Telstra Group Limited (TLS) Earnings Call Transcript & Summary

Good morning, and welcome to Telstra's Full Year Financial Results 2022 Results Presentation. My name is Nathan Burley, Head of Investor Relations. I respectfully acknowledge that I'm joining today from the lands of the Kulin Nation. On behalf of Telstra, I would like to acknowledge and pay my respects to the traditional custodians of country throughout Australia and recognize their continued connection to land, waters and culture. We pay our respects to their Elders past, present and emerging. This morning, after presentations from our CEO, Andy Penn; and CFO, Vicki Brady, we will be taking questions from analysts and investors and then media. I'll now hand over to Andy Penn. Andy?

Well, thanks very much, Nathan. And good morning, and welcome to Telstra's results announcement for the financial year ended 30 June 2022. It was a year in which we saw our underlying business continue to grow and a year in which we closed out our T22 strategy and saw the benefits from this flow through to our customers, our employees and to our shareholders. It was also a year in which we announced the transition to T25, a strategy for growth, a strategy that leverages the foundation and capabilities that we have built over the last few years. And of course, it is also my last results announcement as the CEO of Telstra, and I am incredibly proud of what we have achieved as a team. When we launched our T22 strategy 4 years ago, we were, in part, of course, responding to the operational and financial headwinds created by the rollout of the nbn. We were also responding, though, to the technology innovation that we could see around us and the growing rate of digital adoption. We knew that we needed to fundamentally transform the company to simplify and digitize, to set bold aspirations and take radical intervention and that is exactly what we have done. Telstra is a very different company today. And while, of course, there is always more to do, we are much better equipped to face the very exciting digital future ahead. And this is important because the world is also a very different place. What we could not have foreseen when we launched T22 was COVID and the other seismic economic, political and social changes that have unfolded. I am conscious, therefore, that while there is obviously a keen interest in the details of our results today, which we will share, and they are strong results, the context in which we are presenting them is also very important. I want to start, therefore, by referencing these key dynamics, how we're positioned to respond to them and how we will address the obvious questions that they give rise to in our presentations this morning. Firstly, the rate of digital adoption has clearly gone to a whole new level, and we are sitting on the cusp of another wave of exciting technology innovation with AI, edge cloud, LEOsats, O-RAN and of course, by the end of this decade, 6G. COVID has taught us the convenience of doing things online and that we can now study and work from home very effectively. This is great news for us because through T22, we are so well positioned to grasp the opportunities it presents. And because like many, we have fully embraced hybrid working and have more than 17,000 people working in agile. Our investments in digitization of the business, our clear leadership in 5G, the partnerships that we have announced with Microsoft, OneWeb, Quantium, Viasat and our equity in cutting-edge technologies through Telstra Ventures and directly in Silicon Quantum Computing will all be important assets for the future. So, too, is the decision to set up our infrastructure assets into separate stand-alone businesses and the investments we are making through InfraCo into the national intercity fiber upgrade to boost connectivity right away across Australia. We also announced a landmark network sharing agreement with TPG Telecom. This deal, subject to approval by the ACCC, will be a win for customers across Australia, enabling more competition and choice and enabling regional customers to be better connected than ever before at exactly the time when more people are choosing to live regionally. Secondly, however, despite the exciting technology opportunities and the growth that this will support for us, there is no doubt that there is considerable economic uncertainty in the world today. For Telstra, the good news is the demand for our core underlying business has never been greater. Our balance sheet is strong. And while there is growing inflation, there are some natural hedges in our business, too. Vicki will take you through the detail of all of this in her presentation. And while, of course, we are not immune to the changing economic environment, we are better placed than many. Thirdly, we continue to see the world raising the bar on ESG in the face of growing climate catastrophes, including the role that businesses must play. You have heard me say before that we can only be successful for our shareholders when we are also successful for our customers, for our people and for the communities that we serve. We have significantly increased our focus on ESG over recent years, and it is a key platform in our T25 strategy. We have taken a leading and bold position on reducing the impact of our business on the environment, on supporting vulnerable customers, on diversity and inclusion and responsible business operations. I know that we do not always get it right. But when we get it wrong, we own it and we fix it and we learn from the experience to do better next time. Finally, the geopolitical environment is more fractious than most of us have seen in our lifetimes. Like all businesses, we are seeing disruptions from this with the largest impact being on the supply chains of key network and technology components. It is why our partnerships with key technology providers are so important. Of course, we're also seeing increasing cyber threats, and we are working around the clock to protect our own networks, blocking unprecedented levels of malicious activity, while at the same time, helping our customers to protect themselves and their businesses. As Chairman of the federal government's Industry Advisory Committee on Cyber Security, I will be giving a speech at the National Press Club on the changing threat environment, its implications and what we need to do in response in a couple of weeks' time. We have also significantly strengthened our relationships and our partnerships with government who understand that telecommunications is the platform for the digital economy. And Telstra's is by far the biggest, it's the best and it's the most strategic. It is crucial for the economic success of the nation and national security and our social cohesion. Last month, we announced the completion of our acquisition of Digicel Pacific in partnership with the Australian government, which sees us take 100% equity in this strategically important asset. When we kicked off T22, we could not have foreseen these external factors, but we are certainly in a better position to face them because of T22. So with that, let me turn to the results. FY '22 was a pivotal year for us. As well as marking the end of our T22 program, we have also now absorbed the overwhelming majority of the financial effects of the rollout of nbn, and the growing momentum in their underlying performance is clearly starting to show through. Those financial impacts saw reported total income declines of around $700 million in one-off nbn receipts and $300 million in nbn commercial works. Total income, therefore, decreased 4.7% to $22 billion on a reported basis. While net PAT decreased 4.6% to $1.8 billion, earnings per share was down 7.7% to $0.144 per share on a reported basis, the declines reflect both the impact of the nbn and one-off gains from asset sales last year. In contrast, though, underlying EBITDA on a guidance basis increased 8.4% to $7.3 billion driven significantly by an outstanding performance in the year from our mobiles business. Underlying EBITDA included an in-year nbn headwind of $340 million. Now this is the last year of in-year nbn headwinds, and it brings the total cumulative impact of nbn on Telstra's EBITDA to $3.6 billion per annum. That was a very large and very difficult pill to swallow, but we have swallowed it. Encouragingly, underlying EPS was up 48.5% to $0.144 per share, a strong start against our T25 ambition of high teens CAGR from FY '21 and to FY '25. Also, the Board has resolved to pay a fully franked dividend of $0.085 per share, bringing the total dividend for the year to $0.165 per share. This includes an increase in the ordinary dividend from $0.10 to $0.135 per share and a $0.03 per share special dividend. And this, of course, will be the last special dividend in relation to the nbn one-off payments. It represents the first increase in the total Telstra dividend since 2015. And while it will increase the payout ratio in the near term, it recognizes the confidence of the Board following the success of our T22 strategy, the strong results in '22, our T25 strategy and aspirations for high-teens EPS growth from FY '21 to FY '25, the strengthening of our balance sheet and importantly, a recognition by the Board of the importance of the dividend to our shareholders. I will now turn to the operating highlights for the year. Mobiles, as I have said, has performed exceptionally strongly. We added 155,000 net retail postpaid mobile services. That included 121,000 branded with a strong contribution from enterprise, clearly demonstrating the benefits of our 5G leadership. Retail prepaid unique users were up 215,000, and prepaid services revenue grew very strongly at 14.2%. In wholesale, we added 218,000 services, and we also added over 1 million IoT services. Our performance in fixed for Consumer & Small Business customers has been more challenged, particularly as we are now at the tail end of the nbn migration. Net new retail bundles were negative 87,000, although bundle and stand-alone data ARPU increased by 2.4%. And notwithstanding the disappointing fixed SIO performance, we are confident of restoring financial momentum by leveraging the many value-adding home broadband features that Telstra offers. Also, I applaud the government's recent advice to nbn co and nbn co's subsequent decision to withdraw its special access undertaking and work towards a better industry pricing model. We look forward to an expedited outcome that improves the