Telstra Group Limited (TLS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to today's call to discuss Telstra's announcement: It will invest in 2 major telecommunication infrastructure projects. Telstra would like to begin by acknowledging the rich and diverse stories, cultures and traditions of all First Nations people across country. I'm joining you today from the traditional lands of the Kulin nation; and pay my respects to their elders past, present and emerging. On the call today are Telstra's CEO, Andy Penn; Telstra's CFO, Vicki Brady; Telstra InfraCo CEO Brendon Riley; Telstra Group Executive, Telstra Enterprise, David Burns; and myself, Nathan Burley, Head of Investor Relations. Andy and Vicki will make some opening remarks. We will then open for Q&A with all the executives on the call, first, for investors and analysts; and then media. For Q&A, please note that this call is about the 2 major infrastructure projects we have announced today. We will not be addressing broader business trends or our first half '22 results, which we look forward to discussing in detail on the 17th of February. I'll now hand over to Andy.

Well, thanks very much, Nathan. And good morning, everybody. Thank you for joining us. And I hope your 2022 is starting safely and successfully for everyone. I think -- whilst there remains uncertainty in our world regarding the ongoing impacts of COVID, inflation, geopolitics and other global dynamics, I think the one thing that we can all start 2022 with a degree of certainty about is that the demand for connectivity is only going to continue to grow quite dramatically, but the massive increase in digital adoption that we've seen during COVID, the impact of hybrid working and studying, elements of which are clearly going to be with us for a very long time, if not forever -- certainly in the case of Telstra, we're really embracing hybrid working. The future growth of technology; IoT; the talk amongst the hyperscalers around the metaverse; and the types of applications that are going to become increasingly available, AR and VR, et cetera, is all going to drive demand and, I think, structurally increase demand for bandwidth, demand for coverage, demand for capacity, demand for speed, for low latency. I think this is the world that we're looking excitedly towards. And against that background, as Nathan mentioned and as we've announced this morning, we're very excited to announce 2 major projects today. The first is building the very sophisticated and extensive ground infrastructure and fiber network in Australia for our partner Viasat, which is clearly one of the world's global leading satellite companies. And this will support their really technology-leading new ViaSat-3 terabit-class global satellite system, which is a geostationary satellite. And I'll talk a little bit more about that in a second, with a contract which extends for 16.5 years. So that's the first project. And then the second project is a major new fiber build to build state-of-the-art intercity capital dual fiber paths. The investment will add up to 20,000 new kilometers to our network, increased capacity for our already extensive optical fiber network. So I think these 2 projects just really recognize the strengths of our existing infrastructure and capabilities. And they're a very exciting start to our T25 program, which is leveraging our T22 strategy; and in particular the establishment of InfraCo as a stand-alone business, which is very, very well advanced and progressed, and putting it in a position to deliver profitable growth and value by improving access, utilization and scale of our infrastructure. That's what we were setting up InfraCo to do and that is what we're now further delivering in today's announcement. And I think also importantly these 2 projects are going to be critical to have the largest intercity capital fiber network in the country, which will help future-proof Australia's digital economy; and help Australia meet its aspirations to be a world-leading digital economy by 2030 and at the same time improving further connectivity in regional and rural Australia, which is also crucially important. I'll make a couple of more comments about each of the projects in particular, and then I will hand over to Vicki to talk you through the financials. So firstly, on the Viasat partnership and then project. One of the things I've always been at pains to really communicate and make clear is that, to meet the growing demand for bandwidth and for connectivity in the future, we need multiples of different technologies that complement each other. I can remember about 3 years ago, in the middle of 2019, when we were one of the world's first companies to launch 5G, there was a lot of discussion. And I fielded a lot of questions at the time. Is 5G going to replace the nbn? And questions along those lines. And my comment at the time was no: 5G will be an incredibly powerful and beneficial mobile technology; and will absolutely provide broadband options for many, many customers, but ultimately we need all technologies to work together, to complement each other. And that's exactly what's transpired to be the case with 5G and in support and working in parallel with nbn. And in the same way, satellite is another incredibly exciting area of innovation and technology development that will also complement the bandwidths that are available today through other technologies. And that's both in the geosat space and as well as in the leosat space. Today's announcement is about a partnership with Viasat in geosat. We have got other interesting and exciting initiatives happening in the leosat space, and I hope to talk to you about those at a later point in time. And similarly, these 2 satellite technologies are going to complement each other over time, but essentially today's announcement is about providing the ground station capabilities for Viasat's new series 3 satellites which will offer "1 terabit per second" bandwidth to the ground, which will actually support data and video stream speeds of up to 150 megabits per second. And it will cover a whole range of different services, not only broadband and Internet services but also to airlines, IoT, maritime, mining, backhaul, lots of different capacity uses as well. And I think it's a clear demonstration of the potential that we have when we combine our Telstra Enterprise customer management and service capabilities with Telstra InfraCo's leading infrastructure assets and new build capabilities. What we will be doing is we'll be co-locating Viasat's satellite access nodes. There are equipment at hundreds of our sites across Australia, and we'll build and manage the high-speed fiber links to each site. The network will connect the SAN sites to multiples of redundant data centers that will also house the core networking equipment needed to manage the expected increase in data traffic, so this is really exciting. And Viasat is at the leading edge of technology in the geosat space. And it's part of a global program that they have to cover the world, and this will be the Asia Pacific link of that program which comprises 3 satellites overall. If I then turn to the second project, which is about Telstra's major new fiber investment. This investment will deliver up to 20,000 route kilometers of ultra-high-capacity, low-latency fiber that will enable transmission rates of up to 650 gigabits per second. That's 6x today's common rate. It will enable express connectivity between capital cities, routes such as Sydney-Melbourne, Sydney-Brisbane, Perth-Sydney. The national fiber network project is a multiyear build. And it will commence at scale late this financial year, so in the coming months. And early trial and test deployments are already underway, with also having discussions with key anchor customers for national fiber network. That's actually helping us really optimize the design and the execution and the build, including in particular the global hyperscalers, which are obviously becoming increasingly important to the telecommunications landscape; as well as local telecommunication companies; and our construction partners as well. And as I said, these investments really leverage the opportunity that we've built through our T22 strategy and the establishment of InfraCo as a stand-alone business. They're consistent with that strategy to create value from InfraCo, including supporting our consideration of monetization opportunities over time. And our strong cash flows and T25 growth ambitions provide us the flexibility to make these strategic investments whilst maintaining the financial outlooks that we previously committed to. And Vicki can talk to that a bit further now. So with that, I will hand over to Vicki, but I just wanted to say thank you for your time. And it's an exciting day for us. And I think the whole point about our T22 strategy is it's put us in a strong position to be able to do this. And as I said, T22 was a strategy of necessity. T25 is a strategy for growth, and that's what these investments will achieve for us. So with that, over to you, Vicki.

