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National Press Club -

View in ParlView

This program is not subtitled

The chief executive of The chief executive of Telstra Sol Trujillo. With the joint brawls Trujillo.
With the joint brawls with the Government over regulation and at the same time being readied for
sale, the company faces an sale, the company faces an uncertain end to the year. Live from the
National Press Club in Canberra, Telstra CEO Sol Trujillo. Ladies and gentlemen, good afternoon,
welcome to the National Press Club and today's National Australia Bank address from Sol Trujillo,
Chief Executive Officer Trujillo, Chief Executive Officer of Telstra. Sol Trujillo has just
completed his firstier in this job. In my view, one of the most demanding and scrutinised and most
discussed jobs in the whole of the Australian corp Pret sector and Australian corp Pret sector and
it's been an eventful year for him and for many of us, too. There's much more to come with the
constant more to come with the constant rapid changes in technology and the development of new
regulatory regimes that cover the whole of the telecommunications and media sector. Telstra of
course is a central player in this area of converting technology and it now affects our lives in
ways that many of us couldn't have even imagined a relatively few years ago. So that's a main
reason to welcome Sol here today, but there are others in the case of the National Press Club.
Telstra was our first principal sponsor and filled that role for 12 years and remained one of our
major supporters, especially through our program of special interests to rural and regional
Australia which we'll be able to tell you more we'll be able to tell you more about in the very
near future. We've also enjoyed regular briefings in brief years from Sol Trujillo's predecessors.
First Frank Blun a fellow American and then zig zig fellow American and then zig fellow American
and then...we're glad to see him here today and I hope you will help me welcome Sol Trujillo.