quality of service for all customers and a more economically sustainable industry. In enterprise and in line with our previously communicated aspiration, we returned to growth at both the income level and the EBITDA level. Fixed enterprise EBITDA grew by 2.3% with NAS EBITDA growing by $152 million to offset weaknesses in data and connectivity. InfraCo fixed income was $2.4 billion with core access revenues, including nbn recurring receipts, up 3.1%. InfraCo fixed growth will be further supported by our inter-capital, intercity fiber project announced in February. This will provide ultrafast connectivity between capital cities and improve regional connectivity. We are close to finalizing contract negotiations for the first stages of the build. And we have held very detailed discussions with customers, including, of course, signing up Microsoft as a major anchor tenant. We've learned a lot through this process. And while some of the economics have changed from what we announced, which Vicki will take you through shortly, the returns are still attractive. And in fact, the level of our conviction on this strategically important project has increased. Telstra Health has also had a strong year both operationally and strategically as it continues to scale. Telstra Health revenue for the year was up 13% or 51% when you include MedicalDirector and the PowerHealth acquisitions to $243 million. We've also made significant progress in our initiative to launch Telstra Energy, including gaining the necessary license approvals, building the offering into our new digital environment and conducting a limited number of customer trials. However, clearly, the retail energy market is currently going through a period of severe dislocation. And given this, we will not be scaling in FY '23. We have received around 10,000 expressions of interest from customers, and our intention is to expand our trial to these customers this financial year while we keep the market dynamics under review. Of course, this has obvious implications for our aspiration to be a top 5 retail energy provider by FY '25, and we will update the market on our plans as the market dynamics become more certain. Finally on our operating highlights, underlying fixed costs were down $454 million, and total operating expenses were down $906 million or 5.8%. So in summary, FY '22 has seen our core business perform strongly. Our mobiles result was outstanding. Consumer & Small Business fixed grew in the second half. Enterprise returned to growth at both the top line and the bottom line, and we have started to realize the benefits of setting up our infrastructure assets as stand-alone InfraCo businesses. So it is clear that we have good financial momentum. The left-hand side of this slide shows the growth that we have achieved in underlying EBITDA in the last 3 halves, whilst the chart on the right-hand side shows the evolution of our full year underlying EBITDA, including $7.3 billion for FY '22, our guidance of $7.8 billion to $8 billion for FY '23 and our T25 aspiration and ambition for mid-single-digit CAGR to FY '25. Of course, this statement for FY '25 is not guidance. It is an aspiration, which means there are greater risks and uncertainties associated with it when compared with our guidance statements. Nonetheless, the charts clearly demonstrate the financial momentum that we have achieved and our ambition for further growth. We could also see this start to show through in our reported results, too, as the transitional effects of the nbn rollout come to an end. The left-hand side of this slide shows the growth achieved in reported EBITDA from $3.5 billion in the first half of this year, up to $3.8 billion in the second half, while the chart on the right-hand side similarly shows growth in reported earnings per share from $0.59 per share in the first half of this year to $0.085 per share in the second half. This strong improvement in returns to shareholders is undoubtedly a function of the success of our T22 program, and T22 was successful because we were bold. We set ourselves big, ambitious goals and executed with discipline and transparency. As we close the book on that chapter of our history, it is worth reflecting on just how much we have achieved and how much we have changed as a company. We radically simplified our business, reducing the number of Consumer & Small Business in-market plans from 1,800 to 20. We now have 10.2 million services on these plans. We led the market and removed lock-in contracts and excess data charges and unbundled services for customers. We have 4.5 million customers signed up to our rewards program, Telstra Plus, and our engagement with members is high with product redemptions growing more than 80% in FY '22. Almost half of our sales interactions with our Consumer & Small Business customers are now digital as well as more than 3/4 of all service interactions. The number of calls coming into our Consumer & Small Business contact centers has fallen by more than 70%. And of course, all of these calls are now answered by somebody in Australia. We brought our licensee stores back in-house, and all Telstra stores are now operated and owned by us. We've rationalized a number of active products in our enterprise business by more than 50%. And similarly, our digitization progress in enterprise has led to 40% of all enterprise services interactions now being conducted through the digital channel. The combined impact of all of these positive improvements to customer experience is reflected in our stronger-than-ever episode NPS result, which is up 18 points since the beginning of the program. We have reduced our direct and indirect workforce by more than 1/3. And at the same time, we exceeded our target to recruit new capabilities in new areas, such as software engineering, data analytics, cybersecurity and artificial intelligence with more than 1,500 new hires. We achieved our T22 productivity target of $2.7 billion of annualized cost-out. Our 5G network is around twice the size of our next nearest competitor, and we cover 80% of the population with 3.5 million 5G-capable devices already connected to the Telstra mobile network. Our infrastructure business is operating as a stand-alone business unit with increased transparency, and the successful sale of the 49% noncontrolling interest in Amplitel demonstrates the value opportunities that this has created. In fact, factoring in the towers sale, we have monetized almost $5 billion worth of assets against our original target of $2 billion for the program. And lastly, we are on track to finalize our legal restructure. Pending court approval, we expect to very shortly publish a scheme booklet, which will give shareholders all of the information they need to vote at the scheme meeting to be held on the same day as our AGM in October. So with that, let me officially close out T22 with the final T22 scorecard. Overall, we delivered around 80% of our T22 scorecard metrics. We made significant progress on another 5, and we missed 4. As there have been no significant changes to these ratings since the half year, I will only make a few comments. Firstly, on underlying ROIC. Our target is to achieve 8% in FY '23, and the 7% ROIC achieved this year shows we're on track. Secondly, while our employee engagement score of 82 fell just short of the ambitious target that we set ourselves, we have made significant progress, and we are among the top-performing companies globally. Finally, although the number of Telstra Plus members did not achieve our ambitious target of 5 million, Telstra Plus has been an outstanding success with the members -- number of members growing to 4.5 million since its launch in just FY '19. So with that, let me close out my final full year results presentation as the CEO of Telstra. Our T22 program has been a clear success. We are delivering a better customer experience. Our mobile network remains Australia's biggest and best. Agile is transforming how we work. And combined with our hybrid working model, it's helping our people to feel supported and to perform at their best. Our employee engagement has never been higher, and we are a fundamentally different company with an incredibly bright future as we transition to a new look leadership team and T25, our strategy for growth. Thank you to all of you for your support and challenge over the years and the keen interest which you have shown in following our progress. It has kept us accountable, and it has helped us increase our conviction in our journey forward. I've loved my time as the CEO of Telstra, but now is the right time to hand over to Vicki to lead Telstra's next chapter as we transition to T25. She is an outstanding leader and will do an amazing job. As I said in an interview recently, you do not generally get the chance to choose the timing of when you become the CEO, but it is a privilege to choose the time at which you step down. And as I look back on my time and particularly the last few years, undoubtedly, the thing about which I feel the most proud is the people and culture at Telstra. I've had the privilege to work with some incredible people during my time, and the team I leave behind is the best I've ever experienced. I'm delighted that the strength of that team has enabled us to appoint both my successor and a new CFO from within, and I offer my congratulations to both Vicki and Michael for their well-deserved appointments. I'd also like to acknowledge that the progress that we have made is due to the combined efforts of that team, the support of our Board and the many dedicated Telstra executives and employees. And I want to thank the whole team who have been right behind this incredible transformation. We are a values-led company with a strong culture and a commitment to serving our customers and supporting the communities in which they live, doing business responsibly and playing our role in ensuring the future success and security of Australia. When I started as the CEO of Telstra in 2015, I did so with a vision, a vision to help make Telstra a world-class technology company that empowers people to connect. When I shared that vision externally, many stakeholders, not unreasonably, believed it was implausible given what would be required to achieve it. Nonetheless, as I reflect at the end of my time, I'm incredibly proud to step down after more than 7 years knowing that is what Telstra has become. Thank you. And with that, I will now hand over to Vicki before we open up for Q&A.