Thanks, Andy. And good morning to everyone joining us this morning. I'll make a few comments on the financials across both of these projects before we go to Q&A. So to deliver both the projects we've announced today, we expect to invest $1.4 billion to $1.6 billion outside our BAU CapEx envelope over the next 5 years. We expect to invest up to 70% of this total commitment across our T25 planning period or approximately an additional $350 million of CapEx per year over FY '23 to FY '25. Both of these projects are significant infrastructure investment opportunities that demonstrate the benefits of establishing our stand-alone infrastructure business InfraCo. They are also consistent with our strategy to create value from InfraCo, including considering monetization opportunities over time. Our strong cash flows and T25 growth ambitions provide us with flexibility to make these strategic infrastructure investments whilst maintaining flexibility to return excess cash to shareholders. Together, these investments are expected to deliver incremental long-term accretive growth. Telstra continues to expect cash flow to remain ahead of accounting earnings. CapEx, including this investment, is forecast to be approximately $250 million per annum lower than adjusted depreciation and amortization. Both projects meet our organic investment criteria and are consistent with our capital management framework, including our commitment to balance sheet settings consistent with an A-band credit rating. We expect these investments combined to deliver mid-teens IRR, to reach per annum EBITDA contribution of approximately $200 million by FY '26; and to have a nominal payback period of approximately 9 years. There is no change to FY '22 guidance. And we plan to complete our on-market buyback in FY '22, as previously advised. We also remain committed to deliver all of our T25 financial ambitions. I'll now hand back to Nathan for Q&A.

Great. Thank you, Vicki. [Operator Instructions] Our first question is from Kane Hannan from Goldman Sachs.

Just 3 from me, please. Firstly, just hoping you can talk about what gives you the confidence, I suppose, that this is actually incremental earnings coming through and that it's not more of a defensive CapEx project given some of the things we've seen out in the press around competing networks that look quite similar. So I suppose that's the first question. Secondly, over the years, we have the $3 billion strategic investments. We've now got this investment, potentially some 6G upgrade by the time this one is done, so just interested in how you think about the BAU CapEx and why you're splitting this out from that sort of spend. And then finally, just from a dividend perspective, do we now really just need to see the EPS growth come through to grow your franked dividend? Or is there still scope for off-market -- or on-market buybacks and so on, franked dividends?