APPLAUSE

Thank you. It truly is a pleasure to be here and truly is a pleasure to be here and I want to thank
you for addressing some of my mates - sorry, amigos. Bruce and John and Phil and some of the others
that are here. Senator Minchin, Senator Conroy, distinguished guests and members of the media - I'm
here. We have a chance to talk today and to talk about one of the most important companies in
Australia and that is this company called Telstra. So I really do appreciate the invite, to be able
to come and share a little bit about this company. Unfortunately we don't have three days this
afternoon here. So I will get on with this notion of this company called Telstra and the
transformation that we're undertaking today. As Ken mentioned, I came here in July of 2005 because
I believe I believed Telstra offered a unique opportunity to become the world's best media coms
company. I also best media coms company. I also came here to help the board transform Telstra into
what I call a world-class company. Early on I world-class company. Early on I said that our
leadership team would be driven essentially by two guiding principles - the first one is about
customers. Putting them clearly at the centre of everything that we do within the company and the
second principle is associated with our shareholders and that is about creating shareholder value.
creating shareholder value. Stopping the things that don't create value or destroy value and only
focusing on those things that really do. A year on, I still hold to that year on, I still hold to
that vision for Telstra and everything that we are doing is driven by those principles - customers
and shareholders and that's what we are about. But together get there, we about. But together get
there, we at Telstra have to change. As it is many times in the past from the old PMG to telecom
Australia to what we now know as Telstra. Telstra is changing again. Why? Clearly technology is
changing. Consumer preferences are changing and the competitive environment is always changing.
We're one year into a fundamental transformation. So I like to talk about the fact that if you put
a sign up in front of Telstra today, you'd see a sign Telstra today, you'd see a sign that says
"under construction" because says "under construction" because a new Telstra is emerging. Telstra
is no longer a Government agency. Telstra is not community property and Telstra is no longer just a
telephone company. Telstra is a telecommunications company that is preparing to combin high-speed
transport with digital content the need the changing needs of our business and consumer customers,
no matter where they live here in Australia. Telstra is becoming a Australia. Telstra is becoming a
new kind of company. What I like to refer to as a media communications company. This he notion of
convergence is real and is it happening and I'm here today to happening and I'm here today to tell
you about the progress we've made over the past year. In the first over the past year. In the first
few months as Telstra's CEO, I months as Telstra's CEO, I undertook probably the most comprehensive
review of that company that's review of that company that's happen ad here is what I found. First,
an organisation hamstrung by silence, driven by products and technologies and not customer needs.
Second, our leaders in the business were managing to try to apiece managing to try to apease and
managing to try to apease and please the regulatory processes that exist here in this country,
rather than the customer. Third, an urgent need for investment in new networks to make sure
Australians receive the full benefits of the digital revolution. Fourth, duplication everywhere, in
infrastructure, IT, billing systems. Too many products, too many vendors, no integration too many
vendors, no integration and the result looked like a poorly planned home extension where the door
ways don't quite meet. Fienldy, and most disturbingly, I found 1.6 million mums and dads who had
invested in Telstra and had seen their share value fall from $7.40 many 1999 to $5 when I arrived
last year and had a stock that was being propped up also by some special dividends in which we had
to borrow to pay. The ole Telstra we found a year ago was a company with also sharply declining
revenues from our fixed line business, our phone business was bleeding from the core, flat retail
revenues with costs increasing around 10% a year and a company known by the market again company
known by the market again to be barrowing money to pay dividends and, again, a share price
underpinned by the dividend policies. To address these findings, I announced a strategy to
transform and revitalise Telstra. From what I call a 20th century telephone company in decline to a
21st company in decline to a 21st century digital communications Powerhouse providing truly
integrate providing truly integrated services and the new Telstra would have all of the hallmarks
of a modern new economy enterprise, a company that we could describe as employees and our customers
would feel as fast, flexible, focussed, customerised, networked and global. We're now on networked
and global. We're now on a mission to build that new Telstra and the new Telstra is, again, and the
new Telstra is, again, about the customer. Giving customers the products and services they say they
need, not the products we want them to buy. The new Telstra is modernising its networks,
modernising its networks, Britaining Australia into the 21st century Australia into the 21st
century with high-speed platforms and digital content. The new Telstra is taking out costs and
reducing complexity out costs and reducing complexity in our business. The new Telstra will be
tough on competitors. We will take market share and I have no apologies for saying that. The new
Telstra is innovating in every function at every level of the company. Let me give an example.
Because of the scale and the speed that we're building the new Telstra, we gave early attention to
the compensation of we gave early attention to obviously the composition of the management team.
We've quadrupled the amount team. We've quadrupled the amount of women on the CEO leadership team
women on the CEO leadership team and expanded our talent base to have tried and tested global
talent, including experienced managers I've recruited from Europe, north recruited from Europe,
north America and Australasia. A couple of those leaders that I've recruited are sitting here
today. Bruce Akhurst and John Stanhope who come from and John Stanhope who come from this country
and are part of the team here leading this business. Now, people are work here leading this
business. Now, the people are working together with people are working together with the best that
we can find here in this country and working with suppliers and other providers around the so that
we can deliver those services, those capabilities, the customer experience on time and under
budget. We are doing that. There's been progress everywhere in the transformation of tell tra. For
example, if you heard me talk when example, if you heard me talk when I first came, I talked about
this notion of market-based management. The new Telstra now does in fact The new Telstra now does
in fact put the customer first using modern market research to determine customer segments and
differentiate Telstra from its competitors. For example, Telstra's new subscription-based pricing
plans released last week which included ontime STD calls and local call charges in one single
price. We are simplifying reducing complexity because that's what our customers have told us. Well
over half of the national high-speed next generation wireless Broadband network is already being
built and let me tell you, when we get to that point of this 3 G-850 network, which I said we would
do and have built by the first of 2007, when it is in place, it will reach 98% of all Australians.
Not just five cities, not just limited builds, because we at Telstra are extending and expanding to
serve virtually all Australians. But when is it complete, the 3 G network will deliver peak speeds
of 3.6 mega deliver peak speeds of 3.6 mega bits per second, migrating to 14 Meg per second,
migrating to 14 Meg bits per second by mid-year 2007, give per second by mid-year 2007, giving