Thanks, Andy. This morning, I'm delighted to provide details of our FY '22 results, which demonstrate our ongoing financial momentum and underlying growth. I will also outline Telstra's focus for FY '23 as I take up the position of CEO on the 1st of September. Starting with our income statement on Slide 12. The left-hand side shows our reported results with declines largely due to reduced one-off compensation for migration to nbn. For FY '22, income was $22 billion, down 4.7%. EBIT was $2.9 billion, declining 3.1%. Net finance costs improved by 24% due to a reduction in both net debt and lower average borrowing costs. Tax increased 24%, resulting in an FY '22 effective tax rate of 27% compared to 22% in FY '21. Reported NPAT declined 4.6% to $1.8 billion largely due to decline in nbn one-offs. The right-hand side shows our underlying results, which exclude nbn one-offs, restructuring, M&A and other guidance adjustments. Underlying income declined 1.3% to $21.6 billion. Underlying EBITDA was $7.3 billion, up $562 million or 8.4%. D&A declined 2.1% or almost $100 million. Underlying EPS grew more than 50% to $0.144 per share. The Board has resolved to pay a final dividend of $0.085 per share fully franked, including a $0.075 ordinary and $0.01 special. The FY '22 special dividend will be the final linked to one-off nbn receipts. This brings total FY '22 dividends to $0.165 per share, representing 115% earnings payout ratio. In FY '22, we also completed a $1.35 billion share buyback, utilizing around half of the $2.8 billion net proceeds from the 49% sale of our towers business. Now looking at FY '22 product performance on Slide 13. Mobile EBITDA was our key growth driver, illustrating the successful execution of our strategy and monetization of 5G leadership. $700 million of mobile growth was achieved due to increased service revenue, the final benefits of transitioning off subsidy and lease plans and productivity. The remaining portfolio, in aggregate, declined, which I will go through in turn shortly. Other EBITDA positives included around $80 million from the impact of bond rate changes on employee liabilities and around $50 million from revenue catch-ups from prior periods. Now looking at our key products, starting with mobile on Slide 14. On the top left, you can see mobile service revenue, which I am pleased to say grew 6.4% in FY '22. We are focused on growing mobile service revenue at a mid-single-digit CAGR given it is the key long-term driver of mobile profitability. Service revenue across all segments and subproducts grew, which more than offset mobile hardware revenue decline of 9% largely due to lower volumes. SIO growth was strong. In postpaid handheld, we added 155,000 customers in FY '22 with SIO growth in all segments and brands, including a strong contribution from enterprise. In addition, postpaid ARPU, shown on the bottom left chart, grew 2.9%, including the flow-through of prior price changes. As described at the half, economic ARPU growth was stronger than reported ARPU growth. For the full year, there was $1.22 noneconomic negative impact, which included the shift from gross revenue to net margin recognition for some add-ons. Second half postpaid ARPU grew sequentially on the first half with C&SB MMC growth and momentum from roaming partly offset by lower out-of-bundle, COVID-related messaging revenue in enterprise and from the incremental noneconomic impact outlined. In July, we increased prices in line with CPI for our in-market branded postpaid mass market plans and introduced an option to review prices annually against CPI. This results in increased prices for around 65% of postpaid mobile customers and will flow through from September. There are different dynamics in the other 35% of postpaid customers, and we will continue to review pricing across our portfolio. With international travel back on the agenda, roaming is also expected to support FY '23 growth. Although it's unclear if it will completely return to pre-COVID levels, in FY '22, roaming EBITDA was approximately 20% of the around $250 million pre-COVID level and for the month of June was at around 45%. Turning to infrastructure on Slide 15. The charts on the left-hand side show that InfraCo fixed revenue and EBITDAal declined 4.4% and 1.6%, respectively. Our world-class fiber, ducts and network sites delivered 3% growth in core access revenues and flat EBITDAal. Legacy network disposals contributed positively but were more than offset by a decline in nbn commercial works, which is winding down as the nbn rollout nears completion. Recurring infrastructure revenue from nbn grew by 3.3% as shown on the top right chart. These revenues were indexed -- are indexed to CPI for the remaining average contracted period of 25 years. As Andy mentioned, we are close to finalizing contract negotiations for the first stages of the build and signed up Microsoft as the major anchor tenant. Our strategic conviction remains strong. Not surprisingly, the current economic environment, we have seen cost inflation for construction and fiber supply. Our extensive discussions with customers have provided a clear view of their requirements, including the highest priority routes, and we are adjusting the staging of our rollout to meet this demand. The total number of kilometers built will depend on the final routes. We expect to remain within our strategic CapEx for FY '23 of $350 million, including Viasat, and the targeted total spend over the 5-year project of $1.4 billion to $1.6 billion. Given the cost inflation and the customer demand profile, the estimated FY '26 EBITDA will be significantly lower than previously indicated. However, customer preference for IRU contracts will support cash flow with higher upfront cash contributions. The IRR on the rollout of the first stage is expected to be equal or better than mid-teens. On the broader InfraCo fixed strategy, we have made significant progress. We will continue to focus on improving the access, utilization and scale of our infrastructure to deliver growth and value, also on completing the restructure, providing us further optionality. As we've already demonstrated, where we see the opportunity to realize value through monetization, we will, although we have made no decisions yet in this regard. These are unique and valuable assets, and we will be measured and deliberate as we consider options over the course of 2023. Turning to fixed enterprise on Slide 16, which in FY '22 returned to growth. NAS growth offset the decline in data and connectivity, or DAC, driving 2.3% EBITDA growth as shown in the top right chart. DAC revenue declined 13.3% as shown in the bottom left chart. This was largely due to ARPU compression and technology change. We achieved strong contract renewals of our government and enterprise customers with T-Fibre churn largely confined to mid-market and business segments. The DAC outlook remains challenged with competitive pressures, especially nbn's release of more fiber business zones. In addition, customers are using SD-WAN and Internet as an alternative to private dedicated connectivity, especially for smaller locations. Returning DAC to growth remains our ambition, and we are confident in our ability to win in market, leveraging our extensive fiber footprint complemented by reselling nbn. However, we have seen more disruption than we anticipated, and achieving growth will rely on a broad stabilization of ARPU. We no longer expect this to occur in FY '24. Although we do expect the overall domestic enterprise business, which grew in FY '22, to continue growing. In NAS, FY '22 EBITDA grew 93.8% as shown on the bottom right chart. NAS revenue grew in all categories, except legacy calling. This included growth from security, cloud, IoT, professional and managed services. Second half EBITDA was also supported by revenue recognition linked to milestones on key contracts and strong cost management. The NAS EBITDA margin of 11.5% in FY '22 is on the right trajectory to meet our mid-teens ambition by FY '25. Turning to fixed C&SB, where EBITDA has bottomed and returned to growth sequentially in the second half. Growth was achieved through cost reduction