Thanks very much, Kane. It's Andy. And I -- so I can't remember, Nathan. Or I can't remember if I heard you mentioned or not that Brendon Riley and David Burns are with us on the call today. So David obviously runs the enterprise businesses and is the lead on the satellite device partnership. And Brendon obviously, as you know well, is the CEO of our infrastructure business. And I might -- I think, in terms of your first point, Kane, why do we have confidence it's incremental earnings? I think, on the satellite project, obviously it is a very obvious incremental initiative and major project. And so that clearly, I think, demonstrably does deliver that incremental nature of earnings as well. And I think the second point, on the fiber side, I would comment on. And I might get Brendon to make a couple of comments as well and talk about the changing nature and the evolution of some of the customers -- is -- as I said in my intro, there's no doubt that we are seeing a structural increase in demand for bandwidth. I mean, yes, of course, our business is about providing connectivity and bandwidth. And we do invest in capacity over time, but the last 2 to 3 years in particular, not just because of COVID, but COVID, I think, has highlighted this, it's just the rate of digital adoption and the rate of technology innovation, the whole hybrid landscape, working from home, working -- staying from home, the adoption of IoT is going to -- and we're seeing it with the hyperscalers who are coming through [ as a ] very significant new customer group within the telco space. We're just seeing that structure increasing demand, and we believe that will translate into structural increases and incremental economics as well. And I'll get Brendon to comment on that on just a sec. I think, to your question around how should you think about long-term capital, I mean, we've endeavored to be and I think have been incredibly disciplined around our overall CapEx investments. We've brought our CapEx-to-sales ratio down. We've done that whilst accommodating the rollout of 5G. We said we would do that and we've done that. And I believe we will continue to be able to do the same when 6G comes along. Hopefully, 6G is not really on the agenda just at the moment, but certainly as we approach the end of the decade, that will become obviously another technology evolution. I think that part of the thing with 6G is we're also seeing open access, radio access networks and also network -- software-designed networks as well, which will mean increasingly we'll be able to separate the hardware from the software, which will actually help in terms of improving the efficiency of CapEx and rollout of these new technologies, but these are 2 very significant structural opportunities for us to build growth in the future. And I think they will deliver incremental earnings to that which is otherwise in our financial aspirations. I'll hand over to Brendon just to comment a little bit on his view on some of the customer dynamics and how that's changing and then get Vicki to talk about the question on dividends.

Yes. Thanks, Andy. And Kane, thanks very much for the question. I think, if we look at some of the global providers and the discussions that we've been in, one of the first things is [ they're ] moving very much to buying dark fiber, as opposed to historically what they've bought as "lit" services. And their requirements in many parts of the world are now increasing at 100% a year, so when you look at that demand profile going forward, we think that's a very attractive one. We haven't historically been in the dark fiber business. So we've just launched our first dark fiber products last year. And clearly what we're talking about here for those global providers is a true state-of-the-art dark fiber national network which provides superfast connectivity point to point. So we think that is absolutely a significant incremental market opportunity for us as a company. And then the second dimension of what we're building is that regional connectivity; the use cases that support David's business, the enterprise business, that Andy touched on. We think that is also incremental to what we have today and what we need to do. So I'll sort of pause there in summary, but we definitely see there's a significant incremental opportunity for the Telstra business.

And Kane, Vicki. Just jumping in on your third question, around dividends. So as I spoke to, obviously with these investments included, we absolutely remain committed to our capital management framework. And no changes to our T25 ambitions. You referenced underlying EPS. Obviously that's critical as we look at the dividend. And in terms of our T25 ambitions, as a management team, we're very focused on that underlying EBITDA. So the growth in underlying EBITDA at a CAGR of mid-single digits, that's obviously critical to translating through to underlying EPS growth, so that remains consistent; and as a team, our strategy and how we're executing, obviously very focused on delivering that. In terms of flexibility, obviously, in our updated capital management framework that we issued last September, under the principle 4 there, we included investing for growth and returning excess cash to shareholders. As I referenced earlier, even with these investments in, given any CapEx still remains around $250 million per annum below our D&A, we still retain flexibility from a cash point of view. And so with these commitments and investments included, we remain, as I said earlier, committed to the capital management framework which includes that maximizing our fully franked dividend and seeking to grow it over time; and absolutely still committed, again under principle 4 there, the ability to invest for growth and return excess cash to shareholders. Hopefully, that addresses that question. Back to you, Nathan.

