Annual Report 2015

Results and Operations

Full Year Results and Operations Review

Reported results

Our financial year 2015 results demonstrate that our strategy is working. Customer advocacy has improved, we continued to invest and drive value from our core business and we have laid the foundations for sustainable growth in our new businesses.

The numbers and commentary in the product, expense and segment performance sections have been prepared on a continuing operations basis and align with the statutory financial statements. This means that the results from CSL New World Mobility Limited (CSL), sold in the prior year, are included in the financial year 2014 comparatives. Results from the 70 per cent stake in our Sensis directories business, also sold in the prior year, are classified as a discontinued operation and as such are not included in the comparatives. The financial position section has been prepared on a continuing and discontinued operations basis (that is, they include the results of the Sensis directories business), unless otherwise noted.

Summary financial results

Sales revenue 25,845 25,119 2.9
Total income (excluding finance income) 26,607 26,296 1.2
Operating expenses 15,881 15,185 4.6
Share of net profit from joint ventures and associated entities 19 24 (20.8)
EBITDA 10,745 11,135 (3.5)
Depreciation and amortisation 3,983 3,950 0.8
EBIT 6,762 7,185 (5.9)
Net finance costs 689 957 (28.0)
Income tax 1,787 1,679 6.4
Profit for the period from continuing operations 4,286 4,549 (5.8)
Profit/(loss) for the period from discontinued operation 19 (204) n/m
Profit for the period from continuing and discontinued operations 4,305 4,345 (0.9)
Profit attributable to equity holders of Telstra 4,231 4,275 (1.0)
Capex(i) 3,589 3,661 (2.0)
Free cashflow from continuing and discontinued operations(ii) 2,619 7,483 (65.0)
Earnings per share (cents) 34.5 34.4 0.3

(i) Capex is defined as additions to property, equipment and intangible assets including capital lease additions, excluding expenditure on spectrum, measured on an accrued basis. Excludes externally funded capex.
(ii) Free cashflow in the prior period includes the sale of CSL ($2,107 million) and 70 per cent of our Sensis directories business ($454 million).
n/m = not meaningful

Results on a guidance basis(i)

  FY15 FY15 guidance
Total income growth(ii) 2.3% Broadly flat
EBITDA growth 2.0% Broadly flat
Capex/sales ratio 13.9% ~ 14% of sales
Free cashflow $5.0 billion $4.6 – $5.1 billion

(i) This guidance assumed wholesale product price stability, no impairments to investments, excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The FY15 guidance excluded the FY14 CSL profit on sale of $561m from FY14 Income and EBITDA. Please refer to the guidance versus reported results reconciliation. This reconciliation has been reviewed by our auditors.
(ii) Excludes finance income.

Guidance versus reported results(i)

FY15 FY15 FY15 FY14
  Reported results $m Adjustments $m Guidance basis $m Guidance basis $m
Total income(ii) 26,607 (288) 26,319 25,735
EBITDA 10,745 37 10,782 10,574
Free cashflow(iii) 2,619 2,400 5,019 4,922

(i) This guidance assumed wholesale product price stability, no impairments to investments, excluded any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The FY15 guidance excluded the FY14 CSL profit on sale of $561m from FY14 Income and EBITDA. Please refer to the guidance versus reported results reconciliation. This reconciliation has been reviewed by our auditors.
(ii) Excludes finance income.
(iii) The difference between our reported free cashflow and free cashflow on a guidance basis is mainly due to spectrum payments of $1,302 million and M&A activity of $1,151 million.

On 13 August 2015, the Directors of Telstra resolved to pay a fully franked final dividend of 15.5 cents per share. Shares will trade excluding entitlement to the dividend on 25 August 2015 with payment on 25 September 2015.

Segment performance

We report segment information on the same basis as our internal management reporting structure as at reporting date. Segment comparatives reflect organisational changes that have occurred since the prior reporting period to present a like-for-like view.

Segment total income




Telstra Retail 17,252 16,383 5.3
Global Enterprise and Services 5,674 5,257 7.9
Telstra Wholesale 2,586 2,328 11.1
Telstra Operations 424 289 46.7
Other (excluding Sensis) 671 2,039 (67.1)
Total Telstra segments (excluding Sensis) 26,607 26,296 1.2
Other – Sensis 552 n/m
Total Telstra segments 26,607 26,848 (0.9)

Telstra Retail

Telstra Retail brings together our key retail businesses including Telstra Consumer, Telstra Business, Telstra Media Group and Telstra Health. Telstra Retail provides a full range of telecommunications products, services and solutions to consumer customers and to Australia’s small to medium sized enterprises, as well as the provision of Foxtel and digital content services. Income in this segment grew by 5.3 per cent to $17,252 million and EBITDA increased by 0.9 per cent to $9,449 million.