and ARPU uplift from price rises and improved plan mix, shown in the charts on the bottom right of this slide. The nbn reseller margin for FY '22 was 5%, including a 2-percentage-point improvement from the first half to the second half. We continue to target greater than 8% in FY '23 and mid-teens in FY '25 with further benefits expected from price rises, mix and cost-out. The new digital stack is also driving a step-change in customer experience, and we are pleased to see year-on-year improvements in episode NPS of plus 24 points for sales and activation and plus 12 points for assurance, including from proactive fixes and agent tools to better support our customers. The nbn market remains challenging, including competition from emerging business models. We lost 87,000 net bundle and data SIOs in FY '22. Although focused on profit, a key challenge remains stabilizing SIOs to achieve longer-term sustainable growth. Our fixed C&SB outlook is also supported by growing 5G Home wireless. Its contribution was small in FY '22 due to modem supply constraints, but we expect more scale in FY '23. Finally, international on Slide 18. Our existing international business grew 15.2% in FY '22 in Australian dollars supported by FX. We are excited to have the Digicel Pacific team on board following the completion of the acquisition on 13 July. We see considerable opportunities for growth, and the business is tracking well. Pro forma March FY '22 EBITDA was USD 238 million, and the transaction will add in the order of USD 160 million per annum of D&A. The transaction modestly increases our pro forma leverage by approximately 0.1x. As we own all of the ordinary equity, we will account for Digicel Pacific as a wholly-owned entity, and there will be no minorities in the P&L. The government equity-like securities will be reflected as minority interests on the balance sheet. Turning to our operating expenses, which you can see on Slide 19, which, again, tell a good story. In FY '22, total operating costs declined 5.8%. Excluding one-offs and other guidance adjustments, underlying costs declined 5.7% or by $863 million. Breaking down underlying costs, in sales costs, an increase in nbn payments was more than offset by a decline in other sales costs, including lower hardware. Underlying fixed costs reduced $454 million. We achieved our T22 cost-out target for a cumulative $2.7 billion per annum or 35% absolute reduction in underlying -- in annual underlying fixed costs since FY '16. Key contributors to this productivity are shown on the slide. Given the current environment, I will cover the implications of inflation on our costs, including mitigants we have put in place. Firstly, looking at OpEx and our $14.3 billion of underlying costs. Our sales costs include some inflationary pressure, especially in the other category. However, these costs are largely passed through. Within fixed costs, the biggest bucket is labor. Here, we have some protection from our newly-reached enterprise agreements with agreed wage increases for the next 2 years. On energy, we expect our absolute costs to increase by around $50 million in FY '23. However, we expect our energy PPAs to mostly offset this at EBITDA. Service contracts and agreements and other are areas where we expect costs to be under inflationary pressure. Contracts do offer some protection, while there may be opportunities to manage spend in these categories also. For FY '23, in addition to inflation, our costs will include absorbing a full year impact of insourcing our retail channel and onshoring call centers. Outside of OpEx, importantly, we have revenue levers. As I mentioned earlier, we have increased prices, reflecting CPI in mass market branded mobile, and our nbn recurring revenue of around $1 billion are indexed to CPI. We're also looking at what increasing costs mean for other pricing. Our property -- on property leases, we continue to optimize and have some protection. On interest costs, hedges are in place with around 65% of our debt at fixed rates, inclusive of Digicel Pacific. On CapEx, around 75% of our spend is subject to inflationary pressure with the remainder having some protections, including contracts and capitalized internal labor. We are committed to managing CapEx to guidance. As you can see, overall, we have some mitigants against inflation given the steps we have taken. We will continue to remain disciplined and focused in our management of costs and pricing. We expect modest cost-out in FY '23 despite inflation and the full year impacts I mentioned. Our ambition remains $500 million cost-out under T25. Turning to free cash flow on Slide 21. Free cash flow after lease payments increased 5.9% to almost $4 billion largely due to working capital improvement of $923 million being ahead of what was achieved last year. The working capital benefit was largely due to reduced receivables, including from lower handset sales, strong collections and lower bad debts. Turning to our capital position on Slide 22. We reduced net debt by around $2.6 billion in FY '22 supported by our free cash flow and proceeds from the partial sale of our towers business. We remain within our comfort ranges for all credit metrics with debt servicing at 1.8x. Underlying ROIC improved by 2 percentage points to 7% supported by earnings growth and our tax rate below the statutory rate. Turning now to FY '23 guidance. The ranges and basis on which guidance is provided can be seen on Slide 23. Guidance includes Digicel Pacific across all measures. Our underlying EBITDA guidance is consistent with our previous FY '23 ambition plus a contribution from Digicel Pacific. We expect FY '23 restructuring costs to be less than $100 million and mostly in first half '23. Restructuring costs are excluded from underlying EBITDA and include one-off costs associated with the legal corporate restructure and Digicel Pacific transaction costs. Our CapEx guidance includes an uplift in mobile investment, around $150 million for Digicel Pacific and around $350 million of strategic investment outside of BAU for the intercity fiber and Viasat infrastructure projects. CapEx guidance is modestly below adjusted D&A. Finally, on guidance, we expect to continue to achieve strong cash flow, enabling us to invest for growth and deliver returns to shareholders. FY '23 free cash flow is expected to be around $1.1 billion, lower at the midpoint of guidance than FY '22. Increased EBITDA in FY '23 contributes positively, but this is more than offset by increased CapEx as well as working capital and other benefits in FY '22 not repeating. Finally, I would like to take the opportunity to recognize that this is Andy's last results presentation at Telstra and my final as CFO. I'm looking forward to stepping into the CEO role on 1 September, and I am grateful to be taking over with Telstra in a strong position thanks to Andy's leadership and the foundations he has laid as a result of our successful T22 strategy. I'm excited to be leading a highly capable team to deliver our new strategy, T25, which is set out on Slide 24. In due course, I look forward to engaging with you on T25 and reporting on our progress just as transparently as we did on T22. To summarize, our results clearly demonstrate financial momentum, and we expect growth in our underlying business will continue. We remain disciplined and focused on creating value. We are well placed in the current environment with earnings growth, strong cash generation and a strong balance sheet. We have the right strategy, and the clearest signals of success will be: growing our business, improving our customer experience in NPS, enhancing our reputation and retaining and attracting the best talent. If we get these things right, we are absolutely confident our financial ambitions will follow. Finally, like Andy, I would like to thank and recognize our dedicated teams right across Telstra, an incredibly talented team that I look forward to leading. I'm also looking forward to having Michael Ackland move into his new role as CFO, and I know Michael looks forward to engaging with all of you more closely. I will now hand over to Nathan to take us through Q&A.