Australians everywhere urban and rural high-speed wireless access to the network. Nothing to do
with regulation. Nothing to do with anything other than Telstra shareholders deciding to invest in
shareholders deciding to invest in a competitive context to earn returns in a competitive market.
This new 3 G network will be second to none in the world. Those of us here in Australia will be
able to go anywhere in the world and say and experience the fact that we will have the best. This
will be the have the best. This will be the most advanced network, not only because of the speed,
not only because of the reach, not only because of the quality, but because of some of the services
and capabilities we will deliver associated with it. And so, for those that have been concerned
about is there despair in treatment and investment in Australia between the cities and the rural
parts of the country? There's one company, only one, that is stepping up to invest in all of
Australia. The deployment of our new IP core equipment is also advancing on schedule. This is
critical because the IP core, when we talk about IP, the Internet protocol, is at the heart of the
integrated network and will greatly reduce for us the cost of installing new applications. But it
won't only reduce cost. It's going to enable us to do more and going to enable us to do more and do
more quicker, faster and across all the parts of the country that we operate in. So, we're focussed
on them. But that's not all. Beyond that, we're taking a one-factory approach in terms of how we
are running this business called Telstra. This one-factory model is allowing us to eliminate 80% of
Telstra's 12,052 business in operating information technology systems over five years and basically
upgrading those that remain. Now, think about that. 12, remain. Now, think about that. 12,050
operating systems that have evolved over the last 20, 30, 50 years in this business and the
complexity that's associated with that and that shows up in terms of how we deal with our
customers. Well, we're upgrading them. We're eliminating them and reducing the complexity. We are
building partnerships with vendors. We've decided on a strategy where we are going to focus on
strategic partners. Not 1,000 partners, but a few because we're about speed, few because we're
about speed, we're about efficiency and we're about cost. Fewer vendors, vendors with strong track
records, such as alka till and Ericsson that supply the world's lead world's leading Telcos. In the
case of Ericsson they're a primary supplier in helping us build out this network in the fastest
time this network in the fastest time you will find anywhere on the planet - anywhere. And I've
been around the planet. In the case of Alkatel they've been select boodty five largest Telcos in
the world to do the same thing we are doing because they are world-class in term whoofs they do.
Vendors with commercial off-the-shelf packages is a focus for us because we're going to for us
because we're going to reduce costs and we're choosing vendors with speed and decisiveness, while
acting in full compliance with corp Pret procurement policies. In just six months we've saved $70
million in our procurement of mobile handsets through a strategic agreement with a company called
Bright Star - in just six months. Speed does pay. We have exited more than 25 buildings, cutting
the size of our property portfolio, saving more than $14 million annually and totals nearly 45,000
square metres, more than sent international sized football pitches - and this is more to come
because we are just starting. We've achieved big reductions in customer service waiting time. For
example, by 62% waiting time. For example, by 62% in fixed Broadband, as we call it here, ADSL, and
by 20% in fixed line ADSL, and by 20% in fixed line phone services, we've reduced fault deduction
time by up to 25% while we're taking costs out of this business. We're achieving service delivery
innovations that Kate tore the needs of our customers by also providing online billing. In fact, we
now have more than 750,000 we now have more than 750,000 online billing customers scheduling
payments, managing the status of their accounts in ways not possible 12 months ago and now we're
considering more plexible and customer-friendly customer calls by visiting customers - guess what -
when they want to be served. Sometimes it's in the eveningings. Sometimes it's on weekends. Because
we are organising our serves around the customer. We are making progress. We do have momentum. I've
got to tell ya, I could spend probably another day here listing all that is happening. But, Ken
won't let me. So, we'll move on. I do want to say one other thing, do want to say one other thing,
that Im not going to give you any Im not going to give you any numbers beyond those that I have
today because I can't. We have disclosure requirements, but all I can say to all of you here, stay
tuned for our full-year results that we'll announce on August 10th. But let me noek kus now on the
integrated services that are a key point of services that are a key point of our strategy because
it's not just enough to do things better than we've done before. We've got to create a new value
proposition as create a new value proposition as we think about it in the market place and that is
around this notion of integration. Our plan to integrate services for the consumer was in full view
at the Commonwealth Games in Melbourne this year. Using Big Pond the games were only one click away
on our 3 G mobile phones with eight real-time channels of the games smoied by Channel 9. So on here
you had two words. All I had here you had two words. All I had to show you were two words. They say
Big and Pond and you push the Big and Pond and you push the button underneath the two words and you
could get on and watch the Commonwealth Games. That's how simple, but that's a sign of how we are
interkbraiting our business because the silos no longer exist inside this company. But, Bruce is
sitting here and I do have to say this, that you will find our Sensis brands on there, what ever it
might be, you will find Telstra as an integrated company because that's what our customers are
telling us - make it simple, make it better and make it quick for me in terms of what I want to do.
But, there's a lot more that we are doing in terms of our business because we are of our business
because we are going to integrate every piece that we can, include can, including how we think
about Foxtel. Our relationship with our business, co-investing with News Corp and PBL. But, again,
we don't have enough time today for me to talk about that anymore because I think it's also
important to talk about what Telstra's transformation really means for Australia. Because of
Australia's vast distances, of Australia's vast distances, small population and difficult terrain,
Australia has a lot to gain from Australia has a lot to gain from the deployment of high-speed
Broadband services. There is also a flip side - Australia has a lot to lose if high-speed Broadband
infrastructure doesn't get built. The Australian Government's own Broadband advisory group found
evidence that group found evidence that nationwide adoption of next generation adoption of next
generation networks could deliver economic benefits in the range of 12-30 billion per year. Now
where I come from, that's not small change. It clearly is not. It's not unique to Australia. It's
happening everywhere in the world because this is part of the because this is part of the economic
fabric of virtually every country. Broadband infrastructure directly affects Australia's future in
many ways - in education, in health care, tele work, float management, many other ways that are
still on the destroying boards, but we are working on it. A recent example of what Broadband can do
was found in the experience of composer Nigel Westlake who was able to see and here the Sydney
premiere here the Sydney premiere performance of his percussion concerto from London courtesy of
Big Pond. He wrote to us. "Yes, we saw the Web cast in full stereo. There were in drop-outs or
interference of any sort. The sound was also excellent. It was the next best thing to being there
