now is that we continue to build momentum behind the digital economy by removing barriers, incentivizing growth and encouraging reform. Because if we get this right, the potential economic benefits for Australia and Australians are enormous. Recent modeling from PwC showed that more businesses embracing digital tools could add up to a further $90 billion of incremental value to the Australian economy and importantly, create up to 250,000 new jobs by 2025. Telecommunications networks will make or break the country's digital economy. With so much at stake, it is, therefore, crucial we have a clear, shared vision for the telecommunications industry for the next decade. With the completion of the nbn rollout, there is now an opportunity for Australia to develop such a vision, one that is technology agnostic, one that provides an environment that is pro-investment and pro-innovation, a vision that not only considers the nbn but the success of the whole sector. Our initiatives with Telstra InfraCo and the structural changes that we have announced today support such a vision, as do all of the changes that we have made and are making as part of our T22 strategy because T22 is fundamentally about transforming Telstra for the future and being in the best possible position to grow strongly in the digital economy. I hope that helps set the scene for today's discussion and gives you a sense of our immediate priorities and urgency with which we are facing them. As we move further into FY '22, at a point where we are closer to the finish of T22 than we are from the start, we know we have more work to do to truly transform Telstra, but we also know that we have already made very significant progress. We, therefore, look to the future with growing confidence in our ability to deliver our strategic ambitions and importantly, return Telstra to growth. Thank you. And with that, I will now hand over to Kim.

Thanks, Andy, and hello, everyone. My name is Kim Krogh Andersen, and I am the Group Executive for Product & Technology function here at Telstra. Joining me today to present the 5G update is my colleague, Nikos Katinakis, the Group Executive of Telstra Network & IT. Today, we will give you an update on our 5G network rollout, our technology road map and how we are currently monetizing our 5G leadership. We will also touch on how we believe the 5G ecosystem and the technology evolution will create long-term value and growth for Telstra. Overall, we believe early adoption of 5G is the single biggest opportunity for telcos in this decade. That's why we have doubled down on our 5G investment and leadership. With this short introduction, I will hand over to Nikos, who will give us an update on current 5G network and our technology plans. So Nikos, over to you.

Thank you for the introduction, Kim. I'm super excited to be able to share some of the things we have been doing, and let me start with our 5G deployment. After accelerating our investment, our 5G network already covers 44% of the Australian population. And we are on target to reach 75% population coverage by the end of June 2021. We now have 2,250 sites, actually a bit more than that across the country. We are significantly ahead of our competitors, and our intention is to continue our drive for technological leadership. Besides the opportunities that open up with 5G that Kim will describe later, there are 3 broad factors that have played a key role in our decision to go faster. The first one is that 5G is a lot more efficient than 4G. Our data consumption continues to grow by 30% to 40% per year, and we are always keen to use the next generation of technology that allows us to deliver more data at a lower cost per bit. The second interesting change with 5G is that the device ecosystem is materializing a lot faster than previous generations of technology. We believe that customers that want to get the latest Samsung, Apple iPhone or any other device that already supports 5G will also want the network to use it, and we want to be there for them. Finally, one of the many things that COVID has proven is that change can be made and embraced quickly. It has also proven that the digital economy is central to the functioning of our country, and it will be very important to the economic recovery. Good connectivity is more important than ever before, and resiliency, bandwidth and performance are critical. Telstra's 5G network is already in more than 60 cities and regional towns across Australia, including most of the suburbs of those cities. More than 12 million Australians now live, work and pass through our 5G network footprint every day. Evidence that Australia is doing well in the wireless domain is the recent global GSMA Mobile Connectivity Index in 2020. This is the sixth year running, and it's showing the success of our competitive market. Australia came first in the index, and that index measures infrastructure affordability, consumer readiness, content and services. Last year, we walked you through how the spectrum situation plays out in 5G. I would like to give you an update on this. We have 3 layers of spectrum that we are making available to 5G. Low-band, great for coverage over long distances and in building penetration from the outside. We are selectively using our 850 spectrum that is also used for 3G and 700 that is used for 7 -- for 4G. We have announced that we are shutting down our 3G network in 2024. And in the meantime, we are deploying some cool technology, called dynamic spectrum sharing, that allows us to use the same radio for both 3G and 5G simultaneously. Mid-band is perfect for coverage improvements and additional capacity. And then high-band, or millimeter wave, excellent for massive capacity uplifts. We are using the mid-band, the 3.5-gig spectrum, as the foundation of 5G everywhere we deploy. And this is the spectrum that was auctioned off in late 2018. Finally, we're really looking forward to the auction early next year of millimeter wave. While it's not suitable for broad geographic coverage, it will allow us to meet organic capacity growth, scaling new services and really optimize offerings like fixed wireless to a select group of customers. Two points of differentiation in the way we're deploying our network is that we have focused on deploying 5G in a contiguous fashion and also by using low bands for in-building penetration. One important point that I want to make on this is around speeds. As you can easily understand, peak speeds start to become irrelevant. Most telcos around the globe, including ourselves, have been publishing peak speeds that indicate the progress of the technology. We recently announced 4.2 gigabits per second on a 5G test. With the introduction of millimeter wave, the numbers get so large that really become irrelevant. Instead, we have started focusing on the actual experience that our customers are getting, wherever they are and wherever they use their devices and their services. All major independent studies show that the Telstra mobile networks, including 5G, outperformed all our competitors across all the cities tested, and in some cases, by as much as 50%. In the lower part of the chart, you can also see the evolution of the device ecosystem and the availability of 5G devices from all the major manufacturers for our markets. It's a really good story. Another thing we have been doing is we have founded the 5G Future Forum, and we are developing partnerships with cloud services providers and technology vendors. We have said many times that 5G is particularly important for enterprises, and we are clear that the only way to successfully deploy new capabilities and monetize them is through partnerships. The 5G Future Forum was established in January 2020 by 6 telcos from around the globe, America Movil, KT, Rogers, Telstra, Verizon and Vodafone, came together with the intention to develop 5G interoperability specifications to accelerate the delivery of 5G and MEC solutions around the globe. MEC stands for multi-access edge computing. These specifications, that have started to be released by 5GFF, form the foundation for collaboration between telcos, public cloud providers such as Microsoft Azure, AWS, Google and others, and key technology providers such as Cisco, Ericcson, Nokia and others. It is a collaboration between the complete ecosystem that really enables the introduction of a set of new capabilities that will be taken advantage by the enterprise customers everywhere. 5G and edge compute have the potential to truly change how organizations operate and be a game changer for a range of applications. Let me quickly cover these new capabilities. Telstra can bring elevated value to edge compute-enhanced solutions. This is probably the most important chart in my presentation today because it describes the actual capabilities that we're looking to enable. I'm not going to describe all the points on this slide, but I do want to highlight some of the key ones. By moving the network and the cloud closer to the enterprises, we are able to reduce latency to applications and increase the resiliency of both the network and those applications. We will be taking advantage of our physical presence that we have across the country and the peering points with cloud and application providers to enable those edge sites. We have also been building the people capabilities in security, cloud and software development, so we can support our customers and partners across all these edge locations. And when is all this going to be available? We have started enabling capabilities and working with partners already. As an example, we have collaboration initiatives with Agrifood Connect in Toowoomba, and we have activities in both Melbourne and Sydney. Broad commercial availability is expected from Telstra in about 12 months or so from now. However, as I said, we are seeing key initial capabilities coming online at our innovation centers now. I will pass it back to Kim, who will describe in more detail how we plan to use these capabilities across the various enterprise verticals and more importantly, to give you a flavor on how we're monetizing 5G now and in the future. Kim, back to you.