We saw strong growth in our Consumer business unit with income growing by 6.5 per cent. As a result of the continued focus on customer advocacy and innovative new products and plans introduced during the year, we saw good growth in mobiles and fixed data with post-paid handheld average revenue per user (ARPU) increasing by 6.3 per cent to $61.72 and an increase of 158,000 fixed data subscribers. In Telstra Business, income grew by 2.9 per cent driven by a 3.3 per cent growth in mobile services revenue, revenue from unified communications, cloud hosted solutions and contributions from TSM (formerly SNP Security) and AFN Solutions which were acquired during the first half of the year. Telstra Health also contributed income of $78 million.

Global Enterprise and Services

Global Enterprise and Services (GES) is responsible for sales and contract management support for business and government customers in Australia and globally. It provides product management for advanced technology solutions including data and IP networks, and NAS products such as managed networks, unified communications, cloud, industry solutions and integrated services. GES provides technical delivery support for all NAS customers globally and the recently formed Telstra Software Group and its acquisitions also form part of GES.

Income for GES increased by 7.9 per cent to $5,674 million due to strong growth in NAS and enterprise mobility in Australia, our international GES customers (GES Global) and Telstra Software. GES EBITDA declined by 1.7 per cent to $2,439 million largely due to the ongoing change in product mix from higher profit carriage to lower profit NAS products and GES Global businesses, along with the negative EBITDA impact from the Telstra Software Group acquisitions which are businesses in their early stages. The NAS profitability margin continued its trend of improvement in FY15 driven by scalable standardised offerings, a lower cost delivery model and operational leverage.

Telstra Wholesale

Telstra Wholesale is responsible for the provision of a wide range of telecommunication products and services delivered over Telstra networks and associated support systems to non-Telstra branded carriers, carriage service providers and internet service providers. Wholesale income grew by 11.1 per cent to $2,586 million. This was largely driven by an increase in NBN infrastructure receipts which have increased in line with the NBN rollout. EBITDA contribution increased by 12.7 per cent to $2,398 million.

Telstra Operations

Telstra Operations is primarily a service delivery centre supporting the revenue generating activities of other segments. It also has NBN and property revenue. The EBITDA contribution improved by 4.4 per cent with increases in NBN and property revenue and reductions in labour expenses, partially offset by higher service contracts to support new business growth and NBN related works.


Our Other segment includes the costs of corporate centre functions, receipts received under certain NBN agreements, adjustments to employee provisions for bond rate movements and short term incentives, and redundancy expenses for the parent entity. It also includes China digital media results.


Product performance

Product sales revenue breakdown




Key product revenue

Fixed 6,944 7,076 (1.9)
Mobile 10,651 9,668 10.2
Data and IP 2,883 2,968 (2.9)
NAS 2,418 1,963 23.2

Product profitability EBITDA margins(i)

Mobile 40 40 40 40
Fixed voice(ii) 55 59 54 56
Fixed data(ii) 41 41 39 42
Data and IP 64 65 65 64

(i) The data in this table includes minor adjustments to historic numbers to reflect changes in product hierarchy.
(ii) Margins include NBN voice and data products.


Our fixed portfolio offers fast and reliable broadband, clear and reliable calling, premium entertainment and expert technology advice through our Telstra Platinum® service. We are also creating Australia’s largest Wi-Fi network, Telstra Air®, to provide Australians’ connectivity in and out of the home.

Total fixed revenue declined by 1.9 per cent to $6,944 million. While fixed voice revenue decreased by 7.1 per cent to $3,746 million, fixed data revenue increased by 7.3 per cent to $2,379 million. Fixed voice revenue decline continues to moderate as a result of a strong focus on customer retention. The pace of disconnections was stable compared to the prior year with retail fixed voice line loss of 264,000, taking total retail fixed voice customers to 6.0 million. This was partly offset by additional wholesale lines of 53,000. Fixed voice ARPU decline was consistent with the prior year, decreasing by 4.3 per cent to $42.05.

The increase in fixed data revenue was a result of subscriber growth. ARPU was flat in a competitive environment. We now have 3.1 million retail fixed data subscribers, an increase of 189,000 during the year. The total number of customers taking up a bundle has also increased by 280,000 and there are now 2.2 million customers on a bundled plan, or 71 per cent of the retail fixed data customer base. This increase was driven by the success of our bundled offerings which were refreshed during the year to deliver more value for our customers.