Thank you, Vicki and Andy. So we'll enter the time of Q&A. So on the call is Andy Penn; Vicki Brady; Michael Ackland, GE of Consumer and Small Business and incoming CFO, as Vicki mentioned; as well as David Burns, Group Executive for Telstra Enterprise; as well as Brendon Riley, CEO of InfraCo.

[Operator Instructions] Our first question comes from Eric Choi from Barrenjoey.

I just wanted to say thanks very much, Andy, for your efforts for these past 10 years as well. There's definitely been ups and downs, but congratulations on the strong position you're leaving Telstra in. So on to the questions, I just had 3, and I might ask them one by one. Just the first one on the dividend. I guess you wouldn't have lifted to $0.165 fully franked this year if you didn't think it could be sustained into '23. So can I just clarify that at the bottom end of your $7.8 billion to $8.0 billion EBITDA range, we still think we can get close to a $0.165 EPS?

Eric, it's Andy. Do you want to give us all 3 and then we'll respond, if that's okay? I think we'll be quicker.

Absolutely. Sorry about that. The second one is free cash flow. Can I just clarify maybe higher mobile handset sales may be driving some of this revenue beat and free cash flow miss versus the market? And if that's so, it still looks like you're guiding to neutral working capital. So what are the positives that are offsetting the drag from your handset sales at free cash flow? That's the second. And then on the third, just on InfraCo. Just going through the regulatory disclosures, the ACCC says they've seen some redacted statements which show the separation is going to deliver significant value. And [indiscernible] saying there's certainty of value creation. So I'm just wondering, in 2023, will Telstra be the one that's driving these potential value-creation events? Or will you leave this up to sort of third parties coming in and potentially doing due diligence or looking at the assets?

Look, Eric, it's Andy. Thank you very much for those questions. And I think you'll find given this -- I'm in my last few weeks, I'll be directing most of the questions to Vicki and others. But firstly, thank you so much for your kind comments. That's much appreciated. I'll just make a couple of minor comments on dividend from my perspective and InfraCo from my perspective, and then I'll hand over to Vicki to add hers and also pick up the free cash flow one. Look, I mean, on the dividend, I'll get Vicki to talk specifically about ranges, but I mean, the decision to increase the dividend was very much reflective of the Board, I guess, sending a message of its confidence following the completion of T22, the strong result in the current year, the aspirations in FY '25 -- sorry, in T25 to grow EPS, the fact we've got a strong balance sheet and the fact that it's an important value measure for shareholders, particularly many of our retail shareholders. So ultimately, we obviously -- the Board turns its mind to our capital management framework. I'm very comfortable that we could do that within the context of that. On InfraCo, as I mentioned, we will be sending out, subject to court approval, the explanatory memorandum scheme booklet very shortly for the AGM, which will be held in October. But at this stage, as Vicki said, we haven't made any decisions on monetization or process of monetization. But with those comments, I might hand over to Vicki.

Yes. Thanks, Andy. And thanks, Eric, for those questions. So the first one on the dividend. So as Andy spoke to, you heard the reasons why the Board made the decision to increase the dividend for the final dividend by $0.005. And look, in terms of our underlying EBITDA range, you can see we have tightened that range again. We continue to get feedback that keeping that range tight makes a lot of sense, so $7.8 billion to $8 billion. We don't give, obviously, guidance on dividend. But I think if you take our underlying EBITDA range, you've got a pretty good view of what D&A is going to do with Digicel coming in. And you can also, I think, probably work out where finance costs are headed. So as I said, we don't guide on the dividend itself. But we've got strong confidence in our EPS growth, and that's built into our T25 ambitions. The second one on free cash flow, so, yes, on free cash flow for FY '23, we are assuming quite an uplift in our handset sales in mobile. FY '23 is a year where we will see customers coming off deferred handset plans for both 2-year and 3-year periods. So we have an uplift in customers that will be looking, we expect, for new devices in FY '23. So yes, from a working capital point of view, we expect to use some working capital to support that. Helping to offset that, however, is we are expecting receivables to improve in FY '23 further, and that comes as more of our customers move on to our new upfront plans. So yes, you're right in terms of free cash flow in FY '23. The increase in EBITDA gets taken up by the increased CapEx, investing in the strategic elements under our intercity fiber and Viasat deal and a little bit more into mobile and Digicel. But we will see. We expect working capital, yes, to be broadly neutral. And obviously, handset sales are one of those things we will watch closely. But we are expecting an uplift in handset sales in the year. And I think they were the couple of questions to cover off, so back to Nathan.

Did you want to make any further comments on InfraCo?

In terms of InfraCo, as I said -- as I spoke today, we are very focused on, firstly, finishing the restructure, and Andy addressed that with the time line on that. Brendon and the team are also very focused on ensuring we're running the InfraCo business to make sure we're creating the most value and delivering the best possible outcomes out of that business. They are incredibly valuable assets, and we appreciate that. And as I said, through the course of 2023, we will review that optionality, but we don't have anything more to say on that at the moment.