Thank you, Nikos. All over the world, enhanced mobile broadband or, in simpler terms, 5G devices is the initial use case for telcos to monetize their 5G investment. This is also the case of -- this is also a case for Telstra, where we are monetizing increased capacity, lower latency and higher speed. The network rollout leadership really lays the foundation for strong 5G monetization in Consumer, Small Business and Enterprise segment. Since May 2019, we have launched more than 20 5G-enabled devices, ranging from smartphones, tablets, mobile broadband devices. And this year, all key smartphone vendors have launched their flagship 5G device, like Samsung S20, the Google Pixel 5, and of course, the latest iPhone 12. This has truly accelerated the 5G ecosystem. And as of today, we now have more than 400,000 5G devices in our network. To put this into perspective, at the moment, we are adding around 40,000 new 5G devices every single week to our 5G network, of course, accelerated by the latest iPhone 12 launch. But to really maximize the utilization of our 5G leadership, we also need devices in a lower price range. And in fact, earlier this week, we launched the Motorola 5 Plus. It is priced at $499, which is our cheapest 5G smartphone ever. Our data also shows us that our 5G customers are using about 2x more data than 5G customers. This is the reason why we have refreshed our mobile plans, providing up to 30 gigabytes of data -- extra data and including 5G access on our top 3 plans. This has resulted in significant shifts from customers signing up to the top 3 plans. In fact, 72% of the iPhone 12 devices are on these top 3 plans and not -- so the -- another early global 5G use case is the fixed wireless access. As Andy mentioned, fixed wireless access will be a core technology to improve our customer experience, where the fixed technology is underperforming or not sufficient to work, learn or be entertained from our homes. Currently, about 65% of our customers with copper connectivity are unable to achieve thresholds for 100 mbps services. So that's why we, in September, launched our Telstra 5G home internet product to address some of these experienced challenges faced by our customers. The product is currently invite-only, as we want to ensure we only provide each household with the best possible service, technology and customer experience. We are already getting positive feedback from customers. The download speeds around 280 mbps on average. There is a significant interest in our 5G home internet product from many Australians. And we will, over the next 12 months, scale our solution to capture the value of 5G fixed wireless access to continue addressing the underserved households in Australia. Millimeter wave will be an important enabler, as Nikos mentioned, to ensure the right capacity and experience when more customers get access to fixed wireless access. The 5G network and the fixed wireless access will not only be for our consumers, it will also be a super important enabler for all sizes of businesses. For our enterprise customers, the 5G network will enable the opportunity to provide them with access-agnostic solution to create the required resiliency and flexibility. For our enterprise customers, we have announced Adaptive Mobility, which is a simple mobile broadband and enterprise wireless solution with modular plans, features and services that enable customers to create a solution that fit their specific needs. As part of Adaptive Mobility, we earlier, this year, launched Cradlepoint's 5G wireless network edge solution to deliver the speed, security, reliability required by our enterprise customers. And just like our consumer offering, we will scale up our offering next year when millimeter wave is available. Technology over the next 12 to 18 months will accelerate even further, with 5G in the center of that evolution. For example, the content entertainment industry are already thinking about how they can create, produce and deliver more engaging, realistic content to tell their stories. Part of that is leveraging nascent technologies like AR/VR as well as 8K high-resolution displays to deliver a more immersive experience. This is true across sports, movies, TV, short-form content, advertisements and many other sectors. This also means that our long-standing partnership with the sports codes, with Foxtel will be even more critical to bring these enhanced experiences to our customers in the future. We will also see an explosion of cloud gaming platforms emerge in Australia. I anticipate most of the big hyperscalers launching some form of cloud gaming in the next 1 to 2 years, Microsoft xCloud, Google Stadia, Amazon Luna and many others. As part of our strategic partnership with Microsoft, we are the exclusive partner in Australia for Xbox All Access and we'll enable xCloud for our customers when that's available. 5G's faster speeds, ultra-low latency means customers can play the latest games inside their home and then continue with a seamless and similar experience on-the-go. 5G network slicing can also deliver service-defined experience, configured for AI and VR gaming and entertainment. Even before 5G and network slicing is available, we have developed network-optimized experience for our gaming customers and have early indications that they are willing to pay for this service-defined experience. 5G slicing will be the key enabler of high-quality AR, VR, XR experiences, which will accelerate the device ecosystem with earphones, smart glasses, smart watches and even smart clothing. Exciting -- existing devices will also be 5G-enabled in the future. More smartphones will have 5G connectivity. And we will also see more tablets, laptops and even television with 5G to allow the viewers -- of the viewing of high-resolution 8K videos and mixed reality content. Service-defined slices, combined with the growing device ecosystem, will give us new opportunities to capture the value of our 5G investment and ensure long-term growth. To capture these longer-term opportunities of 5G, the telco industry, including Telstra, need to reinvent the current business model and move away from gigabytes and speed to an experience-centric business model. We believe we are well positioned to capture the value of the different industries and sectors when they digitize and automate their businesses. AI will extract the value of massive IoT and will require a ultra-reliable low-latency network and real-time compute. Our 5G network, slicing, private network will be a core enabler of the ultra-reliable use cases enabling Industry 4.0. But we will also need cloud and edge to create the resiliency and the compute power required for these use cases. While connectivity remains supercritical, it is software and application that will solve the customers' pain points and deliver the real value of Industry 4.0. We are in a strong position as more than half of our current revenue is -- in our IoT business is driven by software and services, which is unique when we compare ourselves to other telcos around the world. For our customers to transform and digitize their business, they will need a world-class professional service and managed service partner, which is the core part of our Telstra Purple. Any industry vertical will have huge potential. We believe we are well positioned to play a leading part of that transformation. But we also know that we would not be able to do that stand-alone. We need to work with strategic partners and an ecosystem to capture the full potential of this fourth industrial revolution. We are already working with partners and customers to combine these technologies to develop important new industry solutions in areas such as tracking, supply chain, telemetrics, digital twin and smart space solution. As Nikos mentioned, some of these strategic partners include, for instance, Microsoft, Ericsson, where we already are working with them to develop digital twin, edge compute solutions and capabilities. This ecosystem will require Telstra to reinvent traditional business models and market structures. To do that, we are transforming as a company into an open ecosystem with programmable interfaces to engage with our partners and customers in a new and agile and digital way. There is an ocean of opportunities, and we are both excited and confident that we will capture 5G growth in the short, medium and long term. To summarize, first of all, we will double down on our 5G leadership and capture the value of enhanced mobile broadband with increased TMMC as well as growing content and device ecosystem. Secondly, we will accelerate and provide fixed wireless access where the current fixed connectivity is not sufficient. And thirdly, we also doubled down on the ultra-reliable use cases, which will create opportunities for our core connectivity business, our NAS business, our professional and managed service business and new opportunities within industrial solutions enabled by 5G, cloud, edge, AI and IoT. Thank you very much. And now I will pass it over to Michael Ackland to give us an update on our Consumer and Small Business. Michael, over to you.