and engaging in exciting experience. I wouldn't have missed it for anything." Now, if u're in the
media coms business, it really doesn't get much better than that doesn't get much better than that
to hear that kind of feedback from people who are learning the new water of how we're all going to
be conducting our lives. Finally, conducting our lives. Finally, broad band gives even small
enterprises the ability to do business around the world. For example, a few the world. For example,
a few months back I met with the CEO of an back I met with the CEO of an online pluer business in
Armadale NSW. pluer business in Armadale NSW. It's called Petals Network. Petals was founded in
1992. Petals has 21 international websites. They also allow buyers to send fresh flowers overnight
to more than 70 countries around the world. Petals Network demonstrates how broad band creates more
opportunities for people in rural and regional Australia and expands geographical markets for
business and helps stem the Britain drain and improves product tivity. It also helps keep families
It also helps keep families together by eliminating the need to relocate for employment.
Australia's currently riding the crest of a resources boom, a decade of strong economic management
has led to growth rates that are the envy of many other developed economies. Also, with the $10
billion Commonwealth budget surplus. Now is the time to set the foundations for future growth. By
putting in place the infrastructure required by a dynamic, international, competitive economy. We
must fix the roof while the sun is shining or we will squander the opportunity or geography and
squander the opportunity by the geography our resources has given us. Where does this level us? The
new Telstra is about building new infrastructure and building infrastructure and building services
that makes things simple for our customers, clouding what I like to refer to as the one click, one
button, one switch, one screen, one capability. We need to invest in infrastructure. The Telstra
network I found when I came to Australia I found when I came to Australia was falling behind the
rest of the world. Service problems had been dealt with through patches and work arounds, fault
rates were high and rising and the network's capabilities were constrained by capabilities were
constrained by the widespread use of pear gain systems and other quick fixes that were often
referred to in the industry often referred to in the industry as broad band blockers. If Australia
broad band blockers. If Australia is to have world class telecom investment, it truly is needed to
rebuild the infrastructure so that we do have a 21st century standard here. As part of the
solution, here. As part of the solution, we're proposing to build out a next generation fibre to
the ode wire line network. This investment is worth more than $3 billion. Under our proposal we
build what we are calling the high-speed access network. Nirnly in the five big cities here in
Australia - Sydney, Melbourne, Brisbane, Adelaide and Perth with expansion there after to other
cities and towns, the new high-sped access network would initially cover about 4 mill I initially
cover about 4 mill I don't know households, more than half of all Australian households. This
network would be available at commercial rates to competitors. commercial rates to competitors. Our
FTTN proposal in five cities does not mean that we have forgotten the rest of Australia. It's
actually just the opposite if ininvestors just the opposite if ininvestors are assure they'd can
earn the competitor returns they need to justify their investment in justify their investment in
building out the FFTN, then over time we expect to etion pand the FFTN footprint to additional
communities around Australia. But let me be clear, it is all about economics, clear, it is all
about economics, it is about returns and it is about is about returns and it is about our
shareholders getting competitive returns. You know, since I've been here, I really have found that
Australia is what I would call an inventive nation with a strong economy, a truly educated
workforce. My belief is that Australia can be My belief is that Australia can be a world leader
inmy space enabled by this media coms sector where the payoffs can be huge for a nation whose few
people are spread over wide open spaces. To achieve this potential Australia needs to invest, I
believe, into this kind of broadband infrastructure now, not later. Telstra remains without
question the only media coms question the only media coms company in Australia with the scale and
scope to deliver advanced, modern, 21st century telecom services to 21st century telecom services
to all of Australia. However, Telstra shareholders expect a competitive return on their investments
and that's why we will not invest if FFTN unless we achieve regulatory settings that will permit
Telstra's 1.6 million shareholders to earn a competitive return that they expect and they deserve.
To use an Australianism I have learnt, "We're fair dinkum about protecting shareholders' interests.
"Standing up for the shareholder is not rhetoric. It is a principle of leadership and management in
the leadership and management in the new Telstra that not only management Telstra that not only
management but also the board of Telstra believes in. As it should be, I think, for every publicly
listed company in a free market economy. A pledge not free market economy. A pledge not to build
out the FFTF unless shareholders can earn a competitive return on their investment. I want to be
clear about something I keep on reading about that we are bluffing. If there's any belief in the
room, let me dismiss that belief. This is serious. We are talking about our shareholders' money. It
is a border life proof policy that is already guiding all of our capital spending decisions. These
positions are not about fighting the Government or failing to co-operate with governing
authorities. These positions are what I call globally accepted free-market principles that are
essential to preserve and to essential to preserve and to advance a healthy, growingn't price
economy that is central to a healthy and prosperous political democracy. While there is a lot that
While there is a lot that management can do and is doing on it own to give life to the new Telstra
others have a critical role in shaping the climate in which we and others work. We, management, can
improve services that we offer, but whether we can provide a new infrastructure that enables our
product and that enables our product and service development potential to be fully realised,
requires regulatory settings that will encourage shareholder investments in a new, high-speed
Broadband network. Governments in the US, Germany, Canada, South Korea, Japan understand the
critical link understand the critical link between jobs growth and broad band deployment and
they're doing something about it. Now, you've something about it. Now, you've seen in our case, we
are building a high-speed broadband wireless network and it's a decision that management and the
board have made because it's not tied to regulation. We know that we go compete in the market place
and we can go earn competitive returns in the market place, but we risk capital. Well, place, but
we risk capital. Well, we believe, I believe, Australia does need a proconsumer, projobs,
proinvestment climb mate that encourages and rewards those who encourages and rewards those who are
willing to risk shareholder capital to build the critical Broadband infrastructure that will
advance awe's future economic performance. Unlike our competitors, Telstra stands ready to make
these investments if the regulatory settings do not require us to give away our assets owned by our
shareholders and enable a shareholders and enable a reasonable commercial return. This is an
investment that this country needs. It's an investment that is well and truly in Australia's
national interests and we cannot afford to let this opportunity pass because let this opportunity
pass because of a mindless continuation of a regulatory regime that's passed itsious-by date.
Future generations of Australians, I believe, will not thank us if we allow that to happen. Thank
you very much for having me here today.