Our next question is from Kane Hannan from Goldman Sachs.

I'll send you off with 3 more questions, Andy. Maybe just the '23 guidance. Just interested if you can comment on what the legacy network disposals are in that. And do you have any nbn one-offs coming through next year? I thought [ it's about ] $100 million sort of left in the bank. Secondly, just on the mobile side of things, are there any comments you can make around the TMMC trends you're seeing in the market at the moment? I suppose really what level of spend down you're seeing under those recent plan changes. And then finally, just obviously a very strong NAS outcome. Is there anything lumpy in that? Or do you think you're going to build off that into FY '23 and maybe offset the data and IP declines again?

Thanks, Kane. I think I can happily pass all of those to Vicki, and I'm sure she'll bring Michael and maybe David in as well.

Excellent. Thanks, Andy. And thanks, Kane, for those 3 questions. Let me take the first one, and I'll get Michael to comment on mobile and David to comment on NAS. So firstly, in terms of FY '23 guidance, yes, you picked up in FY '22. As we have included in our materials, there are some legacy network disposals included inside InfraCo fixed, and they are not one-off in nature. They will continue into FY '23. And as an example of that, as we recover Copper out of our network, we are able to realize value on the disposal of Copper. And so we see that as a continuing program over the next few years. And we also, as Brendon and the team operate InfraCo fixed, they're looking at our fixed network sites, and they find opportunities. Where we have the opportunity, we will realize value from some of our fixed network sites. And we saw that again in FY '22, and we would expect to continue that program of work and opportunities to appear through FY '23. In terms of the nbn one-offs, as we spoke to today, this FY '22 is the final year of our large nbn one-offs. In terms of what we expect in FY '23, there's only -- we expect a very small amount to come. I would expect that more to be in the low tens of millions. So that's my expectation on nbn one-offs. And then why don't I hand to Michael to comment on mobile and the trends he's seeing, and then he can hand across to David to talk a little bit more about NAS.

Great. Thanks, Vicki. And thanks Kane. I think what we're seeing is we obviously forecast for some spin down in churn, and we're seeing that it's well within our expectations. We haven't seen any significant mix change coming through on activations. But I think the trends are pretty positive, but we'll obviously watch that closely as we go through the rest of this year. And over to you, David.

Thanks, Michael. And thanks, Kane, for your interest in NAS. I think it's a mix of a whole -- strong performance across the board. So I think there's some -- you can see that there's some strong cost management and cost takeout in the NAS portfolio. As Vicki showed in the fixed enterprise chart, you can see that all the lines of business, with the exception of calling apps, which is what we would expect, all grew pretty much in double digit but in line with the market. And we're pretty excited about that, and we think that's a very strong performance. And yes, the NAS business does have the occasional lump in it, and we had a couple of transactions and milestones that were key in the second half. So a very strong -- when you put all of those pieces together in the second half of the NAS performance. I'd just reiterate what Vicki said that -- and guidance we've also given on the NAS portfolio that we expect to see continuing single digit -- mid-single-digit growth in the NAS business and retain our mid-teens EBITDA margin outcomes for the future. So we'll stay with those. And as Vicki included in today's announcements, we'll continue to grow top line and bottom line in the domestic enterprise business overall. And yes, NAS will be a key contributor to that as we do expect continued challenges in that DAC portfolio. So NAS will be a key contributor to that, yes.

Our next question is from Entcho Raykovski from Crédit Suisse.

So my first question is on the T25 EBITDA ambitions. Obviously, you've retained that to mid-single-digit CAGR. I guess I'm just interested [ for the avoidance of doubt ], do they still exclude all acquisitions? Or is Digicel now factored in? And I guess where I'm getting to with that question is I'm conscious that there's low expected EBITDA from the fiber build, the DAC growth being pushed out. Can you talk to some of the offsets which would allow you to reach that ambition? That's question number one. Secondly, I've also got a question on divi. Is the intention that the dividend remains fully franked in FY '23 and beyond? I mean I'm conscious that you have a fairly low franking balance and you've got some earnings coming through from Digicel, which might be franked. So what is your thinking around franking? And then finally, a question on the fiber build. How are you thinking about the payback period now on those investments? I think it was about 9 years when you spoke about it back at the start of the year. And if you can give us any specific sense on the EBITDA reduction relative to your prior estimates of circa $200 million, that would be quite helpful.

Thanks, Entcho. It's Andy. Look, I'll pass it all to Vicki. I think -- I mean, I could make some comments, but I think it's probably best that she does...

Thanks, Andy. And thanks, Entcho, for those questions. Just in terms of our T25 ambition, yes, that remains unchanged, and included in that is now Digicel and the acquisitions we've made. So yes, that remains at mid-single-digit EBITDA. As you spoke to and pointed out, there have been a few changes. So obviously, data and connectivity is not performing where we had hoped it would be, so we don't see it returning to growth in FY '24. But as David just reinforced, we do believe the domestic enterprise business will continue growing. So as you think about those DAC not performing quite where we had hoped, disruption continuing there. But overall, the domestic enterprise business, we do still expect growth. And so NAS and mobile play an important part there. And yes, just in terms of the dividend in FY '23, again, I think our capital management framework that we updated last September when we announced T25 is very clear, and we remain absolutely committed to that. And that is the goal: to maximize and seek to grow over time our fully franked dividend. So I would anticipate our dividend being fully franked at this point as I look to FY '23. Then just on the intercity fiber project, just talking about it in a little bit more detail. So as I spoke about, Brendon and the team have done an enormous amount of work, and I might get him to jump in, in just a second and add his comments as well. So long way progressed on the contracts around the construction and the fiber supply, extensive discussions with customers. And that's really informed us around the priority routes and the staging of the rollout. And in this first stage of the rollout, in fact, because we're seeing customers prefer IRU contracts where we get more cash upfront, in fact, we see the payback period on this first stage actually being better than what we talked about is the overall project back when we announced it. So this is for the first stage of it, where we are focused on the priority routes that are most important and where the biggest demand is from our customers. So we see good return on that. In terms of -- I did mention, we are estimating that the FY '26 EBITDA will be significantly below what we anticipated when we announced the project to the market. In terms of there's still a lot working through in build time frames and getting that locked down and customer demand profiles, but when I say significantly lower, it is hard to estimate at this stage. But it would be well, well below the $200 million we had anticipated when we announced the deal. And as we firm up the rollout and at our next results presentation, we'll update on how it's progressing. But Brendon, I might hand to you just to give your insights into the intercity fiber project.