Kim, thank you very much, and thank you, Nikos. Super exciting to hear about all of that technology and where we're heading. It has been an incredibly challenging year for our Consumer and Small Business teams, and I want to thank all of the teams who service our customers for their incredible hard work and also their adaptability. I also want to thank our customers for their patience and their adaptability as we've gone through these difficult times. As well as being challenging, it's also been a year of achievement. And importantly, we're set up well to meet our T22 targets. Today, I want to run through what our current results in our T22 targets mean for our commercial success. But first, I want to talk a little bit about the current market situation. We've seen some significant changes in the market in recent times. The market is evolving, with a number of changes in our competitive dynamics across our competitors and particularly, in relation to the evolution in the market around multi-brand, whether that's with Optus' acquisition of amaysim, the launch of Gomo, the launch of Felix. 5G is becoming more prominent now. You heard from Kim and Nikos that both Samsung, Apple, but also Google, Motorola have launched 5G devices and are creating exciting new opportunities for growth. For example, game streaming is one of the first tangible mobile 5G use cases, and it is poised to scale. Our partners at Microsoft have xCloud in beta and it's close to launch as well. Customer behavior has shifted quickly towards more data consumption and spending more time online during the pandemic. With the nbn migration effectively complete by the end of FY '21, the next stage of the rollout is incredibly important with the $4.5 million network investment plans from the nbn coming over the next few years. And there is a real optimism around restoring value in mobiles. So driving growth. Today, I want to focus on the following 5 key value levers that we're using to drive growth. Firstly, delivering values from our mobile business through a return to ARPU growth in the second half of FY '21; improving our fixed economics through nbn trading levers and cost management across both our nbn and our legacy businesses; strong growth in new products and categories, including media, gaming and small business services; realizing the commercial potential of the Telstra Plus program, through redemption activity and partnerships; and most importantly, driving and delivering a step change in customer experience with the migration onto the new technology stack. So starting with mobiles. The last few years have delivered us a strong foundation for growth in mobiles. The shift to the new simplified upfront plans, the removal of usage-based data charges and no lock-in contracts as well as ongoing network investment has put us in an excellent position. Our premium has been sustained with a $2 increase in transacting minimum monthly commitment uplift over the FY '20 period, and we are on track to achieve a further $2 TMMC increase to the end of the first half of FY '21 on a PCP basis. We're also in the middle of the iPhone launches at the moment. I would say launch, but it's launches, and our performance so far is giving us real confidence. As Kim mentioned, we're seeing strong iPhone preorders, with 72% of the mix so far on the top 3 plans. We're also on track for the -- for ARPU growth in the second half of FY '21 and further growth into FY '22. In order to achieve this growth, we're focused on a number of things, maintaining our 5G network leadership. As Nikos said, our 5G network already covers 44% of the Australian population, and we're on target to reach 75% population coverage by the end of June '21. We now have 5G sites in selected areas of more than 60 cities and regional towns around Australia. There are 1,650 suburbs already with more than 50% coverage of Telstra 5G, and we have over 2,250 sites across the country. Our 5G network covers an area that more than 12 million Australians work or pass through on a daily basis. We are targeting to have over 0.75 million 5G devices on our network by the end of this calendar year. We also expect that 80% of all of our device sales will be 5G devices by the end of FY '22, which will double the 5G device mix that we've seen in FY '21. All of this is supported by our ongoing migration to our new simplified plans. By the end of FY '21, we will have 4.36 million services on mobile in-market plans, which is on track to reach our FY '22 target. We continue to have confidence in our multi-brand approach. And an exciting milestone we have just completed is to move our Belong mobile business onto a new technology stack. We are also building a range of tech network-optimized products that Kim talked about that will hit the market soon. Moving to fixed. In fixed, we're prioritizing improved margin by FY '23. And so what does this look like? We're targeting mid-teens nbn reseller EBITDA margins by FY '23. And we're doing this by tripling the mix of high-speed tier plans as part of ongoing improvements in fixed broadband ARPUs. And we are seeing strong sales momentum in the higher speed tiers already. We're simplifying our cost structure with all of our nbn activations through the new digital stack by early FY '22. And we're accelerating our on-net solutions. Telstra has the largest base of 4G hybrid modems worldwide. Our Smart Modems have full 4G capacity for both voice and data. And in addition to the 5G wireless access that Kim talked about, offer opportunities for customers to be provided an even better experience. We currently have over 2.1 million Smart Modems in use. We want to increase this to 2.6 million in FY '21 and reach our target of 3.1 million in FY '22. Of which, almost 400,000 customers we expect will be using our Smart Modem Generation 3 that we're launching in FY '22. Moving on to our legacy fixed broadband products. We have a pathway to contain the diseconomies of scale in our legacy fixed business. And we're working with the government and stakeholders to support regional and remote communities onto even better technologies. So more broadly in fixed, how are we doing this? As I've mentioned, we're prioritizing customer experience in fixed with our Smart Modem. We recently launched our Games Optimiser product after months of strong beta testing delivered via the Smart Modem. We have launched improvements to our WiFi experience with our WiFi guarantee in our customer base, leveraging smart boosters, is expected to more than triple through FY '22. We have also uplifted our customer experience by improving the performance in our Smart Modems with now up to 25 megabit speeds on the 4G failover, increasing from 6 megabits per second. We're committing to clearer and easier to understand typical evening speeds of 25 megabits per second, 50 megabits per second and 100 megabits per second, which are currently leading the market. It's not just about fixed and mobile, we're also enabling our customers to thrive in new categories. As the market becomes more competitive, we continue to find ways to add value to customers by bringing our whole of customer strategy to life. In gaming, we've partnered with Microsoft to promote the Xbox. The first year of gaming has been successful, and we plan to double the subscribers by early next year due to the Xbox -- the new Xbox coming in Christmas and through the Christmas retail period. We've expanded our media suite with the launch of Binge. Within the first 5 months, we've had 166,000 trials take up the offer. As Kim said, we've launched our 5G home internet, fixed wireless product in late September, and we'll be scaling that up over the next 12 months, particularly with millimeter wave. We're focusing on how we can add value to our small business customers, and we've launched a cybersecurity product and IT support product and a digital marketing product for our small business customers. We've had fantastic feedback from customers using these services, and we're now poised to scale these products in FY '22. A little bit more on security. We have now launched parental control in our My Telstra app, and we plan to launch a new suite of cybersecurity products in calendar year 2021. Moving on to Telstra Plus. Telstra Plus is something we are incredibly excited about, and we have seen great success with Telstra Plus, and engagement is a driving factor of this. In fact, we have hit 2.5 million enrolled customers, which we plan to double by FY '22. As we reach scale on our customer base, redemption volumes and the click-through rates point to a highly engaged base. This is also reflected in a plus 20 strategic NPS differential. Now that Telstra Plus is maturing, the next step is to really put our foot down on driving commercial value. We're building exciting new partnerships that will benefit both consumers and small businesses, so stay tuned. We are seeing redemptions grow at 32% quarter-on-quarter. And the multiple ways to pay, including points plus repayment options for hardware accessories, have been a big success. We've also launched redemption offers in our core services, such as postpaid and prepaid mobile, which we expect to grow significantly. And in addition, we're now expanding our redemption offers to further drive the uptake of add-ons in our core services. Our FY '22 ambition for Telstra Plus is for 5 million members, more partnerships, 1.5 million redemption transactions annually and more than 80% active engagement across our membership base. Moving on to digitization. Throughout the T22 program, we've had a strong focus on improving customer pain points, through the simplification of our plans, the removal of contracts as well as removing usage-based excess data charges. We have reduced our call volume significantly by 15 million from FY '18 to FY '20, and we've increased our level of digital engagement, digital service at 73% as of October. As we've been doing all this, we've been building our new technology stack. Replatforming a company the size of Telstra is a huge undertaking. And you can see from the slide, we've achieved some big milestones over the past 12 months, including the launch of the new My Telstra app, which now has 4.4 million customers already active; launching our console, which is our new customer relationship tool to over 20,000 frontline agents. The foundations of this build are now largely complete, and we're now focused on the migration of our customers onto that new stack, and I'll talk now about how that is taking place. We commenced the migration of postpaid handheld services last month in October, and we are starting the migration of prepaid in November. We expect our migration run rate will be around 750,000 services per month from Q4 FY '21, and we're aiming to hit 50% of sales on the new stack from the end of FY '21 across all products. We are targeting to stop selling our legacy plans on mobile and nbn on the old stack before the end of the financial year. So what does this mean for customers? Our customer reset is already well underway, from simplifying and digitizing our customer service, including the number of types of plans we offer, to the way customers shop and talk to us and the way they pay for their services. Customers, as Andy talked about, are completing tasks such as payments and downloading bills and requesting payment extensions, updating credit card details in digital. Digital transactions performed via the My Telstra app have grown 50% over the last 12 months, and digital sales have dramatically increased in the 2 years, up from 6% to 35% now. We now have 73% of total service interactions via the digital channel. On the service front, we scaled the digital messaging channel in our contact centers very rapidly over a 6-week period during the early stages of COVID, which took our assisted interactions via messaging from around 5% to 55%, which was an enormous effort. But as with any type of significant change of this nature, we faced customer experience challenges as we did this. And we have been refining the effectiveness of the channel, and we feel confident that we are in a very good position. We know this has caused some ongoing issues, but we have a major piece -- a piece of work underway to improve the experience. We are listening to customers, and we're making very significant changes. While we've already seen significant achievements in improving customer experience, we are yet to realize the full benefits of the digitization program. We are only just scratching the surface from a productivity point of view and a customer experience perspective. This will be a step change once we have a critical mass of customers onto the new stack with higher rates of digital conversion, reduced provisioning times from 40 minutes to less than 10 minutes, halving our fault calls with proactive troubleshooting and NPS upside that we're already seeing in pilot customers of between 10 and 20 points on the new technology. Going forward, we intend to lead the market with our transformed sales and service experiences. We are committed to having all inbound calls from our Consumer and Small Business customers answered in Australia by the end of T22. We also have a program of work underway to create rich digital experiences by further enhancing the message experience. So to wrap up, we've made good progress on our T22 strategy so far across our Consumer and Small Business customer base. And as a result, we're well positioned as 5G reaches scale and nbn migration is completed. We have a clear path to delivering growth in mobile and improve the economics in fixed and nbn resellers. Our ongoing customer focus is delivering compelling new offers. It is removing customer pain points, and it is improving our economics. In fact, we are at a 10-year record high for consumer brand consideration. And we're seeing very strong strategic NPS results, which shows there is plenty of goodwill in the market towards our brand that we have built upon during this period. This is being driven by network superiority and ongoing improving perceptions of value for money and competitive prices. We are particularly encouraged with the growth in consideration for Telstra by Gen Y and Gen Z customers, which shows the value under 40s place in high-quality connectivity, and augurs well for the future. I hope that gives you a strong perspective on the confidence we feel in our ability to fundamentally change the customer experience and deliver real growth in the Consumer and Small Business team. With that, I will stop, and I will hand back to David Burns. Thank you.