APPLAUSE

Thank you very much, Sol Trujillo. As usual we have a period of questions from our media members
starting with David Humphreys.

David Humphreys from the 'Sydney Morning Herald'. You've been criticised in the past by some
analysts as being overly aggressive with the main shareholder and regulator. With 20-20 hindsight
would you have changed your would you have changed your approach at all?

We, the answer is no because we are driven, as I said in my speech, by principles. The principles
are clear. We will not principles are clear. We will not do things that are value-destroying to our
shareholders and the regulatory settings and regulatory process to date have been just that. So we
to stand up, we have to discuss, we have to debate, but we are creating the discussion. It's not
just about fighting because actually we are engaging? A lot of dilog because we want to make
improvements and we want to make improvements not just for Telstra, but for all of the competitive
market place and also for all Australians.

Mark Reilly from the Seven Network, Mr Trujillo

Was jolted a little

Mr Trujillo

Was jolted a little bit by your observation that you need by your observation that you need to mend
the roof while the sun is shieping and my mind went to the 1. shieping and my mind went to the 1.6
million mum and dad shareholders who've referred to who have watched their profit plummet to 3.6 or
thereabouts.Cy, I think you know that Australia is moving towards a performance-based labour market
and your performance in the last year your performance in the last year is a share price that's
dropped by about 27% while the rest of the market has again up by 25%. Why should you and your
executive team here not accept a 25% pay cut on here not accept a 25% pay cut on the basis of that
abysmal share market performance?

Well, I think, firs of all, it is important to get facts right and understand causes of right and
understand causes of share price performance. So you start price performance. So you start back at
1999 and share price was at $7. at 1999 and share price was at $7.40. Before I got here the price
had dropped from 7.40 to 5. So it's important to say why would that happen? The answer is because
there's, in part, a regulatory climate here that is about destroying value in terms of the company
and its assets. Also, since I came, we have done two things, which would cause the share price
which would cause the share price to fall further. But for a purpose. No. 1 is that we also had a
special dividend in place that we had to borrow to pay. borrow to pay; which I don't know borrow to
pay; which I don't know of many private/publicically owned companies that spend their time
borrowing to pay dividends. So when you take away that dividend, that special dividend, share price
will fall - and it did fall. But the fall - and it did fall. But the most important thing right now
is that management and the board made certain decisions to change our prospects for the future and
that was about not trying to them was about not trying to them forrise fixes, not trying to just
worry about the next quarter, but to really invest - notice I say "invest" - in this company for
the long term. The board was committed and management is committed to fix Telstra so that
shareholders can grow value, not just next quarter grow value, not just next quarter or next year,
but on no the future. So when you do re when you do rebuild, you don't do when you do rebuild, you
don't do it overnight and you do it with cost and there has been some cost in the short-term, but I
am confident, as long as we're allowed to execute long as we're allowed to execute our plan without
a lot of intervention and a lot of noise and a lot of offsets, we will create value for our
shareholders.

Question from David Crow.

David Crow from the financial review. You've been in talk was the ACCC for months now on the fibre
network. What's the obstacle that you've got to clear before you can put out some sort of pick
document about your plans? pick document about your plans? What do you think the timeframe is going
to be on that? Doesn't the delay in issuing this leave you open to suggestions that you are holding
suggestions that you are holding the Government to ransom over T 3?

First of all, in terms of timing, the first part of your question, obviously we've had a lot of die
with the ACC c. obviously we've had a lot of die log with the ACCC. Mr Burgess who is sitting here
in the audience, along with some of our staff people, have spent a lot of time, had lots of
discussions, shared lots of information in terms of the process. We have not reached any kind of
resolution at this stage. Some of that is associated with the processes that the ACCC has to go
through and has to follow because they have some fudiary doubts on their own. We have articulated
our view and policy and our policy at Telstra has now changed one iota since last July and August.
That is anything we do in terms of building new, needs to be shareholder friendly. It cannot be
shareholder-value destroying. So when we talk about new ideas, and I think we are talking about an
exciting new idea that is both shareholder friendly to Telstra, shareholder friendly to Telstra,
but also procompetition, if we can also procompetition, if we can reach resolution, that will be a
good thing. If we don't, it will be sad. It will be a shame. Because we've both invested a lot of
time and I would say, you know, if it wasn't both of those, I don't think the ACCC would have spent
three months. I can't speak for them and I won't speak for them, but we both speak for them, but we
both invested a lot because we are talking about very important issues here.

Question from Katherine Murphy.

Mr Trujillo, Katherine Murphy from'The Age'. You've used your speech again today to attack the
current regulatory regime in which you operate. Could you tell us what your ideal regulatory regime
would be and do you accept that part of the reason for the current regulatory process is that
Telstra has the dominant position in the market and it is Ben official for consumers to have more
than one media Telcos company or don't you accept that's a reasonable proposition on which to base
a regulatory regime around?