As the NBN roll-out continues, we are seeing good momentum. As at 30 June 2015 we had 211,000 NBN connections made up of 161,000 voice and data bundles, 9,000 data only and 41,000 voice only services.

Other fixed revenue decreased by 0.8 per cent to $819 million with an increase in inter-carrier access services revenue offset by lower customer premise equipment and other fixed telephony revenue. Included in other fixed revenue is revenue from our Platinum customers. 254,000 customers used a Telstra Platinum service this year which provides customers with expert technical advice for either a monthly or on-demand fee.

Fixed voice EBITDA margins declined to 55 per cent as a result of lower revenue while fixed data EBITDA margins remained steady at 41 per cent despite the costs incurred to connect our NBN customers.

Domestic retail customer services (millions)



Mobile revenue ($b)

Mobile Revenue

For the 2015 financial year, revenue in our mobile portfolio increased by 10.2 per cent to $10,651 million. This was a result of growth in ARPU and subscribers in our key mobile categories of post-paid handheld and pre-paid. EBITDA margin remained flat at 40 per cent driven by improved ARPU offset by higher hardware costs due to increased recontracting activity during the year.

We invested $1 billion in our mobile network during the year to provide our customers with the best connectivity and coverage. Telstra’s 4G coverage now reaches 94 per cent of the Australian population and we will continue to expand our 4G footprint to 99 per cent of the population. We now have 7.7 million 4G devices on our network.

The success of our 4G network in supporting increased data usage across all our mobile products has seen mobile services revenue growth of 7.2 per cent to $8,765 million. Retail customer services increased by 664,000, bringing the total number to 16.7 million. We now have 7.3 million post-paid handheld retail customer services, an increase of 113,000. Post-paid handheld revenue grew by 7.7 per cent to $5,389 million. While there was a slow-down in ARPU growth in the second half due to lower excess data rates and higher data allowances, for the full year ARPU increased by 5.5 per cent, from $58.70 to $61.94 (including the impact of mobile repayment options) with customers using more data and moving to higher plans resulting in higher minimum monthly commitments and increased data pack penetration.

Pre-paid handheld revenue growth of 13.1 per cent to $994 million was driven by an increase in unique users and ARPU due to higher recharge values with the average data usage per user per month increasing. Our Boost pre-paid offerings have also contributed to the increase. Mobile broadband (MBB) revenue grew by 0.2 per cent to $1,290 million with customer growth, largely due to growth in data share SIMs, offset by a 3.7 per cent reduction in ARPU. In total, we added 187,000 customer services in this category. Machine to machine (M2M) experienced another year of double-digit revenue growth, with revenue growing by 11.9 per cent to $113 million. We continue to provide productivity solutions to our M2M customers in the key areas of transport logistics, banking, public safety and security and energy and utilities.

Mobile hardware revenue grew by 26.3 per cent to $1,886 million due to an increase in average revenue per post-paid handset (higher average recommended retail price), together with an increase in handset recontracts as a result of the iPhone 6^ launch during the year.

Data and IP

Data and IP revenue declined by 2.9 per cent to $2,883 million with growth in IP Access revenue not enough to offset the declines in ISDN and other legacy calling products. IP Access revenue grew by 1.2 per cent to $1,180 million as a result of increased customer connections however price pressures have impacted yields. There was strong growth in IP MAN, Telstra’s next generation data access service providing high-speed IP access solutions for large to medium corporate enterprises and government departments. IP MAN revenue grew by 6.8 per cent with services in operation increasing by 6.1 per cent.

Other data and calling products revenue decreased by 4.5 per cent to $1,041 million. Migration to IP solutions, including unified communications products in our Network Applications and Services portfolio, is the primary driver for the decline in legacy calling products. EBITDA margins remained strong at 64 per cent despite some price pressures in the IP market.

Network Applications and Services (NAS)

NAS revenue ($b)

NAS Revenue

NAS revenue continued to grow at double-digit rates, increasing by 23.2 per cent to $2,418 million, exceeding market growth in all key NAS portfolios. This increase was driven by existing and new contracts, and acquisitions. Included in NAS revenue is International NAS which increased by 41.4 per cent to $99 million. The Pacnet* acquisition, completed in April 2015, contributed $14 million to International NAS. Managed network services revenue increased by 21.8 per cent driven by increased professional service and security activity and includes revenue from the acquisitions of O2 last financial year and Bridge Point in October 2014. Revenue growth of 8.1 per cent in unified communications was driven by increased IP telephony customer connections. Industry Solutions revenue growth of 41.6 per cent was led by NBN commercial works and contributions from TSM (formerly SNP Security). Overall, NAS profitability continued to improve driven by portfolio growth, scalable standardised offerings and a global, lower cost delivery model.