Thanks, Michael. Good morning, everyone. My name is David Burns. I'm the new group executive for Telstra Enterprise. I've worked in the enterprise market segment for more than 30 years. So I'm truly excited by the opportunity to lead our Enterprise business. I joined Telstra in 2012 and have led both the NAS and the international teams within the Enterprise portfolio before being appointed the Group Executive of Global Business Services. So I truly believe I have a deep understanding of the Enterprise business, its drivers, its customers and the opportunities, and I'm looking forward to successfully growing this business over the coming years. Michael has just highlighted some of the significant outcomes of our -- that our consumer business has realized as a result of our T22 transformation. Likewise, in Enterprise today, I will outline how we will continue to transform our business and the outcomes we expect as a result. While many of the market factors are similar across enterprise and consumer, the criticality of technology to our customers, the prominence of the hyperscalers and the exciting upcoming opportunities with 5G will drive our business even further. So today, I'll update you on many parts of this well-thought-out strategy that I've inherited. And I believe my job is now to execute on this strategy, drive value and good economics and grow the Enterprise business. So let me take you through that plan. Telstra Enterprise generated $8 billion of Telstra's underlying income in FY '20. This came from fixed and mobile connectivity, our services business in Australia and our international operations. The Tetra Enterprise business as a portfolio is expected to return to revenue and EBITDA growth in FY '22. And as I'll run through in today's presentation, it is important to note that from FY '22, some areas within the portfolio will remain challenged, such as data and IP. And in other areas, we are expecting growth across the remainder of the portfolio. But to achieve our overall Telstra Enterprise growth by FY '22, we are focused on 4 key enablers: firstly, leveraging our 5G and network leadership to maintain our SIO share, stabilize our ARPU and drive growth by scaling our mobility services and our IoT business; second, executing our next generation of services offerings by rapidly scaling our business in key growth markets such as cloud and security, and in parallel, we will maintain our share and margin in existing profit pools across our traditional NAS business; thirdly, setting up our data and IP portfolio for long-term sustainable growth by migrating our customers to new plans and propositions; and finally, by continuing to execute on our international profitable growth strategy by focusing on OTT and Enterprise segments and efficiently leveraging our assets. So let me take you through each of those 4 pillars. And firstly, let's look at our mobility portfolio. As you heard from Nikos and Kim, our 5G network now reaches more than 44% of the Australian population. And by June of '21, that will be 75%. Innovation and use cases for the Enterprise segment will be a key element of the monetization of these investments. 5G is being productized and developed for enterprise customer use cases as it will bring higher speeds to our customers, enabling them to overcome business challenges with incredibly innovative applications. 5G is central to our new modular, standardized Adaptive Mobility plans. Launched in August, these simple plans focus on speed rather than data inclusions. The plans cover handheld, mobile broadband and enterprise wireless and have 3 5G-compatible speed and price tiers: Essential, Enhanced and Epic. Adaptive Mobility brings to life our next generation of mobile leadership and is one of the key ways we will improve mobile EBITDA. We are focusing on, firstly, stabilizing our overall ARPU trajectory, upselling 5G -- or sorry, using 5G as an upsell stabilization, including targeting $3 to $5 uplift on the Adaptive Mobility Enhanced and Epic plans offering 250 megabits per second and unlimited speed caps, respectively. We'll then grow our mobility managed services attach rate by 8 percentage points from FY '20 to '23 to over a close to 1/3 of our mobile base. We'll then radically simplify our mobility portfolio in line with the T22 strategy by reducing the number of plans from more than 2,000 to 12 or less, and then we'll improve the customer experience by more efficiently managing sales and service requests, lowering cost to serve and improving margins through digitally enabling and integrating these new plans onto our new digital customer systems. As we move beyond handsets, 5G is exciting for customers as it gives them access to the quality and speed of a fixed connection on a simpler and easier to manage way. For example, enterprise 5G wireless can power businesses, cloud-based applications and remote working needs without being connected to a fixed network. The Adaptive Solutions portfolio also enables the integration of wireless and fiber access into a secure SD-WAN solution. And in June of this year, Telstra Enterprise customers were the first in the world to be able to buy and use the new Cradlepoint 5G wireless network edge solutions. Telstra also has the largest IoT network in Australia. So leveraging our mobile network advantage, we can bring industry-specific solutions to our customers. A cornerstone of growth, our IoT business, is a great example of how the network connectivity and technology services arms of our business work to create specialized solutions to meet the customers' needs in various industries. We are targeting a doubling of our IoT services attach rate by FY '23. And as the 5G ecosystem matures over the next 12 to 18 months, we are well advanced -- that we will see well-advanced network capabilities for enterprise and industry use cases, which will unlock new monetization opportunities. These capabilities include slicing, edge, AR, VR and other key technologies powering what we call the fourth industrial revolution, or 4.0, which Kim outlined a little earlier. Leveraging Telstra's 5G network leadership, we are well positioned to provide these exciting new opportunities and technologies to our customers. So for example, 5G enable -- can enable use cases in the health care industry, such as virtual reality training in surgical procedures or supporting critical patient monitoring applications through AI-enabled decisions at the network edge. To perform these critical activities, these technologies need 5G's low latency. So as we move towards full 5G capability at scale, we'll also be able to monetize the network through access to APIs, quality of service tiering and prioritization in a B2B2X model, i.e., we can help our customers service their customers. So let me go to the second pillar now, the services business. Our ability to provide our customers with technology solutions that leverage our networks and drive business outcomes has been key to our advantage. It's one of our key advantages. So as competition in the connectivity market continues to intensify, we will maintain our focus on growing our unique technology services capabilities. Today, our NAS business is the largest contributor of revenue to Telstra Enterprise and will be a key driver of our future growth. The key elements of our NAS business are our significant managed network services and unified comms portfolios and Telstra Purple, our professional and managed services organization. It's just over a year ago that we launched Telstra Purple, a team of native technology experts focusing on app development, secure network design and cloud migration, helping our customers digitally transform and make the most of the latest technologies. Telstra Purple has some of Australia's best talent, more than 1,500 of them, in fact, with core strengths in security, network, cloud and app development. And over the last -- past year, this team has worked on more than 8,000 customer projects, including development of apps and platforms for industries such as mining, health care and transport. And additionally, due to COVID, they've helped on examples such as new building management solutions that COVID has caused and many other industry-leading digital products or projects. But as market continues to evolve and grow with the hyperscalers, AWS and Azure are driving much of that market. COVID has only accelerated our customers' need for flexibility, the cost benefits of cloud applications and moving their workloads to public clouds. The urgency of digital transformation for many businesses continues to increase. And with every cloud migration, they need a flexible modern network to support their application performance. The rise of IoT connectivity further enables businesses to use technology to improve operations and save money. So I believe that Telstra is uniquely positioned to grow in this environment. I've already mentioned Telstra Purple's software-based capabilities, our network flexibility and resilience, which we now combine by partnering with the hyperscalers. Take our recent