Telstra : Transcript - ACCC draft decision on mobile roaming

Dear Sir or Madam

I attach a copy of the transcript, from the conference call held on Friday 5 May 2017, in relation to the ACCC draft decision on mobile roaming, for release to the market.

Yours faithfully

Company Secretary

Telstra Corporation Limited

ACN 051 775 556

ABN 33 051 775 556

MR A. PENN: Thanks very much, Jason, and good morning, everybody, and thank you for joining in to this call. As you will have seen earlier today, the ACCC released a draft decision that, if confirmed, will support continued telecommunications competition and investment in regional Australia. This is the right decision for the people, businesses and communities of regional Australia because it ensures the industry still has the incentives to invest.

Because today we live in a world where being connected is so much more important than it has ever been before, whether it's talking to family or friends, mobile banking, doing business, or using many of the services in our lives today that can only be accessed online. It is even more important for people in regional areas as it is for those living in the cities, because often they do not have the same physical access to the services that are available in the cities.

Now, as you will appreciate, it requires a significant amount of infrastructure and billions and billions of dollars to build and maintain these networks that allow this to happen. It's even more so in regional areas due to the sheer size of our country, where it takes much more investment to give regional Australians the connectivity they need. Today's announcement by the ACCC means that all telcos will continue to have the opportunity to invest in regional Australia and ensure more people can enjoy the benefits of future technology upgrades. This will be particularly important given the exciting opportunities and benefits that 4G and in the future, 5G will bring to rural and regional Australia.

Now dozens of community groups, business leaders, local councils and politicians from all over the country made this clear in their submissions to the ACCC. The overwhelming call from regional Australia was that their top priority was encouraging telecommunications investment to improve and extend mobile coverage. Last year we committed to keep investing to improve and expand our mobile network in regional, rural and remote areas.

Before this draft decision, we had shared with the market our plans to invest

$350 million in new technology in regional base stations, more than $200

million to continue our work on the first two rounds of the mobile blackspots program, and $100 to $200 million for new regional co-investments. With the co-investments, we estimate this will be up to a $1 billion boost to regional mobile coverage.

We also support the ACCC's suggestion to encourage greater transparency about network quality, expansion and improvements. If this decision is confirmed, we will immediately move to expand our 4G coverage to reach 99 per cent of the population by later this year. It also paves the way for ongoing investment in the coming years that would see an additional 1.4 million square kilometres of 4G coverage for regional and rural Australia.

This means that about 600 base stations will be upgraded from 3G to 4G, giving the Australian population access to world-leading 4G networks.

It is useful to briefly recap on why so many people were strongly against regulatory roaming. It's like if you've got your own farm and you've worked over many years very hard to improve it, only to be forced to allow a rich foreign company to plant crops on it, of course your incentive to further invest in your farm would be reduced. Why spend the money if all you're going to do is give it to your competitors as a free ride? No company invests its money, let alone its technology and its talent if ultimately it is going to be required to provide those assets to its competitors. It would deprive that company of the point of difference that it has strived so hard to build, especially competitors with their own capital who have the capacity to invest but just have not - have chosen not to do so in regional Australia.

Under the current rules, all mobile network operators have the incentive to expand the size of their network because it helps them attract customers. Moreover, the current regulations are in place to facilitate the sharing of mobile towers and access to backhaul. That exists today. I also want to be clear on another point. Telstra receives no subsidies from the Government. Let me repeat that. We have received no subsidies from the Government. We have participated in the Government's Mobile Black Spots program, which is a co-investment program, and we've put our money alongside the Government's to provide better coverage to regional Australia.

These programs of co-investment, the Mobile Black Spots program is a program that is available to all operators and all operators have invested in it. We've always been the provider of the best networks in Australia, and my commitment as the CEO has been to continue this through increasing our investments in the networks for the future to ensure that our customers have access to the fastest speeds, greatest capacity and best coverage and the best content.

We've always been and will continue to be the company that regional Australia can rely on. In the past six financial years alone, we've invested more than $8 billion of our shareholders' money building Australia's biggest and best mobile network with 15 per cent of this investment directed to cover the last two per cent of Australia's population. I strongly encourage others in the industry to follow Telstra's lead and put forward serious investment plans

in order to deliver the kind of future that regional Australia and regional Australians deserve.

If this decision is confirmed, I look forward to Telstra getting on with the job of supporting regional Australia and even more investment. Thank you, and I will now hand back to Jason, who will facilitate some Q&A.

MR LAIRD: Okay. Thanks, Andy, and as I said, we have Andy and Tony Warren available for questions. So just check, Operator, if we have any questions. I see we have Max Mason from Fairfax.

MR M. MASON: Hello. Good morning, guys. I just wanted to ask a quick question. We were on the ACCC teleconference about 10 minutes ago and I guess there is an expectation from the competition regulator that there will be commercial roaming agreements. Just from Telstra's standpoint, what is a reasonable price that your competitors should have to pay to you for using your network?

MR PENN: Well, there's already a market and we have a number of wholesale arrangements with other mobile operators through MVNOs and there are other commercial roaming arrangements in place in the market, and each of them are individually negotiated and it's an effective market. The pricing for using Telstra's network or the pricing on any of these roaming arrangements is a function of the individual commercial arrangements for each of those particular transactions. But whatever price obviously has to reflect the investment that we make in that network.

MR MASON: That's it from me now. I'll let others ask questions. MR PENN: Thanks, Max.

MR LAIRD: Okay. Thanks, Max. Our next question is from Eric Pan from JP Morgan.

MR E. PAN: Good morning, guys. Congrats on the decision. My first question is, was this a key piece of information for your capital management review, and if so, do you feel that you need to wait for the final decision before you conclude your review, or are there other pieces of information that you're waiting for?

MR PENN: Well - - -

MR PAN: And then - - - MR PENN: Sorry.

MR PAN: Sorry. Go ahead.

MR PENN: No, no. I interrupted you. I'll let you finish your question.