OK. First of all, I'm a very procompetitive person

Love competing. It's just I like it when we come into the

Ring to compete or the field to compete, we are competing on equal terms. That's point No. 1. I
think this morning there was some sort of announcement by the so-called gang of nine that were
proudly talking about the fact they have almost 60% share of Broadband. Now, to me if they have 60,
then that must mean they have 60, then that must mean we have 40, which means we're not dominant.
Right? Isn't that the way the math works? So I think the the math works? So I think the point is
there's a lot of competition is there's a lot of competition that exists today. Actually, there's
almost 700 ISPs. There's many different facility-based players here in Australia. The punchline is
we need to get to a regulatory environment where the rules are environment where the rules are fair
for everybody and one that Telstra is not the sole risk taker, in is not the sole risk taker, in
terms of investing in infrastructure because we at Telstra have a very clear policy today and that
is we allow access to our copper lop infrastructure, which is where the man play used to be and
everybody has equal access to that. Everybody has the same access as Telstra to those copper lops.
Now if we happen to be better at innovation, if to be better at innovation, if we're willing to
risk capital to kbre willing to risk capital to kbre even further and create twinnion, further and
create twinnion, Telstra should not be penalised. They should not be penalised. They should not be
told the mums and dads not be told the mums and dads who've invested in this company should not be
told, "You invest your money, be told, "You invest your money, but we will share it with those
investors in Singapore or those investors in Hong Kong or those investors in London." I don't think
that is right. I don't think that that is right. I don't think that is fair. That's consistent with
the positions that we have taken. positions that we have taken.

Tonyed by.

positions that we have taken.

Tony Boyd.

At the strategy day last year you said if you didn't get $30 access prices from your copper loop
from the ACCC your revenue would suffer by a billion or more and you wouldn't be able to pay your
dividends. You said you are already borrowing to pay the current dividend and you are going to keep
borrowing for a couple of years. When you said that, were you bluffing? Or will you cut the ditend?

Well, let's make sure the facts of what we said in November are correct. What we talked about was
in November that we were advocating for a $30 unbundled advocating for a $30 unbundled local loop
because that's what our costs are. You or anybody else or any of us in this room could pretend they
are different, but we write cheques every day, every week, every month covering the cost of what we
do. So, we're not into academic conversations here. We're talking about real cash and real people's
money, meaning our shareholders. What we said in November was we What we said in November was we
want to make sure that unbundled local loops cover our costs so that we're not subsidising
Singapore telecom, we're not subsidise we're not subsidising anybody else. What we also said was if
the regulator imposed the propose regulator imposed the proposed prices of the staff, in terms of
debundled local loop prices, it would affect our cash and revenue allocation to the tune of 200 to
a billion per year as they built out and took more share. That is what and took more share. That is
what we said, but not if we didn't get $30. It was about what they would impose at that point of
time, just to be technically correct.

And they have proposed that.

They have

proposed that.

They have independent yet imposed a deaveraged unbundled local loop price regime that was discussed
last December, November, object timeframe - not yet. That's why we're having conversations why
we're having conversations today because obviously that will dramatically change many things. If
they impose that kind of decision, it can affect dividend policy, it can affect revenues, it can
affect earnings, it can affect a lot of things. So it's an important issue.

Next question from James Grubel.

James Grubel from Reuters. You've previously said that the fixed line revenues are going to be an
area where revenue is going to be where revenue is going to be falling as more people move to
mobile. I'm just wondering if your forecasts just wondering if your forecasts for that are on
target or is the that are on target or is the take-up of mobile phones in favour of fixed line
revenue, is that going a line revenue, is that going a little bit slower than expected?

Well, I mean there are some phenomenons mean there are some phenomenons that have been affecting
Telstra, but they have also affected other they have also affected other Telcos around the world
and one of them is what we call PSTN refugee you stream, which is kind of your ole core Telco
revenue stream that we announced with our mid-year results that had declined 7.6%. That's the most
profit most profitable part of our company. It is affected to a large extent by lots of competitors
that have offerings of calling plans and substitution for services ta we provide. The second thing
that's affecting our revenue stream is affecting our revenue stream is this shift that you've
referred to a lot of us are using mobile phones and making calls there instead of on making calls
there instead of on the fixed-line network. That is also happening. What we talked about happening.
What we talked about back in November is as management, we needed to be more aggressive in terms of
fighting, trying to stem some of those losses that we were experiencing in terms of what this PSTN
revenue stream. We needed to PSTN revenue stream. We needed to be more innovative on our pricing
and more innovative on our pricing and I think you' seen here in the last think you' seen here in
the last two or three months, we're in market, we're fight we're fighting and we'll announce rupts
on August 10th.

Matt Price.

G'day, Mr Trujillo, Matt Price from'The Australian'. You painted a really rosy picture of Telstra.
I thought was I was in Xanadu and not the Press Clubment I'm confused because there's a building up
the road often full of politicians. The Liberals don't like you much and Liberals don't like you
much and the Labors like you even left. The demeanours and family first and Nationals and the
Independents like you even less than them. Why do you think that is so? What's your impression
after a year here of the political debate and do you regret not sending one of the very senior
management to Senate estimates recently where everybody recently where everybody cross-party
regarded it as an about of contempt that you didn't?

Well, first of all, the board didn't hire me to run for officer. So let me be clear about that.
Number 2, in terms of how do our customers think about us - all of our brand survey research is of
our brand survey research is only going up. So to me, the voters for us are those that but our
services, those that use our services because they're the poll that counts for me. Because they
drive our earnings. They drive ur results. Ou, They drive ur results. Now, do I regret not hoeing
up at Senate estimates. I understand that a CEO has never gone to Senate estimates.