announcement with Microsoft. Telstra Purple holds Microsoft Gold Partner status and accreditations including Cloud Platform including cloud platform, app development, security and DevOps, as well as the exclusive Azure expert MSP program. Telstra Purple is also an AWS advanced partner, certified in migration, DevOps, containerization and a member of its MSP program. An example of the application of these AWS capabilities was a project recently with VicRoads, helping it adopt cutting-edge technology such as Docker and Amazon's Elastic Container Services, and scale its cloud presence more effectively and efficiency. Telstra Purple is the key to this success. NAS is also a great foundation for our managed service offerings, which particularly -- which are particularly important as it drives the benefits of cloud applications. We are investing in tools and systems to standardize and scale our managed services to not only improve our margin, but also help scale our managed services business into the next tier of Enterprise and mid-market businesses. Our financial performance in NAS has demonstrated our focus on execution on cost management and we expect to maintain our mid-teens EBITDA margins. Acquiring capabilities, combined with our Telstra core skills in security and UC, as examples, has been critical to our strategy to build our NAS portfolio to what it is today. Acquisitions provide us with vital capabilities that bolster our relevance in today's software-driven, digitally transformation focused world. And we will continue this approach as we see good opportunities to progress our strategy and drive overall shareholder returns. So let me now turn to our Networks business. At last year's Investor Day, we spoke about the need to transform our Enterprise data and IP portfolio, given the changes the market was experiencing. These trends included the shift away from premium IP VPN to SD-WAN and hybrid connectivity, as well as NBN's continued focus on the Enterprise segment. And as I've just outlined, it is not just the competitive forces that we've had to respond to, as our customers are also increasingly shifting workloads to the cloud, which means our connectivity solutions must also be adapted accordingly. And so in September, we launched an exciting brand-new proposition to meet our customers' rapidly evolving fixed connectivity needs. Telstra's Adaptive networks is our new Enterprise network suite of products that provides customers and -- with the commercial and technical flexibility to pay for what they need, and easily scale their service requirements up or down. This enables them to run their network efficiently, effectively and securely. Telstra's Adaptive Networks unbundles the connectivity layer with the access layer, allowing for a hybrid network and for customers to embrace the latest in SD-WAN technology options. It positions us for further opportunities on top of the network in security, cloud and applications. Telstra's Adaptive Networks is a game changer for our Enterprise data and IP portfolio and a key part of our T22 strategy to build simplicity and flexibility into our products. By combining a simple, flexible offer, with our built-in network smarts and resiliency, together with direct connectivity into Australia's largest Internet backbone, we are confident that we can secure our current customer base on our 250,000 kilometers of existing Telstra Enterprise fiber and mitigate NBN overbuild risk for our existing 60,000 lit buildings. We also continue to invest in SD-WAN capabilities to help customers take advantage of the benefits of software-defined networking. Through deep partnerships with the leading SD-WAN providers, Cisco's SD-WAN and Meraki, and VMware's VeloCloud, Telstra has created industry-leading adaptive SD-WAN solutions to suit a broad range of customers. Our Adaptive Network offerings will include NBN-based solutions as well. This is particularly relevant for regional Australian businesses that are currently being served with copper-based technology that won't be fit for future purpose. By partnering with NBN, we expect to drive new customer growth opportunities and capital efficiencies as we seek to migrate 30,000 copper Enterprise connectivity services to fiber. Overall, we are targeting a return to EBITDA growth for our data and IP portfolio by FY '24. As legacy calling revenue continues to reduce in line with the 2022 exit of ISDN, we are focused on transitioning the associated -- those associated services to NAS products. The rate of decline in data access and connectivity revenue will continue over the next 2 years as we proactively migrate existing services to adaptive offerings. And we are focused on setting ourselves up for long-term sustainable growth. So let me now turn to the fourth of our pillars, which is our international business. Telstra Enterprise International is a competitive challenger in international markets, connecting international businesses to Asia and Asia to the world. We operate in more than 20 countries outside of Australia, serving global Enterprise, wholesale and OTT customers. We have a strong global presence with 400,000 kilometers of cables, the largest subsea cable network in Asia Pacific and more than 2,000 points of presence. And in the last fiscal year, Telstra Enterprise International achieved strong growth, with key highlights being, firstly, $2 billion segment revenue with global connectivity EBITDA growth of 20% at constant currency, and we continued significant investments in new cable routes with industry names such as HKL, PLCN and Southern Cross Next. More importantly, these cable routes are expected to provide us with 20 terabytes of additional new design capacity by FY '22. So our strategy going forward, we are focused on continuing our strong performance in international through these following key initiatives. Firstly, we will continue to drive our global carrier value proposition to OTT and carrier customers, targeting large deals. These deals generate cash flow and help us maximize the value of our cable investments. We are increasing our focus on our Enterprise customer segment as an APAC focused Enterprise connectivity and service provider, as our second strategy. And thirdly, and finally, we are focused on driving EBITDA growth on a constant currency basis and maximizing cash return. This will be achieved by strategically investing in cable routes that are most demanded by customers and return the most profit, and by continuing to leverage the Enterprise Customer Hub to drive operational efficiency and improve customer experience. So let me summarize. In line with our T22 commitments, we will continue to execute initiatives to drive simplification and improved customer and employee experiences, digitize our business and achieve profitable growth. Firstly, in simplification, we will continue to simplify our business and put the customer first in everything we do. Since 2018, we have reduced Enterprise products by 35%, and that will be at 50% by the end of this fiscal year. I've outlined our simplified product offerings, Adaptive Mobility and Adaptive Networks that make it easier for our people and easier for our customers to do business with us. The improved customer experience has been reflected in an uplift in our strategic NPS across all of our customer segments, along with an improvement in our own employee engagement. Secondly, we have made great progress with our B2B digitization program over the last year, improving how we service our customers. I've talked about our recently launched Adaptive mobile (sic) [ Mobility ] and Adaptive Networks products, with Enterprise mobility migration underway to its new digital stack. Our Telstra Connect platform simplifies and improves the customer experience, as it provides customers with a centralized self-service tool to digitally manage incidents, request services, track orders and monitor their network performance. We exceeded the target of 4,000 active customers on Telstra Connect by the end of FY '20, and we're on track to achieve our T22 commitment of more than 7,000 active customers by the end of this fiscal year. And finally, it is imperative that we continue to drive profitable growth as a business by prioritizing and aligning to market demand. To achieve the overall growth I've highlighted, we've created new product suites such as the Adaptive Network Solutions, which is focused on providing our customers with the best networks and enhancing customer flexibility and simplification. We're also focused on mobilizing our NAS and Telstra Purple business towards cloud and digital technologies to support our customers' drive towards digital transformation, and strengthening Telstra Enterprise International through additional capacity and digital tools, all of which will continue to our growth outlook. Thank you for your time. I appreciate it. I'll now join Andy Michael, Nikos and Kim for a Q&A session. But as we set up for that, let's show you a quick video to give you a flavor of our new Telstra Adaptive Network Solutions. Thank you. [Presentation]