Thanks, Vicki. Thanks, Kane. Our next question comes from Eric Choi from Barrenjoey.

I have 3 as well. First one, for Brendon, can I just drill into that dark fiber demand a little bit more? I wonder if you can give us some metrics on, say, how many dark fiber pairs or just fiber pairs you have on those grids today; maybe what these hyperscalers are asking for; and then where this investment will potentially take you to; and also how that sort of compares to, say, a HyperOne or a Vocus. The next question is for Vicki or Brendon. I guess your commentary around a mid-teens IRR and 9-year payback suggests that, that EBITDA will escalate above that $200 million you've called out, so can you just give us an idea of what you're projecting that fully ramped-up EBITDA to be? And then sorry to harp on this point, Vicki, but just back to the dividend. It sounds like there's no change to your dividend growth aspirations, so just to be crystal clear: In a scenario where Telstra delivers EPS above $0.16 in FY '23, is it still on the table for Telstra to lift the dividend then and maybe with the potential for an unfranked dividend as well? Or does anything from today in terms of free cash flow impacts change your willingness to do that?

It sounds like that's you, Vicki and Brendon, so I'll let you maybe lead, Vicki.

Yes. Thanks for that, Andy. And maybe, Brendon, do you want to talk to the fiber demand side, first? And then I can address the last couple.

Yes. Thanks very much, Eric, for the question. In terms of our [ current ] capital network, we really haven't been in the dark fiber business with that network in terms of some of the use cases that we're talking about, so building a new state-of-the-art network that really services that dark fiber opportunity, we think, is pretty important. What we're being asked to design and build is obviously massive capacity; [ low ] speeds; very, very low attenuation. So as Andy mentioned before, you're going to see a sixfold increase in speed; a sixfold increase in capacity; and in terms of the fiber strands, an increase probably a little bit beyond those multiples. So the reason that -- in terms of the potential-customer conversations we're having, what obviously they're looking for is the ability to engage in long-term commercial arrangements with the latest technology that provides substantial headroom for growth because, deploying the infrastructure, the control mechanisms they want to have on these networks to support all of the services that we can tune, the switching costs are reasonably considerable. So that's why we've designed what we have. That's why we're going to build and deploy what we're talking about. It is a competitive market, Eric. So there's a lot more detail we have, and maybe we can get into that in a little bit more detail in sort of more private investor discussions. Thank you.

Thanks, Brendon. And Eric, let me now address your second 2 -- the other 2 questions. So firstly, on the mid-teens IRR, and yes, I spoke to FY '26, we would expect EBITDA contribution to be around $200 million across these 2 projects. You're right. It does grow beyond that. Obviously these are very long-term investments. The inter-capital fiber project, we've looked at over a 25-year period, so it's a strategic long-term investment. And I thought that FY '26 number was an important marker, Eric, just to give a sense of where we expect to be by FY '26. And yes, we would expect growth on that, but I won't go into exactly all of the assumptions. I think, based on mid-teens IRR, I suspect you'll have some estimates of your own on that. Then on dividend, again just to be really clear: There is no change on our position on dividend. It absolutely remains consistent. And as I said, as a management team, absolutely focused on underlying EBITDA which can translate into underlying EPS growth. And as I said, we retain flexibility in terms of our cash flows are strong. We remain inside all of our credit metrics for that A-band rating, so there is no change as a result of these investments. And really I think that's because we're in a position now having executed on T22. We do have cash flows in a good place, and obviously we've got the T25 growth ambitions, so no changes in our view in terms of dividend. And we did address in the capital management framework. We put that principle 4 into the updated framework to make it clear that we would look at investing for growth and returning excess cash to shareholders, and that could happen in a number of ways. So Nathan, I'll hand back to you.

Thank you, Vicki. Our next question is from Lucy Huang from Bank of America.

I've just got 3. So firstly, in terms of that $200 million EBITDA number by FY '26, just wondering if you can give us a sense as to whether that majority of the number is coming from that Viasat contract. Or are you expecting some substantial commitments to come through from the intercity fiber project? And then just secondly, with the intercity fiber, just I guess how early do you think we can get some commitments from some of the hyperscalers or even potentially the nbn? And then just thirdly, with the Viasat project. I'm just wondering if you can give us some color into, I guess, the tender process. Were there other bidders for the project, for example? I just wanted to get a sense as to how competitive it was.