Yes. Thanks very much, Vicki. And thanks, Entcho. Look, Vicki, I think you've summarized it really well. Entcho, since the last update we gave, we've done a massive amount of work on the design. And that feeds into the cost side, and that's the dark fiber solution design that's particularly being requested by the hyperscalers and some of the other major providers. So there's additional requirements that go into the cost there. We've completed the tendering work. They're higher. We've factored in inflation, so the costs are a little higher. And just in terms of how we're staging the build-out and the routes and the prioritization of those, we're going to focus on the routes that our customers want that obviously generate the returns. So that has the implications for FY '26 EBITDA. It's still going to be a fantastic project. The IRRs, the payback, as Vicki has indicated, will be a little shorter with some of the cash contributions that we'll get. And I think the other thing that I would say is we're going to be really disciplined with our capital management. We have indicated there is a lot of capital [ to get on with ] the project. So we want to make sure we're very disciplined in the early years and generate the returns. But I'll pass back to you, Nathan.

Our next question is from Darren Leung from Macquarie.

I just had 3 questions as well, and I'll ask them [ all at once ]. So the first one, I just want to have another go with the dividend. So does the dividend policy of the 70% to 90% of underlying earnings still stand? And any framework we should be thinking about particularly relative to free cash flow, please, just given the spread here? And then the second one was just on the FY '23 EBITDA guidance. It's obviously a good outcome compared to the [indiscernible]. But it looks like the bulk of this is obviously driven by Digicel, and you've had a pretty good cost-out outcome in terms of the [indiscernible] cost-out. So I'm just curious as to why this couldn't have been higher. Or is it more this conservatism around some of the inflation piece there, please? The third one was just on CapEx. There was previously the $3 billion of BAU CapEx comment, and there's obviously the inflation piece here as well. But if inflation moderates, does this comment still stand? Or does it actually start to come off a bit, please?

Thanks, Darren. Just on the middle question, because you were cutting out a little bit. I think it was, basically, can we sort of comment on what's underlying the, I guess, the progression from FY '23 underlying EBITDA to guidance for -- sorry, from FY '22 to FY '23? Is -- that was your question?

Yes, please.

Yes, cool. And then on the dividend policy, well, the dividend policy has been updated. But I'll pass that over to, with the other questions, to Vicki.

Thanks, Andy. And thanks, Darren, for those questions. Firstly, on dividend, yes, we did update our capital management framework back in September last year as part of the T25 announcements. And so that 70% to 90%, any of those payout ratios were removed. And so we went to a policy around seeking to maximize and grow over time our fully franked dividend. So that's not part of the policy. And as you can see for the dividend that the Board decided on in terms of our final dividend for this year, you can see that our earnings payout ratio is above 100%. It is well supported by free cash flow, and we have the franking credits to support the fully franked dividend. So those prior ratios are no longer part of the capital management framework. In terms of FY '23 and Digicel and our guidance range. So I would start with in terms of Digicel, we would see that adding a little over $300 million to our underlying EBITDA. I spoke to the pro forma EBITDA in U.S. dollars for FY '22. As we take over Digicel, obviously, we're reviewing the business, and we're looking at some of those opportunities where we might invest a little bit more in CapEx and OpEx to support the growth in that business. And so I would expect Digicel to contribute a little over $300 million. So when I factor that in, you can see still very strong underlying growth baked into the guidance range for the underlying business, excluding Digicel. And I should just comment, I know in an earlier question from Entcho, we did set our T25 mid-single-digit EBITDA ambition for growth there without Digicel. We're not updating that ambition. But obviously, Digicel is a new addition into our business. And then on CapEx, a couple of things to comment on then. Yes, our capital management framework talks about BAU CapEx of around $3 million -- $3 billion, I should say. And so as Digicel comes in to be part of our business, we do see some elevated CapEx compared to where we would see running at sort of over the medium to long term. And that's as we support the build-out of the network, and we see that sitting, as I spoke about, for this year at about $150 million, and that's likely to be in that order for a few years. So we have Digicel coming in. We also have, as I mentioned, a little bit of an increase in mobile CapEx this year. And again, that's just supporting the rollout of our 5G network and ensuring we've got the right capacity and quality in our mobile network. So the big difference is obviously Digicel coming in, and that will become part of our BAU CapEx.

Our next question is from Fraser Mcleish from MST Marquee.

Actually, I think you just answered all my questions in that last comment, Vicki. But -- so I'll just leave it with saying congrats, Andy, on that final result. And it's been a pleasure dealing with you over quite a number of years now. And good luck with your future endeavors, Andy.

Well, thanks so much, Fraser. That's -- firstly, I'm glad that we've actually addressed your questions. So -- but look, thank you so much. It's been a pleasure to work with you, [ Fraser ]. You've always been incredibly balanced and fair and challenges us appropriately, which I appreciate. So I hope our paths cross again in the future.

And good call on the dividend, Fraser. Our next question is from Lucy Huang from UBS.

Congrats, Andy, as well on the retirement. I just might add in kind of 3 more questions. So just firstly in relation to CapEx. So I noticed that you mentioned that 75% of CapEx is exposed to inflationary pressure. So just wondering in this environment whether you're seeing beyond FY '23 it's possible to keep to the underlying guidance of about $3 billion. And if not, which projects could we see some potential CapEx being pulled back on to manage that? And then just secondly in terms of the guidance, I'm just wondering what you're factoring in for a return in mobile roaming revenues. I noticed you guys mentioned that in June, we're sitting at [ about ] 45%. So how much more are we factoring into FY '23? And then just lastly on InfraCo [indiscernible] intercity fiber, just wondering if you can comment on the competitive dynamics in the market currently. And if we're a bit more moderate on the build spend, is there a risk that competitors can actually accelerate the build of their own fiber? And would that impact kind of the returns that we're expecting there?

Thanks, Lucy. Vicki?

Thanks, Andy. You're enjoying this a lot, aren't you?

I'm enjoying this very much. [ You can take my job ].

And Lucy, thanks so much for those questions. Let me take the CapEx question. I'll then hand over to Michael to talk more about how we're thinking about mobile roaming in FY '23, and I'll get Brendon to talk about the intercity fiber and the competitive dynamics. So firstly, on CapEx, yes, as I spoke to, about 75% of our CapEx spend we see as facing inflationary pressure. But as I said, we would absolutely in FY '23 manage to our guidance range. As I look to '24 and beyond, obviously, there's a lot going on in the macroeconomic environment and a lot of uncertainty around what inflation will do. That will be something we see that we'll have to, as this year progresses and as we get closer into our planning process and then setting guidance for FY '24, I will come back and talk about. But absolutely reassuring you in FY '23, there will be inflationary pressures we expect, but we will manage inside our guidance range. And we have a very clear view of our priorities and some of the things where we would trade off if we needed to in terms of CapEx. And obviously, the mobile network and its build-out, intercity fiber build-out and the Viasat build-out, they're all very clearly defined. And yes, in any CapEx plan, there'll always be things where we would make trade-offs. But I'm very much committed to delivering CapEx inside the guidance range that we've spoken about today. So Michael, I'll hand over to you on mobile roaming.

