Telstra Group Limited (TLS) Earnings Call Transcript

Good morning, and welcome to Telstra's results announcement for the year ending 30 June 2026. I'm Nathan Burley, Head of Investor Relations. I'm joining today from the lands of the Gadigal people. And on behalf of Telstra, I acknowledge and pay my respects to the traditional custodians of country throughout Australia and recognize the continued connection Australia's First Nations people have to the land, waters and culture. We pay our respects to Elders past and present. This morning, we will have presentations from our CEO, Vicki Brady; and our CFO, Michael Ackland. We'll then open to questions from analysts, investors and the media. I will now hand over to Vicki.

Thank you, Nathan, and good morning, everyone, and thank you for joining us. I'll make three comments reflecting on the year before turning to Telstra's overall performance and our outlook for the future. Michael will then cover the details of our financials. First, the pace of change over the last 12 months has been extraordinary from geopolitics to policy and technology, with AI and global investments in digital infrastructure accelerating dramatically. Second, network resilience was brought into sharp focus. We experienced a significant network outage in July, which reinforced how much Australians rely on connectivity, and we know that reliance will only grow. Third, Australia is at a critical moment. We are laying the foundations for the next few decades of our economic growth, prosperity and resilience. We must position ourselves to drive and participate in the value created by AI and the digital infrastructure boom with sovereign capability and assets working in our national interest. At the same time, Australians are concerned about the impact AI could have on jobs and society. As a country, how we build trust, skills and inclusion will have a significant impact on whether it delivers benefits to all Australians. Telstra's Connected Future 30 strategy positions us well to lead and adapt through this rapidly changing context. We remain committed to enabling Australia's digital future and to working with government to ensure benefits and opportunities are shared widely. Turning now to Telstra's performance for the year. FY '26 was a strong year as we continue to deliver for customers and shareholders. We increased investment in our network and delivered ongoing earnings growth, reflecting momentum across our business and disciplined cost control and capital management. You can see a summary of our 2026 results on this slide. Reported financial performance compared to the prior period included EBITDAaL up 3% to $8.2 billion. Net profit after tax up 2.7% to $2.4 billion and earnings per share up 5.3% to $0.199. Our underlying results provide a clearer view of financial performance. Our underlying EBITDAaL was up 4% to $8.3 billion, cash EPS up 14% to $0.255, and underlying return on invested capital up 0.5 percentage points to 9%. Michael will take you through our financial performance in detail, including the drivers of our underlying EBITDA growth across Mobiles, Fixed Consumer and Small Business, InfraCo Fixed and Amplitel. He will also detail the drivers of our cash earnings growth and positive operating leverage of 2 percentage points, which was in line with our Connected Future 30 targets. On the back of cash earnings growth, the Board resolved to pay a final dividend of $0.105 per share, bringing the total dividend for the year to $0.21 per share and representing a 10.5% increase in the prior year on a cash basis. The final dividend is 90.5% franked, with a franked amount of $0.095 per share and an unfranked amount of $0.01 per share. The final dividend is consistent with our capital management framework and our aim to deliver a sustainable and growing dividend. Our dividend is supported by strong cash earnings, and our Connected Future 30 ambition remains to deliver mid-single-digit growth in cash earnings. In June this year, we completed our $1.25 billion on-market share buyback. And today, we have announced a further on-market share buyback of up to $1 billion. This shifts our capital structure towards more debt and less equity and has been enabled by earnings growth and the strength of our balance sheet. Importantly, these buybacks are alongside increased CapEx and strategic investment. Buybacks allow us to lower our cost of capital and manage our source of funding more efficiently. This approach also supports earnings and dividends per share growth and together with increased dividends, demonstrates the Board and management's confidence in our financial strength and outlook. Turning to our Connected Future 30 strategy. Over FY '26, we laid important foundations for its delivery. There is a detailed scorecard in the appendix that shows our progress. I won't go through that now, but I will call out some highlights. Customer engagement is becoming a stronger commercial advantage for Telstra. Over the last year, we focused on making interactions easier, more personal and more valuable for customers. We now have more customer support across -- available across more hours and channels, including 24/7 faults support. We have continued to add new functionality to our AI-powered digital assistant and digital self-service tools, and more customers are choosing these tools and having their inquiry resolved. We also introduced generative AI-powered search across telstra.com and My Telstra app as well as translation into 37 languages. For customers who prefer to call us, our average call handling time, our wait time have reduced to 2 minutes. We completed the migration of our consumer customers to the new digital stack and decommissioned the old system last month, creating a stronger foundation to innovate in how we serve customers. For example, we rolled out Customer iQ in the year, bringing together millions of data points to better understand the experience of our customers. This is helping our team to proactively address issues and have better conversations