Media product portfolio revenue increased by 3.4 per cent to $931 million. This portfolio includes Foxtel from Telstra (previously Premium Pay TV), IPTV, (which includes T-Box® sales, Foxtel on T-Box, BigPond® Movies and Presto), Mobility and other content (which includes exclusive AFL and NRL rights and music subscriptions) and cable revenue.

Foxtel from Telstra revenue increased by 9.4 per cent to $662 million. This was driven by growth in subscribers as a result of the reintroduction of Foxtel from Telstra bundles in May 2014 and Foxtel price reductions in November 2014. A shift in focus to Foxtel from Telstra has reduced T-Box sales revenue by $33 million. Excluding T-Box® sales, IPTV revenue increased by 19.6 per cent due to Foxtel on T-Box and Presto sales growth. Mobility and other content revenue declined by 2.5 per cent to $79 million. The continued decline in legacy mobile download services has been partly offset by the increased take up of NRL and AFL subscribers.

Cable revenue declined by 1.7 per cent to $118 million. This represents income from the supply of HFC cable services to Foxtel. While there was an increase in cable subscribers, there was an offsetting reduction in ARPU in line with new Foxtel pricing introduced in November 2014.


Global connectivity revenue grew by 27.7 per cent to $780 million driven by the continued increase in wholesale carrier data. The Pacnet acquisition also contributed $90 million to global connectivity. Other sales revenue increased by 39.4 per cent to $1,238 million. Other sales revenue includes revenue from our China digital media portfolio which increased by 81.3 per cent to $504 million. This was largely driven by Autohome with revenue increasing by 98.0 per cent as a result of increased advertising services and dealer subscriber growth.


Expense performance

Operating expenses

Labour 4,921 4,732 4.0
Goods and services purchased 6,847 6,465 5.9
Other expenses 4,113 3,988 3.1
Total operating expenses 15,881 15,185 4.6


Total labour expenses increased by 4.0 per cent or $189 million to $4,921 million. Our total full time staff and equivalents (FTE) increased to 36,165. This increase in FTE was mainly driven by organic growth and M&A activity across our NAS portfolio (in particular the Pacnet acquisition), Telstra Business, and our nascent Software and Health businesses. Additionally, business growth and the conversion of contractors to permanent staff in our China business also contributed to the increase. Offsetting these increases were reductions in FTE driven by our restructuring programs across various parts of the business.

Salary and associated costs increased by 8.4 per cent or $287 million to $3,686 million. This increase was mainly driven by the increase in FTE, as well as salary and wage increases which also incorporated the change in the statutory superannuation contribution. These increases were partially offset by a favourable year on year bond rate impact of $58 million, driven by a favourable outcome of $71 million from the transition to a high quality corporate bond rate for the calculation of employee long service leave provisions, in accordance with AASB 119. This change resulted from the G100 concluding in May 2015 that a deep corporate bond market exists in Australia.

Labour substitution costs increased by 3.7 per cent or $29 million to $816 million. This increase was mainly driven by the establishment of global operations to support the expansion of our NAS business, higher field fault volumes due to adverse weather events, and increased costs in support of NBN activations.

Redundancy expenses decreased by 55.0 per cent or $138 million to $113 million, driven mainly by restructuring work returning to normal levels within our core business, the impact of the Sensis divestment on the prior year, and redundancy expense savings from the redeployment of staff to growing areas of the business.

Goods and services purchased

Goods and services purchased increased by 5.9 per cent or $382 million to $6,847 million. Cost of goods sold (COGS) (which includes mobile handsets, tablets, dongles, broadband modems) increased by 6.0 per cent or $173 million to $3,079 million. This was driven mainly by the strong demand for our iPhone 6^ offerings. This increase was significantly offset by a $397 million decrease in COGS driven by our divestment of CSL in the prior year.

Network payments decreased by 0.3 per cent or $6 million to $1,725 million. This decrease was mainly attributable to our divestment of CSL and reduced payments to overseas carriers due to lower negotiated roaming rates. Offsetting these decreases were higher onshore carrier network outpayments in support of increased mobile subscribers and increased NBN network payments as we migrate customers to the NBN.