Mr Bur jence turned up.

You were asking about me. In terms of senior manage management secretary of the bird, senior
management, have appeared there at Senate estimates. We have experts that go there. There's a
myriad of questions they get asked. Now, I assume people want answers and they want the people
there that can give them the answers. I don't know every detail about the company. I can't know
every detail about the company. But you ask me about strategy, you ask me about the strategy, you
ask me about the major strategic thrust where we are allocating capital and that sort of thing,
that's why I'm here today. I can understand those questions.

Michael Sainsbury.

G'day. Sol, you like to talk a lot about your successes and obviously you've had successes and
obviously you've had a few. Even these days your groove tron was left off your CV you spent two
years there and the company collapsed. Can you tell us what happened there and is that going to
happen at Telstra.

Absolutely. No. 1, getting facts straight - it is 1, getting facts straight - it is on my CV.
Because Gravitron was a 2-year period of time in my career where one of the large venture capital
firms asked me to go capital firms asked me to go oversee a start yuch capital. It was actually in
the year 2000 and in actually in the year 2000 and in the year 2000 those of you who are familiar
with the technology industry, you know that it was the equivalent of the great depression.
Industrial yns of dollars in invested capital for most start-ups and existing companies that had
started up within the last 5 or 10 years lost significant shareholder value. You could look at Sun
and Cisco and Microsoft and virtually every company, in that period of time they lost value N the
case of Gravitron, we built a great product, ready to go to market. The problem is in that period
of time post-Y2k and nobody was buying. So what happened was the board, which included myself, we
decided to fold it into another company so that it could continue to live on. I moved on because it
wasn't worth my time in terms of the opportunities I had, as well as the compensation that I
required to be associated with the company of that size. So that's company of that size. So that's
what happened. Not hiding it in any fact. It's on the CV. I think it was an important experience
for somebody like me because running big companies sometimes small decisions get mass get massed,
in terms of their importance, and in our case here at Telstra we're paying attention to every
single decision so that we every single decision so that we can leverage the opportunities as best
we can.

Chris Hammer.

Chris Hammer from SBS'Dateline'. You say you're looking after every detail. One of the details that
some people have been concerned about some of the strategic alliances that you eluded to in your
speech alkatil, Ericsson and kvp bright kp star, there has been some criticism with Alkatil been
some criticism with Alkatil and Brit Str that these didn't go through a normal sort of tender
process, a transparent process. What's your reply to those sorts of criticisms? Is it a difference
between corp Pret culture here in Australia and the ones that you are used to overseas?

Well, first of all, the answer is those are complete are completely in all, the answer is those
allegations are completely incorrect and if there was the chairman of the bird or any one of our
bird members standing here today, I can assure you they would say there is full transparency in any
major procurement we've done in this company. So facts are transparency is alive and well and not
only inside the company, but outside the company because we have been more disclosing at Telstra in
the last year than in the history of this company because I want the markets to know, I want our
board to know, to know, I want our board to know, I want our employees to know. Now n terms of the
relationships, I think it is important to get this out because somebody that chose not to pursue
facts didn't really understand what a relationship that I had with Alkatil. I was on the advisory
board. Now, I don't know advisory board. Now, I don't know if any of you are on advisory birds, but
in the case of Alkatil, we met once a year and had a nice dinner. It's a bunch of global political
leaders, leaders who had a nice dinner, saw a presentation from Alkatil, in terms of how they are
doing and they asked for feedback doing and they asked for feedback in terms of the economy in the
US, Asia, wherever, what do you think about the technology and what do about the technology and
what do you think about the direction? We give feedback and you a-au revoir and feedback and you
a-au revoir and you go. That's what being an adviser is. No fudiary responsibility or
decision-making authority. So you don't affect anything really in terms of that process. To say
there was a relationship? OK. There was a relationship. However, the most important thing is people
should important thing is people should ask me is Alkatil the best potential supplier for us, give
given the strategy we have? That should be strategy we have? That should be the question that is
asked and the answer is yes. Now, since we've answer is yes. Now, since we've made that decision if
you go to Deutch telecom they are using them and British telecom, they are using them. If you go to
ATNT, they are using them or China telecom, they are using them. What would they say? Is that a bad
decision or a good decision? I will say one other thing. Part of what we've been thing. Part of
what we've been doing is trying to move with speed. is trying to move with speed. Taking two years
to tender and end at a decision that you could get to in six months versus two years means a
year-and-a-half of benefit that you can drive in the market. This management team, this board of
Telstra is focussed on results. That's what we're going to do.

Glenn Milne.

Glenn Milne from news limited Sunday publications and'The Australian'. I'm sure everyone in the
room is grat pied by the fact that you're fair dinkum and I that you're fair dinkum and I wanted to
test your understanding of that phrase. You say in your speech, "We are not bluffing." I wonder if
you can't get the regulatory regime fixed on your terms, whether you would walk awe way from this
job.