Welcome back. Now we'll move to our Q&A session. I would ask that we focus the questions on the presentations around Consumer and Small Business, Enterprise and 5G, as we've yet to hear from Brendon and Vicki on InfraCo, and we'll get to those questions in the second session. So with that, Taylor, do we have any questions on the line, please?

Percent by end of CY '21. Just wondering what your views are on that. And what proportion of your gross adds are on 5G handsets so far? And then just a question on InfraCo. I don't know if this is jumping the gun a bit, but I suppose the one thing we haven't addressed is capital structure. So just wondering if there's the ability, just referencing other sort of infrastructure comps, to take on more debt, and potentially even to fund buybacks? And if that was the case, do we -- how do we sort of balance EPS versus the credit rating, whether we're willing to sort of steer away from that traditional A band credit rating to sort of support the EPS?

Thanks. It's Andy. I hope, I think -- hopefully, you can hear me okay. We just lost the first part of your question, but I think you were really talking about the proportion of 5G devices that we were seeing on the network, which you heard from Michael and from Kim. So I might just ask Michael to comment on that. And perhaps -- Yes, please, that would be helpful.

Sorry, the first question was actually on, I guess, the ARPU uplift from 5G and the 5G iPhone because Michael said there was 72% being added on the top 3 plans. So the math sort of suggests an average ARPU of $55 to $60, excluding Belong and Enterprise?

Yes. Got it. No, look, and I'll get Michael to maybe comment on that. And look, on the one on capital structure and InfraCo, I think I might hold that over, if that's okay, until we got Vicki on the stage as well. And once she's had a chance and Brendon had a chance to take us through the InfraCo presentations. But Michael, do you want to talk about the 5G flow-through into ARPU and what we're seeing on the plans?

Yes, absolutely. So to 73% on the top 3 plans, which is $65 and above. There are some offers in there with Telstra points, but I think the maths of around a $55 to $60 average in terms of the gross adds going on is about right. And then the second one is what proportion of handsets are 5G in our gross adds. So through Q1, about 65% of our Android sales were with 5G. And with Apple, obviously, the new range is 100% 5G. But obviously, there's sort of a broader Apple range that we're still selling in terms of SEs and others. So I would expect us to be very quickly, probably for Q2 to be well above that 65% range. And then as we go into next year, it will move around. Particularly given you've got, I think, as Kim pointed out, such a broad price range on the 5G devices now, both in Android with Motorola and Google, but even the iPhone Mini as an entry price 5G. So yes, 65-ish would be a good range, and then going up from there as the forces come out of the range for gross adds.

Yes. And to the extent that that's a much higher number than our competitors the same that they may be experiencing, I think that's just clearly a demonstration of the fact that we've got a much better network and we are much further advanced in relation to 5G. So -- because I think there was a question about some of our competitors are saying they're seeing a much lower proportion, but that doesn't surprise me because actually, we're just a lot further advanced in relation to 5G than our competitors are.

Excellent answers. And just to follow on, Michael, since forecasting mobile ARPUs is such as dark art, if we're sort of putting on head brand at $55 to $60, with Belong sort of coming in probably in the $15 to $20 range, and Enterprise is sort of a discount to that $55 to $60, presumably, if everything sort of goes according to plan, at the end point, you could still conceivably get to a blended ARPU in the low 50s versus your high 40s today. Is that -- am I mapping that all right?

Well, I think, We're confident of our ARPU growth targets into the second half and then further growth into FY '22. And I think all of the mechanics you described there is exactly the way that we would think through the through the math. And so lifting the TMMC on an ongoing basis, not just in main brand, but across all of the brands, lifting that TMMC is broadly where we want it to be, and that will flow into ARPU, as we said, with second half growth and further growth into '22. So.

That’s great. Thank you, Taylor. Can we go to the next question, please?

Yes. Your next question comes from Mr. Kane Hannan from Goldman Sachs.

Just 3 for me as well, please. Firstly, just updated ROIC target, Andy. I suppose, just for the avoidance of any doubt this time around, but just a sense of what the underlying EBITDA would be if you hit, I suppose, 8.0% ROIC in FY '23. And just confirming, there's no assumptions around telco sales or any other asset sales in that number? Secondly, just on your fixed margin outlook, you're sort of going from arguably 0 margins in '21 to a mid-teens level in FY '23. Just wondering if you made any assumptions around fixed wireless in that number. And just a bit more detail around how you're actually going to do that, given it looks like a bit of a hockey stick recovery? And then finally, just a quick one around the mobile ARPU outlook. Just confirming what your assumptions are around mobile roaming, particularly in that FY '22 comment of continued growth?

Thanks very much, Kane. I will answer the first one. And I'll get Michael to answer the second one on roaming, and then we'll go to Kim to answer the middle one on fixed, if that's okay, ken? And I only do it that way because Kim is in sydney and I'm in Melbourne. So do you want to just do the one on roaming -- sorry, yes, on roaming first, Michael, and then I'll go to the one on ROIC?

Yes. So our forecast for second half ARPU growth and then further growth of ARPU into FY '22 is independent of whether -- it's not excluding roaming. We have a roaming assumption where we expect in the outer years to see a return to roaming, and that's -- so there's no qualifications on our ARPU growth in the second half of '21 or further growth in '22.

And then on the ROIC one, Kane, there isn't any assumptions in asset restructures or monetization in the update on that ROIC. And to your point, I think, and Vicki will talk a bit more about this later, when we updated our ROIC in conjunction with results, we probably were a bit conservative in terms of how we expressed that. And so we've sought to address that by being a bit more definitive that we see ROIC at approximately 8% in FY '23. And that -- and of course, there's a number of factors that do come into ROIC. Obviously, there's EBITDA. There's D&A. There's interest costs. There's the capital position. So it is a broader range, but we would sort of estimate the EBITDA would be sort of at the lower end of that range to be equivalent to ROIC at around about 8%. But I'll get Vicki to come back on that, I'm sure, when we get here from her in the second half of the presentations. And then, Kim, do you mind just talking a little bit about some of the important contributory factors that help get us from here to a mid-teens margin on reselling NBN and the extent to which fixed wireless may or may not play a role in that?

Yes. Thank you, Andy. And first of all, that target is on the NBN reseller only, so it is really about that. And then fixed wireless access and some of these unmet opportunities we see that will come on top of that. But to do that, now when we have -- we are getting closer to the finalization of the migration to NBN, it's really about operational efficiency and operational excellence. So to really ensure that we capitalize on the new digitization stack, ensure that we utilize that automation in the back end to take out costs to ensure that reseller margin. On top of that, also, of course, ensure that we increase the top line. We have reintroduced the 100 Mbps products into market. This is a very important part of increasing the ARPU for our TMMC for our NBN reseller customers. So it is a logic of operational efficiency excellence to take away the cost and automate that back end process. And then it's about ensuring that we set up, same logic as the mobile, to sell to a higher ARPU and therefore, increase the TMMC. So it is a combination of these 2 things that create a very clear plan to that target. So we believe it's about operational efficiency and excellence.

Your next question comes from Mr. Entcho Raykovski from Crédit Suisse.

So my questions, running through them one by one. Firstly, I'm sorry, I don't want to labour the point around the ARPU growth. But the comments on ARPU growth in mobile in the second half, if you can just give us further color whether you think that growth is likely to be marginal. Sounds like you've got reasonable confidence, but any more color whether you think it can be only just get there or do you think you've got a reasonable level of growth that you can achieve? And secondly, the productivity target, obviously, $2.5 billion by FY '22. But can you talk about the quantum of the beyond FY '22, especially given a lot of the digitization initiatives you've spoken about? I suspect you're not going to give us a number, but just the level of significance of those additional targets. And then just finally, interested in how you reconcile the expectations for data and IP growth in FY '24 with NBN's plans to expand the reach of their Enterprise ethernet products, and whether that creates sort of risk to some of those growth projections?