Other goods and services purchased increased by 11.8 per cent or $215 million to $2,043 million. This was mainly driven by increased service fees for Foxtel, cloud services, IPTV and digital content, and mobile insurance in support of increased subscribers. This increase was partially offset by our divestment of CSL.

Other expenses

Total other expenses increased by 3.1 per cent or $125 million to $4,113 million. This increase was the result of higher service contracts and agreements, promotion and advertising costs and the accounting impact of the Sensis divestment. This was partially offset by the divestment of CSL, and the recognition of unrealised losses driven by the liquidation of our subsidiary Octave, both in the prior year.

Service contracts and agreements increased by 6.0 per cent or $88 million to $1,556 million, largely driven by increased investment in the simplification of our core business, and costs associated with increased NBN commercial works. Promotion and advertising expenses increased by 21.7 per cent or $75 million to $421 million, mainly in support of growth in our China Autohome business, and domestically in support of the iPhone 6 launch, customer advocacy programs and Belong, our low cost ISP brand.

For the purposes of reporting our consolidated results, the translation of foreign operations denominated in foreign currency to Australian dollars increased our expenses by $97 million on the prior period, across labour, goods and services purchased, and other expenses.

Net finance costs

Net finance costs decreased by 28.0 percent to $689 million largely due to an $87 million reduction in net borrowing costs and a $175 million reduction in other finance costs.

The reduction in borrowing costs was predominantly due to lower average debt levels resulting from debt maturities which were funded out of existing liquidity. The average interest yield on gross debt for the year was 5.8 per cent compared to 5.9 per cent in the prior year. The closing gross debt interest yield at 30 June 2015 was 5.7 per cent compared to 5.9 per cent at 30 June 2014. The reduction in yield arose through a combination of a reduction in short term market base rates year on year, resulting in lower costs on the floating rate debt component of our portfolio and from refinancing at lower rates.

The reduction in other finance costs primarily relates to non-cash revaluation impacts of our offshore debt portfolio and associated hedges that result in a floating position (fair value hedges). Volatility from these revaluation impacts has been significantly reduced due to changes implemented in the way we designate fair value hedges for accounting purposes and the adoption of the new accounting framework (under AASB 9 (2013)) which allows a component of Telstra’s borrowing margin to be treated as a cost of hedging and deferred to equity. Residual volatility from market movements has not been significant. Notwithstanding changes to accounting treatment all cash flows continue to remain economically and effectively hedged.


Financial position

Summary Statement of Cash Flows

Net cash provided by operating activities 8,311 8,613 (3.5)
Total capital expenditure (6,206) (4,018) 54.5
Sale of shares in controlled entities (net of cash disposed) 4 2,397 (99.8)
Other investing cash flows 510 491 3.9
Net cash used in investing activities (5,692) (1,130) n/m
Free cashflow 2,619 7,483 (65.0)
Net cash used in financing activities (6,882) (4,430) 55.3
Net (decrease) / increase in cash and cash equivalents (4,263) 3,053 n/m
Cash and cash equivalents at the beginning of the year 5,527 2,479 123.0
Effects of exchange rate changes on cash and cash equivalents 132 (5) n/m
Cash and cash equivalents at the end of the period 1,396 5,527 (74.7)

Capital expenditure and cash flow

Our operating capital expenditure for the year was 13.9 per cent of sales revenue or $3,589 million (excluding spectrum). This investment has enabled us to meet ongoing strong customer demand from the growth in our customer base. This includes building the nation’s largest Wi-Fi network, continuing investment in growth areas (such as network access services and cloud services) and supporting the accelerated rollout of mobile 4G and 4GX networks.

Free cashflow generated from operating and investing activities was $2,619 million, representing a decline of 65.0 per cent. The difference between our reported free cashflow and free cashflow on a guidance basis of $5,019 million is mainly due to spectrum payments of $1,302 million and M&A activity of $1,151 million, including the acquisitions of Pacnet Limited, Ooyala Inc., Videoplaza AB and Nativ Holdings Limited. These increased payments were partly offset by lower cash capital expenditure. Increased cash from operating activities, predominantly as a result of revenue growth and working capital timing, were offset by decreases due to cash from divested entities included in the prior period.