Well, the bird asked me to come here. They recruited me. They asked me to help them pick the right
strategy (board) and transform the company and I committed to the company and I committed to the
board that I'm here to do that. There's many elements of how we think about transformation of this
company. transformation of this company. Last week I had a an interview with Michael Sainsbury. He
said, "How is this political stuff going and how much of your time is taken doing that?" I said, I
spend very little time on the details of the regulatory process. Some of it is possess and some
requires expertise by people like Tony war enand Phil Burgess and others. Where I spend Burgess and
others. Where I spend my time is the big machine. How I go time is the big machine. How I go to
market strategies are working, the infrastructure choices, how we're changing our processes, how
we're going to pick the right technologies, how we are going to change our IT infrastructure. I
spend my time doing that. That's spend my time doing that. That's 90% of the transformation. Does
the transform nation get capped and limited to some extent by this limited to some extent by this
fibre to the foed issue? Absolutely. But is it the defining issue of our transform nation strategy?
Absolutely not. What is fibre to Absolutely not. What is fibre to the node mean? Let me say it
again. It limits our ability to provide Broadband, but more importantly, Broadband, but more
importantly, and this is the sad part for me, it limits the access to services for all of Australia
and I think that would be a tragedy for all of Australia for a policy, a set of policies, that are
from the past that do not recognise the changed future, not to enable that future future, not to
enable that future to happen I think that would be sat. happen I think that would be sat. So we're
advocating hard, we're being outspoken about it and we're being fair dinkum.

APPLAUSE

Mr Trujillo you spoke about nice dinners just before and it take dinners just before and it take
mess to - takes me back to a very nice dinner I had with your colleague Mr Burgess here at the
National Press Club just above where we are standing now and he made the memorable remark that he
wouldn't recommend Telstra shares to his own mother. With the Government set to put 6 million
Telstra shares on the open market later this year, can open market later this year, can you
confidently say to the mums and confidently say to the mums and dads of Australia that they buy
those shares; that it's a good value for money investment?? Well, let me say first of all, that I
have spent in the last

Probably month or so -

the last

Probably month or so - I've been on throw different continents. I haef add a conversation with the
minister. The minister has said minister. The minister has said , "We the Government, are committed
"We the Government, are committed to T 3." He said, "Sol, are you committed?" We said yes. How do I
demonstrate that? I go out and I talk to potential investors and including some existing
shareholders. I've probably had meetings with 25 or 30 in the last month or so. I've been talking
month or so. I've been talking about Telstra, talking act the market, talking about the
transformation, talking about some of our results that are public and talking about also those
issues that they want me to address in person as the CEO of the business. Do I recommend shares?
That is not my duty, that is not my job and I legally can't do that. job and I legally can't do
that. But do I talk about the prospects? Yes. Do I talk about the prospects in a full disclosure
way? Yes. Which means I talk about the upside of means I talk about the upside of the business and
I also talk about the down side of the business because that's my duty and I will always do that. I
have been doing that that. I have been doing that because I'm proud of this company that I work for
and I'm proud that it is Australia's biggest, best and most innovative company as we transform this
business.

Our last question today is from Steve Lewis.

Mr Trujillo, Steve liss which from'The Australian'. I want to reflect on that memorable dinner. I
was there as well

Want to argue that Mr Bur jence' comments and the companies made by yourself and your made by
yourself and your management team over the past 12 months

Has helped, in a sense, talk down the share price of Telstra which the share price of Telstra which
has dropped from $5 to $3.45. After one year how much responsibility should you take as chief
executive for the drop in shares, for the fact that 1. drop in shares, for the fact that 1.6
million mums and dad shareholders have lost vast sums of capital they have invested in Telstra.
Shouldn't you apologise Telstra. Shouldn't you apologise for the drop in share price and take
responsibility?

Right now I think again the facts, as I said before, are the Shay price and what's happened to the
share price, some happened to the share price, some of that I do own. But it's with a promise on
the other end of a transformation. Now, what I don't take responsibility for is the take
responsibility for is the share price drop from $7.40 to $5 because that's all part of a raim and a
process that exists here in Australia that needs to be fixed Australia that needs to be fixed and
will have continued negative will have continued negative impacts to drive share price negatively
in terms offer value creation further. What we also did as a board was we decided that it was not
appropriate anymore to borrow to pay the dividend. That caused share price drop. Was I here before
when that dividend policy was created? The answer is no, I wasn't. But is it the right thing not to
borrow to the right thing not to borrow to pay the dividend? Absolutely. Until you generate the
cash or have line of sight that you're going to generate enough operating cash flow to pay for
dividends and what we've articulated on November 15 is a plan, a real plan that is publicly
viewable in terms of five years how we're going to send some money in the first two years, which
the first two years, which depresses share price, but is going to share price, but is going to
improve earnings, is going to create value over the following three, four, fifthier in terms of the
process. I stand behind that so I do take responsibility for the part of the share price that's
dropped because we are spending more and near term earnings do go down - I own that earnings do go
down - I own that and I'm proud of it because I know I'm going to drive returns from that. The
other stuff, in terms of the settings, the regulatory process, all of that, that existed before I
got here. I don't own it, but what got here. I don't own it, but what I do own is trying to change
it and trying to improve it so that the mums and dads don't see their $7.40 continue to sink
because it's got continue to sink because it's got to go the other direction. That's my pledge.
That's what we are doing pledge. That's what we are doing and we're going to be fair dinkum about