with customers, supported by AI-powered tools to help them get up to speed quickly and improve complaints handling. These improvements are translating into better experiences and more customers choosing us and staying with us. In FY '26, strategic NPS increased to positive 20 and episode NPS to positive 49, the highest year-end result since we started measuring NPS. Under our Network-as-a-Product layer, we continue to invest to deliver Australia's leading mobile network. Over the last 5 years, we have invested more than $9.5 billion in our mobile network nationally, with $3.8 billion of this in regional Australia. In total, we have invested more than $19 billion in overall CapEx and spectrum in the last 5 years. As our profit has grown, so too has our investment in our networks and digital infrastructure. In FY '26, it was around $800 million more than it was in FY '21. Over FY '26, we upgraded nearly 1,200 mobile sites with 5G advanced capability and built more than 150 new mobile sites to continue to improve the experience on our mobile network. We also upgraded more than 1,800 network sites with backup power. Every year, we experienced around 165,000 mains power interruptions across our fixed and mobile sites. And due to our investments in backup power, around 97% of those had no impact on services to customers in FY '26. Overall, these improvements and others are translating into more consistent experiences for customers. In FY '26, we lifted our network experience index by 1.6 points, which is our measure of network reliability and performance. We also brought new services and value to customers. We chose to invest in satellite messaging, and we recently expanded this to include Select Satellite applications like maps, weather and Internet messaging. We continue to expand our product offerings for enterprise customers across Mobile and Fixed, including dynamic 5G to deliver tailored network performance and our Adaptive Networks Centre, which provides our customers greater visibility and control over their network. We also introduced Adaptive Collaboration to help mid-market customers integrate calling and collaboration tools. We know we let our customers down in July, and we have taken full accountability for this. We have an initial understanding of the root cause of the outage and have taken steps to address that. We are completing our investigation with an external expert, and we will be transparent about those findings and the actions we take as a result. We take any disruption to our customers and Australians extremely seriously. When things do go wrong, we're committed to taking accountability, giving people clear information and fixing issues as quickly as possible. As connectivity becomes increasingly critical, we're also committed to continuing our work to further strengthen the resilience of our network and the services Australians rely on. This includes working with key government and enterprise customers to identify critical use cases and ensure appropriate resilience, redundancy and safeguards are in place. Under digital infrastructure, we are seeing very strong demand signals for our digital infrastructure assets, and we are turning those into contracted value. Some of the world's largest cloud and AI companies have signed long-term contracts across our Aura Network, subsea cable or long-haul fiber assets, including Google, AWS, Firmus and Microsoft as our foundational partner on our Aura Network. We are over halfway through the build of our Aura Network, with more than 8,500 kilometers of fiber in the ground and six routes ready for service. We now expect the total strategic investment, including Viasat, to be around $1.8 billion through to FY '28, compared with our previous estimate of around $1.6 billion. Michael will speak more to the ongoing management of the remaining build. Our Aura sales pipeline has increased significantly over the last 6 months. This strengthens our confidence in the project's returns, including an expected mid-teens IRR and cash payback period of around 9 years. Over FY '26, we expanded our subsea cable capacity through partnerships with Google and Keppel, strengthening our international capacity and our offering to customers. We also completed the construction of eight new satellite ground stations. Turning to the enablers of our strategy. You can see the progress we're making against them in the appendix slide, and I will call out two highlights. The first is our investment in data and AI capability for our people with more personalized learning and tools. Over FY '26, we expanded our data and AI academy with different learning pathways based on role, and more than 15,000 of our people completed at least one course. We were also one of the first in Australia to roll out Microsoft's personalized learning agent. 86% of our people with a Copilot license used it weekly or more over June, and we also added the ability to build agents. The second highlight relates to our technology leadership. We have been extremely disciplined about scaling AI with strong foundations, including reusable architecture, governance, security, cost management and simplifying our data ecosystem. Over FY '26, we reduced our data platforms by another 15. We have 17 today, and we're aiming for three. We also implemented a company-wide control plane that provides a central view of how AI is being used across the business to help us control costs, monitor adoption, optimize performance, manage risks and ensure our AI is safe and compliant. We also have the ability to switch applications between AI models based on cost, speed and reliability. Looking ahead, we are focused on continuing to deliver value for our customers, communities and shareholders, including through delivering on our Connected Future 30 targets around cash earnings growth, underlying ROIC and operating leverage. Over FY '27, there are five things I would like to call out. One, we are accelerating our mobile transformation to further improve the experience on our network. This includes