SYDNEY, AUSTRALIA: Telstra will invest $1.6 billion approximately in two major telecommunications infrastructure projects to support the nation’s digital economy and enable unprecedented levels of connectivity across Australia.

The two distinct projects are:

• Building and managing the ground infrastructure and fibre network in Australia for Viasat, a global communications company. This program will support the new ViaSat-3 terabit-class global satellite system as part of the 16.5 year contract.

• A major new fibre project to build state-of-the-art inter-city dual fibre paths. The investment will add up to 20,000 new route kilometres to increase the capacity of Telstra’s already extensive optical fibre network in Australia.

To deliver both projects, Telstra expects to invest $1.4-1.6 billion outside of its BAU capex envelope over the next five years. It expects to invest up to 70 percent of this total commitment across its T25 planning period, or an additional ~$350 million of capex per year over FY23 to FY25.

Telstra CEO Andrew Penn said the two projects recognised the strength of Telstra’s network assets and were part of Telstra’s T25 InfraCo ambition to deliver profitable growth and value by improving access, utilization and scale of its infrastructure.

“Investing in these two truly significant nation-building projects will see us continue to have the largest inter-city fibre network in the country, helping to future proof Australia’s digital economy and further improving connectivity in regional Australia,” said Mr Penn.

Penn said the infrastructure investment opportunities demonstrated the benefits of Telstra’s T22 strategy, including to establish InfraCo as a standalone business.

“They are also consistent with our strategy to create value from InfraCo, including considering monetization opportunities over time,” said Mr Penn.

“Our strong cash flows and T25 growth ambitions provide us the flexibility to make these strategic infrastructure investments, whilst maintaining flexibility to return excess cash to shareholders. Together, these investments are expected to deliver incremental long-term accretive growth.”

Telstra continues to expect cashflow to remain ahead of accounting earnings. Capex, including this investment, is forecast to be ~$250 million per annum lower than adjusted depreciation and amortisation.

Both infrastructure projects meet Telstra’s organic investment criteria and are consistent with its capital management framework, including a commitment to balance sheet settings consistent with an A band credit rating.

Telstra expects these investments combined to deliver mid-teens IRR, to reach per annum EBITDA contribution of ~$200 million by FY26, and to have a payback period of approximately nine years.

There is no change to FY22 guidance, and Telstra plans to complete its on-market buyback in FY22 as previously advised. It also remains committed to deliver all of its T25 financial ambitions.

Telstra InfraCo was created in 2018 as a standalone infrastructure business unit within Telstra to provide greater visibility to the market of the value of this business and create more optionality for the future. www.telstra.com.au