Thanks, Vicki, and thanks, Lucy. I mean I think as Vicki said in her speech, we saw mobile roaming at around 20% of pre-COVID levels in FY '22. And that was very much back ended with June at, I think, 45%. We expect that to continue to lift in both the first half and second half of '23. And if you look -- it's always hard to predict what's going to happen. But if we look at the forecast for lift capacity airline, lift capacity out of Australia, I think the prediction is around 50% in the first half of next year of pre-COVID levels and around 65% in the second half, and we're pretty aligned to that as well. So that would place it at around that sort of dollar mark for -- additional dollar mark for ARPU in the -- throughout '23, which was similar to what we saw on a PCP basis in the second half of '22. Thanks.

Did Brendon want to make any more comments about the fiber competitive environment? Brendon?

Yes. Thanks, Nathan, and thanks for the question, Lucy. Yes, it's an active market. I think we've seen over the last year, not just in our announcement but other announcements of fiber builds, more undersea cable capacity being built in and out of Australia. So it's definitely a very, very active market, Lucy. There's been a huge amount of interest in our project since we announced it, and that's from hyperscalers, global companies, local telcos, government, commercial organizations. I mean everywhere I go around the country, there's just a massive interest in what we need to do. And that's because we need to build more demand, and we obviously need to do more in relation to regional Australia. I don't think there are too many companies that could take on this project at this scale. And the fact that we've already announced we're doing it, we've committed the CapEx. We'll commence construction next month. We've done our construction tests in Western Australia and New South Wales. We'll commence construction next month. We're of and away. We will build a very significant and material amount of the project in the next 3 years, and we've already landed our first anchor tenant. So we're of and away. It's going to happen. I'm very excited about it, huge interest. And yes, it's a competitive market.

Our next question is from Roger Samuel from Jefferies.

I've got 3 questions as well, hopefully quick ones. Firstly, just on the T25 ambition of mid-single-digit CAGR or EBITDA, if the Telstra and TPG regional network sharing deal is not approved, is that going to reduce the ambition? The second question, I just want to clarify on your previous FY '23 ambition. Did you include the contribution from Digicel when you made that comment before? Because when you made the aspiration around this time last year, you mentioned about $7.5 billion to $8.5 billion. And then in February, that was reduced to $7.5 billion to $8 billion, so I just want to clarify that. And thirdly, just on the spectrum spending, you mentioned that you're going to commit to [indiscernible] on the low-band spectrum. Can you tell us what the timing of that spending?

Roger, it's Andy. Look, just a couple of quick comments from me, and then I'll pass to Vicki. Of course, we announced the TPG Telecom MOCN deal, I think, in late February of this year, whilst we announced the T25 strategy last September. So I think that answers your question in terms of, no, it wasn't included in those initial aspirations. So the corollary of that is that it doesn't -- if it didn't get approved, which I can't imagine why it wouldn't get approved, but if it didn't get approved, that wouldn't impact that outlook. And then on the -- but just to give you a little bit of history on the $7.5 billion to $8.5 billion and then I'll hand over to Vicki and she can sort of talk more about things going forward. But the $7.5 billion to $8.5 billion, I can't remember when we first announced that, Nathan. It was probably 3 or 4 years ago, and it wasn't announced at that time as an aspiration. It was announced actually as a range which was intended to be helpful to say that at that time, we estimated that we needed our underlying EBITDA to be in that range to support -- effectively, underlying EBITDA that would support a dividend around $0.16 in accordance with the capital management policy at that time. And the reason the range was so high, by the way, was because we were trying to forecast CapEx, D&A -- sorry, finance costs, et cetera, at that time as well. And so that created quite a big range. We did bring that in to $7.5 billion to $8 billion more as part of our overall ambitions for T25. And so that obviously didn't include Digicel because we announced that, I think, in October of last year. So look, that's a bit of history for me. But I should hand over to Vicki because obviously, she's leading this going forward, and I don't want -- I want her to set the expectations appropriately.

Thanks, Andy. And thanks, Roger, for that. And Andy is spot on. So just on Digicel, because I know -- I'm sure there's plenty of people working out where the guidance range sits. So as Andy said, when we said -- when we talked about the ambition of the $7.5 billion to $8 billion, it was not including Digicel. And as I spoke to earlier, we think about Digicel contributing maybe just a little over $300 million. So when I look at our guidance range of $7.8 billion to $8 billion for FY '23, I absolutely see, excluding Digicel, that we're inside the ambition that we had spoken about for the business, excluding Digicel. And then, Roger, you had a final question on spectrum, and this is our payment for the 850 megahertz spectrum that we secured at auction. In terms of the timing of that payment, it's been set that we would pay for that spectrum shortly before we get access to it. We're due to get access to it in July 2024. So we would expect payment to be shortly before that, so somewhere mid-calendar 2024.

Thank you, Roger. Our next question is from Harry Saunders from Evans & Partners.

Congrats on your retirement, Andy. I had 3 questions as well. Firstly, can you give an update on the interest rate sensitivity provided in the accounts, which is the $20 million NPAT impact from a 100-basis-point move? So what does that look like after the Digicel acquisition? Secondly, can you give any further color on fixed wireless subscriber numbers and perhaps where the opportunity is there? And just finally, any expectations for the mobile division margin?

Thanks very much, Harry, and thanks for your kind wishes. Vicki?

Thank you. Thanks, Andy. And thanks, Harry, for those questions. I might -- I'll take the interest rate one in just a second, but I will get Michael to talk a little bit about fixed wireless and how we see the opportunity there, and then I can talk a little bit about mobile margins as we look forward. So firstly, just in terms of interest rates, it's -- in terms of that, we provide that view in the accounts, obviously. And you can see that there that it says we estimate the interest rate exposure if there was a 100-basis-point move up against the parts of our debt portfolio. And as I said, 65% of our portfolio is fixed in terms of rates. That has an impact of about $30 million on NPAT, so relatively small. In terms of what it looks like post-Digicel, it would increase a little bit. But definitely, we don't see that as material. So hopefully, that helps gives you a little bit of more color on that. In terms of mobile margins, obviously, mobile margins are sitting for FY '22 at a very strong level. The one thing through FY '23 is obviously we are anticipating that hardware revenue does lift again as we see customers on both 2-year and 3-year deferred repayment plans coming out of contract for their handsets. So that will have a little bit of an impact in terms of overall margin just as that revenue increases. It's obviously at a lower margin than service revenue. But I remain optimistic we're still committed to the service revenue growth in the mid-single digits. And obviously, that's very important and a key economic driver. So mobile margins are sitting at a reasonable level, and other than hardware, obviously, that's one of the big things that would come into that calculation as we look at FY '23. But I remain optimistic the mobile business is in a very good place. We see growth continuing, and I see it continuing to deliver strong margins. So on that basis, let me hand over to Michael to talk a little bit more about fixed wireless access.