Thanks, Entcho. I might go first again to Michael to talk about the mobile ARPU. I think Entcho's question really is how material will the increase be in the second half. And to the previous question, I mean, it is a bit of a -- not so much a dark art. It's just more that there are a lot of moving parts in the ARPU equation. So I don't know, Mike, if you can provide any color, and then we'll go to -- I'll talk about productivity, and then we'll go to David on the data and IP question.

Yes. Okay. I'll try and provide a bit of color to that question. We have a large base and ARPU moves relatively slowly, and there are a lot of moving pieces. What I would point to is that our confidence in moving ARPU back to growth in the second half is driven by 18 months' worth of actions that we've taken in market from a pricing perspective. Now whether that's removing the $10 Belong plan from market, whether that's the ongoing and continual lift in TMMC and plan mix that we've made, whether it's the significant pricing changes we've made within our JB Hi-Fi channel to really target value. All of those are what are built into the base. And so obviously, our transacting MMC has an impact, but we only do, we only transact on a certain proportion of our customer base in any period. So we're confident around returning to growth. But I would reiterate, this has been a long journey of ongoing changes in the way that we've competed in market. And it is a big base and the ARPU moves relatively slowly.

Thanks, Michael. And on productivity, you're right, Entcho, to point out, and I've been deliberately trying to make the point, that there's an enormous amount of work that's gone into the digitization of our business. And as I said, I can't underestimate just how significant the scale of that work is. I mean, Telstra is an enormously large company with a massive amount of historical legacy in products and systems and processes. And so, upgrading all that and replatforming all of that is -- it really is a generational project. It doesn't happen overnight. And so a lot of the hard work is really what we've been doing over the last few years, and particularly under the T22 programming. And the slightly frustrating thing about that is in a way is that of course you have to do really 95 -- close to 95% of the work before you start to get really the material changes and benefits. And Michael tried to provide a little bit of color of what's coming up literally just in this year. And he quoted a few statistics about, you know, how many -- what proportion of new business we'll be having coming through the new stack, and the proportion of customers that we will migrate. So FY '21 is a really material year in terms of how we start to leverage that. The important point of all of that is a bit to your point. And what it means is actually the productivity benefits of that are actually going to flow beyond the T22 period, so beyond FY '22. And so that's why we're confident enough to firstly say, productivity will absolutely be a feature of what comes after T22. And as we said at results, we'll talk about that some time in the next 12 months or so. It will absolutely be a feature, and it will absolutely be material. I don't want to go further in terms of what the numbers will be. And of course, we will absolutely deliver what we said for the rest of the T22 program, which is another $400 million this year, and by definition, another $300 million the year after. And then thereafter, it will be -- I anticipate it will be in the hundreds of millions as an ongoing basis for a period of time as we flow that through. But I don’t want to say further than that, because Vicki will kick me under the proverbial table. But I think, enough to say, it is -- we expect it to be a contributor to ongoing value that we're creating. And it's a lot to do with the very significant work that's been put in place in the platforming, and then the migrations that happen from there. So why don't I -- I'll pass back to Sydney and get David to talk about how we're going to get data and IP growth notwithstanding NBN's aspirations in the data and IP area as well.

Thanks, Andy. Look, I think this is a combination of or plays here. And I like the cards I've got, frankly. Firstly, we recognize we needed to do something with the products, so hence, Adaptive Networks, it's flexibility, it's ability to go up and down, it's ability to meet customers' demand and need. And we're rolling that out as we speak, and the take-up and the interest from our customer set is in very early weeks is very, very positive, and I'm very excited by that. I do recognize that as we transform, if you like, or migrate our customers -- and our first objective is to maintain our customer base, by the way, is to migrate them from, let's call it, a back book to a front book in this instance, is going to only but help in that decline, but it's about retaining our customers. And what I am excited about is the quality of our network, our Telstra fiber that we based that upon, the partnerships, as I outlined in my presentation in SD-WAN, and we will use the NBN where appropriate, where we haven't got Telstra fiber and where that's right. Regional Australia is a great example for businesses in those places. But on top of that, what I like is that combination that will use our services strength because our customers are using our data and IP networks to do their own digital transformation to move more and more to the cloud. And it's a combination of both of those things that I think that gives us a great set of cards and a great play with our customer set. So we will work with NBN. But we have a great set of assets, we have a great play, and I'm pretty confident that we'll retain our customer set, and that's the most important objective here.

That's great. Taylor?

Your next question comes from Mr. Sameer Chopra from Bank of America.

Just had one question. Just kind of want to understand, with COVID and the changes in behavior, sometimes kind of letting go of people, what are the trends that you're seeing in things like -- and I'm talking about subscriber numbers. What are the trends you're seeing in terms of mobile broadband and sort of switching between prepay and postpay? If you can just give us some color around the subscriber end and how we've kind of tracked in the last 6 months through COVID behavioral changes, that would be really appreciated.

Simon, no, thanks very much for the question. I might get Michael, maybe to go first, and then we could go to Sydney and see if Kim would want to add anything and then maybe even David from an Enterprise perspective. But Michael?

Yes, I'll answer relatively quickly. So we have seen a bit of a shift back to subscriber growth between pre and post, so people converting from pre to post has turned a little bit. And we've seen subscriber volume sort of new activations in prepaid soften quite a bit through this period because people aren't out and about the same way. But our unique users has been very, very strong in prepaid, so people who had them kept them. Mobile broadband, a little bit up and down, but David probably has -- there's probably an interesting story there on that in Enterprise.

Yes. Okay. Let's go to -- thanks, Michael. Let's go to Sydney, and David and Kim, not sure if who wants to go first.

I can go first, and thanks for the question. I think COVID has definitely shown us different behaviors from our customers. And that goes for both Consumer, Small Business and also our Enterprise customers. And I think the first thing is really when people are working, starting and be detained in their homes because of the lockdown, we have seen increased demand to the connectivity. And therefore, that's also the reason why fixed wireless access is so important to bring to market now to ensure we bring the right technology to the right homes in Australia. So to ensure the right capacity, the right speed, the right experience in the homes, that's one thing. Then the other thing is really that we have seen people going out of the office space and in to have a more flexible environment. And that's why we have seen an upgrade, and David can come back to that, especially in Enterprise, where we have provided a lot of additional mobile broadband to serve that needs. And then, of course, one of the biggest things we have seen under COVID is the UC portfolio. The whole UC portfolio and the collaboration tools and video conference and all these things, that is a significant change in behavior that had increased, again the need for quality. And we work again to ensure the service defined experience so people have a good experience. And we do that together with our own solution, our partners, Cisco solutions, but also together with Microsoft Teams and all these things. So to ensure a wide range of offering, again, to support the flexibility our Enterprise customers demand, as David, he mentioned before. The last point I think is important is the affordability. This situation, this COVID potential recession, really gives customers a different affordability. And therefore, it's so important to keep the 5G penetration that we, as Michael mentioned as well I also mentioned earlier, we provide the customers with that range of offering an affordable 5G handset to still digitize themselves and benefit from 5G, but in a way, they can afford. So we really see a lot of different impact on the way we are serving our customers. And we're trying to be on the forefront of that. And then it is definitely opportunities for us that can fuel our growth and solution to our customers. But David, you've seen it in enterprise as well?