Do you want to -- Vicki, it's Andy. Do you want to take the first one and then pass over to Brendon on intercity fiber? And then David can make some comments on the Viasat project.

Yes, absolutely. And Lucy, thanks for the question. I'm not -- I won't break up EBITDA across the 2 projects because obviously there's a number of dynamics going on in the build and operate phases of both projects, but maybe just to give you a sense if it's helpful: Over that T25 planning period where we've talked to spending up to 70% of the total commitment, which is around $1 billion of CapEx, if you look at that, a little under 1/3 of that relates to the Viasat project, with the remainder going into the intercity fiber build. So that gives you a sense. And then combined, FY '26, we see being at around $200 million of EBITDA contribution across the 2 projects. Andy, back to you.

[indiscernible] -- yes...

Maybe [indiscernible] just on the second question, Lucy, yes. So yes, we've -- look. We've been working for a little while now under confidentiality arrangements with a number of parties on opportunities. Obviously today's announcement changes that, so we're able to talk a lot more openly about it, but yes, it's certainly our intent to progressively sign major anchor tenants soon and customers to the project. And we will certainly look forward to updating you in the weeks and months ahead on that. Thanks.

David, do you want to make some comments on the Viasat's and...

Yes, please. Lucy, to your question. This has been quite a long engagement with Viasat. They did undertake their own assessment of the Australian marketplace and providers. And we have been working with Viasat for about the last 12 months to complete the design, the commercial discussions; and ready for today's announcement. So that's what the process has been. Given the significance of the hundreds of network points that they need across Australia, it's quite an engineering discussion and design and feat. And so it's taken a little bit of time to put that together, but we've been working one-on-one since then.

Thank you. Our next question is from Tom Beadle from UBS.

[Audio Gap] as well. Just following on Kane's question just around cannibalization, maybe just asking it a bit differently. I mean, to what extent will your new fiber network replace or upgrade existing fiber networks? And then how much capacity on this new network might be used by your existing customers on existing services? And does that $200 million EBITDA number include an assumption that maybe existing customers might upgrade their services or buy new services just given you've built this new network. The second question is just on the IRR assumptions as -- and around fiber as well. What type of utilization rates are you assuming there? And just finally, on CapEx. Once these projects are all complete, what type of maintenance -- what level of maintenance CapEx might these projects require once it's completed? And also, I guess, if there is some replacement of existing networks, how much might you save on maintenance CapEx on existing infrastructure?

Brendon, do you want to maybe just talk to the first and third points, which is really to what extent is there potential for cannibalization? And to what extent is there incremental demand both from new customers and existing customers, I think? As -- if I interpret Tom's question correctly -- and then the related or the additional point, which is -- which I think may help address the question on utilization rates as well. And then I think the second part is really what's the post-build CapEx implications both incrementally and/or efficiencies and savings. And then I don't know, Vicki, if you've got any other comments on the IRRs.

Yes. Thanks, Andy. And thanks for the questions, Tom. The way that I like to think about it is, if we're looking at everything we can assume and given most of it comes from different parts of the world, you have to get all of the data and information from another part of the world to major sites in Australia. So data center to data center as fast as you possibly can. And that's predominantly a dark fiber opportunity and that's an incremental opportunity fundamentally for us, so there isn't much cannibalization there. The second thing we need to do is, once it's -- once all of that information and data is in the country, then we have to reticulate it; and get it to all of us, [indiscernible], get it to businesses. And there's clearly continued growth in fiber demand to support that, just like we've got growth in our mobile network and we need to build new networks and it drives incremental growth. It's certainly true that we will be retiring [ parts ] of our existing inter-capital network once the new network is built. And to your point, that will help us address what potentially could be life cycle management headwinds if we try and stick with the existing network for too long. We haven't disclosed the specific maintenance CapEx in detail, but typically that's a low percentage of the total CapEx that's required to operate and build networks. But we think it's a combination of complete new workloads; and servicing growth on the existing workloads; and being very, very efficient in life cycle managing and replacing some of the, yes, existing aging networks that we have. I'll pass back to Andy or Vicki.

Yes. Was -- any other comments you wanted to make, Vicki, on...

Yes. I mean just a comment. I know, Tom, you asked specifically about utilization assumptions. I won't go into those, but as you would expect, any investment of this magnitude, strategic infrastructure business case, we've applied a lot of discipline and rigor in putting those assumptions together. And I think there's huge opportunity here, as Andy has spoken about, in terms of just how structurally demand requirements are changing. And so it's a very rigorous business case and, as I said, confidence in those mid-teens IRR across these projects. Nathan, back to you.