Financial settings

Target zone
Debt servicing(i) 1.3x 1.3 – 1.9x
Gearing(ii) 48.3% 50% to 70%
Interest cover(iii) 15.0x >7x

(i) Debt servicing ratio equals net debt to EBITDA
(ii) Gearing ratio equals net debt to net debt plus total equity
(iii) Interest cover equals EBITDA to net interest

Debt position

Our gross debt position at 30 June 2015 decreased by $1,086 million to $14,962 million. Gross debt comprises borrowings of $15,634 million and net derivative asset of $672 million (which includes assets and liabilities both current and non current).

The net decrease in gross debt reflects a combination of the following impacts. An increase of $2,060 million due to a $1,308 million United States dollar bond debt issuance, $580 million debt acquired from the acquisition of Pacnet (repaid during the year), $82 million finance lease additions and $90 million relating to loans from associated entities and within our subsidiaries. This was offset by a decrease of $3,146 million due to $2,798 million term debt maturities, $220 million repayment of commercial paper, $47 million finance lease repayments and $81 million revaluation impacts.

Net debt at 30 June 2015 was $13,566 million, an increase of $3,045 million from the prior year. This movement comprises the reduction in gross debt of $1,086 million offset by a reduction in cash and cash equivalents of $4,131 million.

Our gearing ratio at the start of FY15 was 43.0 per cent, following the sale of CSL and the 70 per cent stake of our Sensis directories business in FY14. This was below the low end of our target range in anticipation of significant outflows in the current year, including $1.3 billion to acquire spectrum licences and the $1 billion off market buy-back. Our gearing ratio has increased to 48.3 per cent at 30 June 2015 reflecting the increase in net debt, and remains just below the conservative end of our target range. Debt servicing (net debt/EBITDA) remains comfortable at 1.3x and we have extended the average debt maturity profile from 4.7 years to 5.0 years.

Summary Statement of Financial Position

Current assets 6,970 10,438 (33.2)
Non current assets 33,475 28,922 15.7
Total assets 40,445 39,360 2.8
Current liabilities 8,129 8,684 (6.4)
Non current liabilities 17,806 16,716 6.5
Total liabilities 25,935 25,400 2.1
Net assets 14,510 13,960 3.9
Total equity 14,510 13,960 3.9
Return on average assets (%) 18.9 20.4 (1.5)pp
Return on average equity (%) 30.3 32.3 (2.0)pp

Statement of Financial Position

Our balance sheet remains in a strong position with net assets of $14,510 million. Current assets decreased by 33.2 per cent to $6,970 million. This decrease is largely a result of a reduction in cash and cash equivalents of $4,131 million used to fund the acquisition of Pacnet, debt maturities, spectrum license payments and the share buy-back. The prior period balance also included proceeds of approximately $2.5 billion from divestments. Offsetting the decrease in cash and cash equivalents was an increase in trade and other receivables of $549 million due to a higher customer deferred debt as a result of higher average recommended retail prices of our smartphone range, increased debtors resulting from an increase in sales revenue and debtors in newly acquired entities. Inventories also increased by $129 million due to the Planning Design Services Agreement and the Joint Deployment Works Contract with NBN Co. Inventories also increased to support higher mobile hardware sales.

Non current assets increased by 15.7 per cent to $33,475 million. Intangible assets increased by $2,950 million due to the acquisition of spectrum licenses and an increase in goodwill resulting from acquisitions of controlled entities and businesses. An increase of $468 million in derivative financial assets is primarily attributable to net foreign currency and other valuation impacts arising from measuring to fair value. Defined benefit assets increased by $252 million due to a change in the bond rate, in accordance with AASB 119, and higher investment returns.

Current liabilities decreased by 6.4 per cent to $8,129 million. Borrowings decreased by $781 million due to a reduction in short term commercial paper and the maturity of domestic and offshore debt, partially offset by the reclassification of debt due to mature within 12 months to current borrowings. Derivative financial liabilities decreased by $186 million due to foreign currency and other valuation impacts from measuring to fair value. Revenue received in advance increased by $187 million mainly due to newly acquired entities.

Non current liabilities increased by 6.5 per cent to $17,806 million. Borrowings increased by $591 million primarily as a result of long term debt issuance, offset by reclassifications to current borrowings. The decrease in derivative financial liabilities of $258 million reflects foreign currency and other valuation impacts from measuring to fair value and also includes the reclassification to current for transactions maturing within the next 12 months. Revenue received in advance increased by $450 million mainly due to newly acquired entities. Deferred tax liabilities increased by $272 million due to deferred tax liabilities acquired in new investments, an excess of tax deductions over accounting expenses for fixed assets, and the tax effect of actuarial gains recognised for the Telstra Super defined benefit fund.