Look, I think the only thing I'd add to that, Kim, because I think you've covered the points very well, is that the obvious point of being able to work from anywhere, and that's an Enterprise requirement. Telstra has had 20,000 people, more than 20,000 people working from home since early March, and so have most enterprises, and we know we'll continue to do that going forward. So not only is it in the mobile broadband pick up that we've seen recently in the industries, you talked about the UC portfolio. But also in Telstra Purple, we see lots of projects about this enabling of enterprises to be able to work from anywhere. So there's no doubt that COVID also does create in the Enterprise space some opportunities as well as some challenges. And so that continued migration to the cloud of companies, et cetera, as I outlined in my presentation, it does represent an opportunity for us.

Your next question comes from Mr. Ian Martin from New Street Research.

Two questions, if I could. Just with the multi access edge compute, and you seem to be suggesting that's effectively a whole new area of business potentially with incremental value. And we've seen how this has played out previously with technology change that the telcos, the network operators invest heavily in the infrastructure, but a lot of the value goes to content providers. And in this sector, you've got your cloud service providers and lenders and so on. And I guess, the risk is that a lot of that value in the network you're building ends up being paid away in software licensing and content, particularly to those cloud vendors. So I wonder if you can comment on that on how you're managing that risk? And secondly, just in relation to 5G, the early indications seem to be that the level of usage is 2 or 3 or more times higher than 4G, and that is becoming quite a difficult thing to manage from a -- both from a network point of view and in terms of consumer satisfaction with lots of reports of consumers switching 5G off rather than running to the edge of their data allowances.

Ian, Andy. No, great to hear from you. Thank you. On that second point, I'm not sure that's an experience that we're having, but I might -- actually I've got Nikos with me. I might get Nikos to tackle both of those, both from the edge compute perspective where we see that opportunity, and then also, what we're seeing in terms of the experience on the 5G network.

Thank you, Andy. I'll start with the 5G edge compute, our mobile edge compute capability that we're deploying and how does that play out. As I said before, the ecosystem collaboration is key to the success, and I think you highlighted that. So in the absence of collaboration between operators, cloud providers and the content, and the content can come in the form of applications or any other content, that ecosystem will not work. But we have seen already quite a few announcements on this collaboration, so we are quite, quite confident that this is going to work out. We have the infrastructure assets and the locations across the country, so we can deploy as needed. And that creates a brand new opportunity. Kim mentioned a few of use cases, but I'll give you some examples of where the money is really going to come from, from that ecosystem. AR, VR, you can imagine 3, 4 years from now, the estimates are about 200-plus million dollar -- devices of AR, VR headsets. Unless you have the compute power in your pocket in the network, you'll end up with a massive helmet on your head. Clearly, that's not going to work out very well. So edge compute is what's going to enable a lot of the capability, especially on AR, the augmented reality applications that we're going to see. Same thing for face recognition in airports, same thing for measurement of food traffic in stores. That ability is key, and it's all brand-new capability that's going to emerge. On traffic usage, 5G, compared to 4G, is about 10x more efficient. And as you can imagine, a lot of it comes from spectrum. It's the first time that we have seen the expansion of spectrum usage in so many other bands at the same time. So growth in data continues to be about 30% to 40% per year. And in the absence of this technology evolution, we will not be able to handle it, like you said. So 5G, yes, we do see incremental traffic. It's the early adopters, and they always use a lot more. We expect that to stabilize and reach a new water level in the next few years. Just to give you an idea, the average monthly consumption now of a user is the 15 to 20 gigabytes per month. So that's still not big enough to kill anybody's data bucket, at least in Australia, where we have quite generous, I would say, data plans. So Andy, that's it.

At least, at Telstra, we have generous data plans. So maybe that our competitors are not offering that sort of same level of competitiveness. And then, of course, we also have data available beyond that as well in all of our plans as one of the things that has been central to our T22 program, which is getting rid of excess data charges. So thanks, Ian. And Ross, happy to go to the next question.

Your next question comes from Mr. Fraser Mcleish from MST Marquee.

Just 2 for me. First one for Michael. Just wondering if you could comment on what you're seeing in the kind of mobile sort of competitive pricing environment, anything that encourages you or concerns you? In particular, if you could talk about how you're thinking about the sustainability of that $65 entry point for 5G. That's the first one. And then just Andy, I wonder if you could comment on NBN pricing. Obviously, that upgrade to your NBN margins guidance, it doesn't kind of suggest that NBN pricing, wholesale pricing is killing you quite as much as previously. Do you still see a need for that NBN wholesale price to come down?

Thanks very much, Fraser. Look, I think on NBN pricing, I mean, firstly, just to be clear, our aspiration to get NBN reseller margins to mid-teens does not assume any major sort of structural change from NBN in terms of its approach to pricing, et cetera. Our position on pricing hasn't changed, and we think those prices are too high, and structurally, the CVC continues to be, I think, a potential headwind to the development of the digital economy. And so our position on that hasn't changed. But in terms of our modeling and our outlooks and our forecast, we're not planning for any sort of structural change. We hope we get one, but that's not assumed in our numbers. But Mike, I MIGHT get you to talk about the competitive dynamics in mobile as well.

Yes, great. So I think there's -- obviously, we're in the middle of iPhone launch, and there will be a series of other sort of flagship device launches through the first half of next year. And the innovation on the handset side as more and more 5G devices come, and we see that is, I think, gives us some confidence around people being in market and being willing to spend. So -- and I think what we've seen in this latest iPhone launch, particularly is that the competition around the service plans has probably anchored a little bit higher than it has in the last few launches where there was less excitement about the new phone, so that's definitely a positive. I think the other thing that gives us some confidence is the range of device prices that we've seen and a real slowing in that increase of device prices where we've seen quite an escalation of device prices over the last few years, which always puts pressure back on the underlying service plan..

Our next question comes from Mr. Brian Han from Morningstar.

Andy, on the likely productivity benefits beyond T22, do you think most of that will be in the ServeCo vehicle or will there be more efficiency gains in the other sort of passive infrastructure vehicles? And secondly, can I please circle back to the mid-teen margin targets for NBN reselling? Given the current NBN access cost structure, how big is the margin leverage from tripling customers on high speed tiers?

Thanks, Brian, I'll send the question on NBN reseller and the dependency -- I think what I'm interpreting from what Brian is saying, Kim, is how much is the mid-teen aspiration dependent on getting customers to trade up. So if you can give a bit of color on that. But firstly, in terms of the productivity question, I think it is fair to say that there would be, just in nominal terms, more of the productivity would be in ServeCo than the InfraCo businesses mainly because there's more cost in there, there's more activity, there's more transactions. That's where we'll be operational aspects of the business are. But that's not to say that we won't be setting out InfraCo teams' productivity and efficiency targets as well, so we certainly will. But I think it is fair to say that just nominally, just where the cost actually sits, it would be greater in ServeCo than the InfraCo parts of the business. But why don't I -- with that said, I'll pass the NBN reseller margin question to Sydney and to Kim.

Thank you, Andy. And again, as I mentioned before, the efficiency is one thing. Then on the top, there is the change to the higher tiers, that's one element. And after we now are back in market, on the high tiers, we see an increased uptake on the 100 Mbps, but we also see uptake on the even higher plan mix -- the plan tiers. On top of that, we also sell some of the add-ons that will increase this. We have the Wi-Fi guarantee, where we ensure and guarantee that you not only have a connectivity at your access point into the home, but actually have guarantee in Wi-Fi, where you use the device in the home, that's one thing. We will always come with optimized products, and as I mentioned before, into the homes. We also have security. We have all these things coming in on top of the pure connectivity. That will increase the ARPU and the top line. But we see an increase already. We have already seen an increase from where we were before with -- in the tiers, an increase in the tiers, to actually improve this. So all in all, we see a significant need, so all the places where we can provide the higher tiers, we do that now because we are in market with that product mix, and our customers, they demand better experience because of the need they have realized under COVID. So we see a quite clear roadmap to get us to that top line point we need, and then, of course, combined with our operational efficiency and excellence with all the back-end processes. So the combination is still the same, but the need from the customer and demand from the customer have increased as a part of COVID, and that's what we're utilizing now with these new product mix we have in market.