Thanks, Vicki. Our next questions come from Entcho Raykovski from Crédit Suisse.

I'll go with 3 questions as well. The first couple should be pretty straightforward. I guess, firstly, can you give us some guidance on the depreciation profile of this investment; just, I guess, number of years that we should be thinking about depreciating it? Secondly, how should we think about the expected margin of these projects once they're up and running? I appreciate you've given us an EBITDA number, but is it a similar EBITDA margin to InfraCo Fixed at around 65%? And the third one. I mean this has been asked already, but if I can ask it in a different way: It's around the deployment of intercity fiber. I'm just conscious that you have spoken over the years about pressure in that wholesale and enterprise space and there being pressure on margins. And I appreciate your comments around dark fiber, but I guess, how do you think about the risk that your competitors deploy the same infrastructure [ and arrive at the ] mid-teens IRR that you've spoken about today? I guess what I'm trying to get to is what gives Telstra a competitive advantage to roll out this fiber and be successful in generating those returns.

Thanks very much, Entcho. I think Brendon can talk very clearly about our strategic differentiation, so we might get him to do that on your last one, but Vicki, do you want to take the first couple of questions on depreciation guidance and then margin?

Yes, absolutely. And thanks, Entcho, for those questions. On the first one -- and what we're investing in here is largely infrastructure, very long-life infrastructure. So in terms of depreciation profile on this investment, very long asset lives. So well beyond 20 years, 20-, 30-year asset lives, so long term. So that's how I'd be thinking about depreciation profile. And then on the second question, around the expected margin, yes, I referenced EBITDA because I thought that would be the most useful in terms of that FY '26 expectation of $200 million. These will be high-margin, high-EBITDA-margin revenue streams just by nature given obviously they're big infrastructure investments higher on CapEx and then high EBITDA margins. And so yes, the way you're thinking about that looking at sort of InfraCo's EBITDA margins, I think, is a good way to think about it. They will be very high-margin revenue streams. And I'll hand over to Brendon.

Yes. Thanks, Entcho. So the way we're designing the network, the technology; and how we're deploying it will give us a competitive advantage. So we will have an all-terrestrial dual-path network. We'll be using the latest high-capacity, high-speed, low-attenuation fiber tech. We will have paths which service that superfast need for point to point as well as regional. And I think -- if you put all of that together and look at what others have announced or what others have, I think that will be a material differentiation point. The feedback that we're getting on this design and on this deployment from potential customers is extremely positive. And I remain very confident about our ability to drive the differentiation [ and compete and win ].

Our next question is from Darren Leung from Macquarie.

[indiscernible].

Darren, have we lost you? Okay, it looks like we've lost Darren. We'll go to Roger Samuel's from Jeffery (sic) [ Jefferies ].

I'll stick with 3 as well. Firstly, just...

Operator, it looks like we've lost Roger as well.

[indiscernible]. Can you hear me?

Yes, we can here you. Go ahead.

Sorry. Yes, yes, great, yes. First question is on the Viasat contract. And I'm just wondering how secure that contract is for 16.5 years. Can they terminate the contract halfway through? And volume and pricing as well. Second question is just on your CapEx. And if we look at HyperOne, they are building like similar distance of intercity fiber as well; and I think their CapEx budget is 1.5 billion. So what you've announced today, $1.4 billion to $1.6 billion for 2 projects -- and so I'm just wondering if you're confident with that number. And thirdly and from memory, back in 2016, you announced that the CapEx would increase by $3 billion over the following 3 years. And I'm just wondering. What happened then? And wasn't it enough to upgrade your network; and now you have to spend another $1.4 billion, $1.6 billion to upgrade the network? And I'm just wondering if there's any risk in the future that you may need to increase your CapEx again perhaps to upgrade your metro fiber networks, for example.

Thanks, Darren. Look. It's Andy. Why don't I respond in the first...

Roger here, yes, yes.

Sorry, sorry. Sorry, Roger. We lost Darren. My apologies. Let me respond in the first instance. I mean regarding -- and I'll take your questions in reverse order. You're correct. In 2016, which is 6 years ago now, we did announce a $3 billion investment. That was basically in digitizing the business and our core network. That was the platform that we needed to be able to launch our T22 strategy. And through that, as you know, we have completely rebuilt and built new BSS systems, so CRM, billing, provisioning systems. That's what's actually enabled us to support taking -- or we would have taken out by the end of this year $2.7 billion cumulatively in costs. It also enabled us to putting the platform for basically moving to much more network functioned -- software-defined network, rather, and a lot of core resiliency in our broader network. And that, we committed to produce or to deliver annualized, I think -- or was it cumulative? I can't quite remember now. Vicki, [ this 540 million ], was it cumulative, annualized? I'm looking at Vicki. Anyways, we committed to provide an economic return for that, which we did. And that was an audited return, so I believe we delivered on that well. Since then, we've obviously been very disciplined as well in terms of how we've managed our CapEx, including bringing our CapEx down whilst funding the rollout of 5G. We've also said, though, that as a part of our capital management strategy, we need to look for opportunities to invest and grow in the future. And this is one that we believe is very significant. And as I said earlier, I think we're seeing a structural change in demand, so this is very much taking advantage of that opportunity. So we will continue to manage our CapEx in a very disciplined way, but if there is opportunity for incremental growth, then I think you'll be disappointed if we didn't take it. In terms of our confidence around the level of build costs, firstly, can I sort of say, with HyperOne -- it's not for me to comment on HyperOne. I know Bevan well and have utmost regard for HyperOne, but I can't comment on other people's projects and numbers. I remember when TPG announced they were going to build a new mobile network for $600 million. Candidly, I never believed how they can do that. And history has shown that it couldn't be done, and they weren't able to do it. So I think, in the end, it's a function of what you deliver. And we've got -- I think, as Brendon said, we've got the experience. We've got a lot of existing infrastructure. So networks of this nature, they require a lot of ground infrastructure, things like [ repeater sites ], amplifiers, existing ducting, routing. And so we've got a very, very significant existing set of infrastructure across the country. That's going to give us both the experience, speed to build. And it gives us a lot of synergies in terms of the build as well, so that may explain some of the differences that you may see. And then finally, in relation to the Viasat contract and how secure is it, I can't specifically talk about the terms of the contract. As you can imagine, they're subject to a confidentiality arrangement between us, but you can imagine, and I think David said this, we have spent a lot of time on this project with Viasat. This is part of a major, major program by them to launch 3 new series 3 state-of-the-art geo satellites across the next period of time, 1 in the Americas, 1 in EMEA, 1 in Asia Pacific. This is all of the ground infrastructure work and network to support that one in Asia Pacific. These are decades-long investments and commitments, and then you should therefore assume that the major contract can provide all of the ground station. And let me be clear about this. So this isn't just about providing the ground station for Australia. What they're doing is they're choosing to locate their ground station -- major ground station capacity for the satellite in Australia, which will then enable them to basically broadcast that and cover the rest of the Asia Pacific region. So I think, given the nature of the contract, you can assume this is pretty much a commitment to a very long-term partnership. It's not the sort of thing you're going to choose to change every 2 or 3 years, if that makes sense. So I'm just looking at sort of Brendon and -- or David, if there's -- and Vicki. And is there anything more you would like to add on your sides? Now I'm getting a shaking of the heads. So thanks, Roger. And back to you, Nathan.

Okay, I think we've got Darren back on. Go ahead, Darren.

[ Guys, can you hear me ]?

We can.

Good. Apologies about before. In the interest of time, I might just keep it to 2 actually. So the first one was just in relation to capital fundings. Obviously there's a bit going into the ground. In your initial discussions with your capital partners in relation to the monetization of [ fiberco ], have any of those discussions [ already ] mentioned incremental projects and whether they'll be funded by Telstra or the capital partners where they come in? And then the second question was more on a high level. The ROIC on the project in FY '26 looks to be sort of mid-teens. InfraCo fiber looks to be in like the low 20s. Any reason for sort of the difference there, please?

I'll get Vicki to maybe -- it's Andy. Darren, I'll get Vicki to comment on the second point. On the first point, I think what you were asking is have we discussed this project with our capital partners on InfraCo Fixed. To be clear: We don't have any capital partners on InfraCo Fixed. InfraCo Fixed is 100% owned by Telstra. We are going through the process of finalizing putting it in through -- into an independent -- or sort of an independent entity through a new group restructure, which will give us the opportunity to take advantage of monetization and value-adding partnerships if that's what we choose to do. But to be clear: We have not done that to date. We obviously have on the towers side. And you can imagine, as we've sort of thought about this and as we've taken advice and as we've continued to proceed with the setting up of InfraCo Fixed, we are very clear in our minds that these sorts of investments will only increase the attractiveness of InfraCo Fixed to potential third parties, yes, when we consider monetization, but at this stage that's all I can say on that. I'll pass over to -- maybe Brendon might want to add a comment on that. And then I'll also get Brendon then maybe to pass to Vicki on the ROIC and then -- yes, sorry, the ROIC question.

Yes. I was just going to sort of say, Darren, InfraCo Fixed is a really diverse portfolio of different assets. And so we've got the [ pits ] and the darks. We've got data centers. We've got all the fixed network sites. We've got fiber. And obviously, well, particularly in the fixed network sites, we've got 2 very, very large anchor tenants in Telstra and nbn. The IRRs we're looking at for the fiber project, in terms of mid-teens, we think that's a healthy IRR. And it compares very well to projects of a similar nature around the world. So yes, that will probably be my explanation, but Vicki may have something else to add on that as well. Thanks.

Yes. No, Brendon, spot on. It is a portfolio. And also the other comment I would make, Darren, is obviously taking FY '26 on these big projects, obviously with new infrastructure projects, big investment upfront. And as I spoke to, yes, $200 million EBITDA contribution is where we're aiming for FY '26. We would expect it to grow over time. And obviously, as you look at InfraCo Fixed, it is that portfolio. It has assets that were built -- long-term assets built a while ago, so I would expect you see a difference in those profiles just taking that snapshot of FY '26 in the way you did. And as Brendon said, it is a big portfolio of varying assets in there. So Nathan, I'll hand back to you.

Okay, we'll take one final question from Nick Harris from Morgans.

I'll make it boring and just ask one final question like you suggested. I'm just trying to get my head around the ramp-up in that EBITDA. I appreciate you said it's $200 million in FY '23, but does that sort of gradually ramp up into that number as you gradually build out the network? So would it be sensible to say $100 million EBITDA perhaps in FY '25, or do we have to wait till the network is 100% built and then it starts [ off a ] 100% billing?

[ Do you want to take that ], Vicki?

Yes, sure. And Nick, just to clarify. So the $200 million EBITDA contribution is FY '26. I think you might have just said FY '23, so just...

I'm sorry. Yes, '26, yes.

Yes, it's FY '26. That's right. So -- because we will be obviously in construction phase, [ as what Andy ] have spoken about. And yes. So we've put the $200 million. I thought that would be a helpful marker for FY '26. We've obviously talked to the mid-teens IRR. And as I said, we expect growth on the $200 million, but -- I mean I haven't broken down exactly how that ramps up, but I think, if you put those pieces together, you can probably come up with some estimates. So Nathan, back to you.

In the interest of time, we're going to close the call now. I know there is -- some questions in the queue. We will -- we have your names and numbers, and we will follow up with you later in the day. Andy, I'll hand over to you, if you've got any final remarks.

Yes. No, look. Well, thanks very much, [ Brendon ]. And firstly, just again thank you, everyone, for making yourselves available to dial in to the call. I wanted to say personally and very clearly that we're acutely conscious of getting the balance right between making sure we take advantage of the opportunities to invest in the future and support the further growth and success of the company. And I do think we have seen very significant ramp-up in demand which is leading to a bit of a structural change in demand. And we see an opportunity for incremental investment to deliver incremental return; and we will be very, very disciplined about that. I think, through our T22 program, we've also shown that we can be and are disciplined in terms of delivering efficiencies in CapEx and efficiencies in productivity. And so we're very focused on that, but we're also incredibly focused that we've made a commitment as well that we believe we can deliver the company's performance sufficiently. [ It will ] create opportunities for us to invest in the future but also at the same time generate opportunities to deliver excess returns to shareholders as well. And I know things such as our -- sorry, our potential to increase the dividend over time is incredibly important. And also other returns to shareholders, such as we have been through the share buyback, are important as well. And our commitment is we will continue to balance those 2 things very thoughtfully and in very -- in a very disciplined way and make sure that we are delivering on both sides of growth and value returned to shareholders and meanwhile taking forward into T25 all of the disciplines that made T22 a great success. So I appreciate your support and dialing in. I think this is an incredibly exciting opportunity, but I know also you'll be acutely concerned to make sure that we deliver the CapEx execution as efficiently as possible and within the parameters that we've set as well as delivering those excess returns to shareholders as well. And so we will hold ourselves accountable and report that to you in the same way as we have the broader progression of the business. And I look forward to, with Vicki, Brendon and David and others, speaking to you more about that in results in a couple of weeks time. So Nathan, thank you. And I think that covers everything I wanted to say.

Thank you, everyone. We look forward to talking to you on the 17th of February with our results. Bye-bye.