through increasing the density of our network and accelerating our rollout of 5G stand-alone to provide an even more consistent experience, more capacity and lower latency for AI applications. Investment in mobile networks will be critical to unlocking national benefits from AI as this is the way most people will use it. We're also increasing our investment in security to help keep our customers safe and taking the lessons from our outage in July to further inform our already increasing investment in network resilience. Two, we will continue to evolve our Network-as-a-Product offerings and expand our mobile network APIs, enabling developers to integrate network capabilities into their applications. Together with progressing our products across Mobile and Fixed, this will bring us closer to our goal of creating more value from our networks for customers and sharing in that value by reinventing commercial models. Three, we will continue to help our people build data and AI capability and transform our business and customer experience with AI. This includes through accelerating progress on our cross-company AI transformational initiatives like agentic customer care, expanding fraud detection and prevention and improving fixed network planning and optimization. Four, we will focus on driving revenue from our digital infrastructure assets, including our Aura network. We will also consider future needs to support Australia as an AI and digital innovation hub, and we are assessing a range of opportunities, including in subsea cable capacity. Our network and digital infrastructure leadership built over decades means we are uniquely positioned to deliver Australia's digital future, both under Connected Future 30 and beyond. Five, we will also remain disciplined on costs, capital allocation and creating shareholder value. As we continue to invest in network resilience and growth, we will maintain our focus on productivity, simplification and positive operating leverage. As I close, I want to acknowledge and thank our customers for their patience and understanding during our network outage in July. We don't take this for granted. I'd also like to thank the Telstra team for everything they have delivered in the year and for the way they responded to the outage. It's never a situation we want to be in, but I want to recognize our team for the care and dedication shown and for the discipline applied to our investigation. It will help us deliver a stronger and more resilient network for our customers. I'll now hand to Michael to take you through the results in detail.

Thanks, Vicki. FY '26 was a strong first year under Connected Future 30. We delivered growth in cash earnings, improved operating efficiency and increased investments in our network and digital infrastructure. We also improved customer outcomes and delivered higher shareholder returns. Earnings per share increased 5% to $0.199, supported by growth in key products and our $1.25 billion share buyback program completed in the year, in addition to the $750 million in the previous year. Across the group, total income and operating costs declined. Our focus on improving operating leverage resulted in deliberate actions to continue optimizing our fixed enterprise and international portfolios with divestments and product exits during the year. Our reported results included $55 million of net non-cash impairments and M&A impacts that are excluded from the underlying results. Excluding these, underlying EBITDA after leases, or underlying EBITDAaL, increased 4% to $8.3 billion, in line with our guidance. When we look at these results after BAU CapEx, instead of depreciation and amortization or D&A, we see that cash EPS grew strongly to $0.255, up 14%. This is higher than EPS growth as BAU CapEx was broadly flat, while D&A grew, and we expect D&A to continue to grow. As Vicki said, with stronger earnings, the Board announced FY '26 dividends of $0.21 per share, which are 90.5% franked. This is up 10.5% on a cash basis from last year and represents 82% of cash EPS. Turning now to cash earnings, where we delivered a strong result. Cash EBIT grew 8% to $4.7 billion with growth in key products, strong cost management and BAU CapEx broadly flat. Finance costs grew 5% with higher lease costs and tax expense grew with a lower effective tax rate. With that, cash earnings grew 12% to $2.9 billion. We also invested a further $457 million in strategic investments, including the Aura Network. Looking at our product EBITDA performance. We delivered growth across Mobile, Fixed C&SB, InfraCo Fixed and Amplitel. Fixed-Enterprise and International results were partly impacted by the divestment -- the decisions to divest businesses and rationalize products as well as FX headwinds. Other EBITDA also increased with favorable bond rate and FX movements, the absence of an equity loss, which occurred in the prior period, and energy generation gains. Note that these product results include an additional $92 million of redundancy costs this year compared to last year as we continue to simplify our business. Turning to our key products, starting with Mobile, where we are continuing to win in market. Mobile service revenue grew 4.8% with growth across all products, postpaid, prepaid and wholesale handheld, mobile broadband and IoT. Our focus continues to be on providing the best products in market so that we can continue to deliver sustainable growth for our mobile business. Consistent with this, we delivered average revenue per user, or ARPU, growth across all categories, brands and segments. Growth in users and ARPU was stronger at the lower price points. Overall, handheld ARPU grew nearly 4% and grew -- and our users grew over 270,000 or 1.9%. Mobile EBITDA grew 3%, with service revenue growth partly offset by higher costs similar to the first half. Most of the increase in costs this year was driven by higher-than-usual remediation compensation and redundancy rather than underlying operating cost growth. Satellite and network-related costs represent a step-up in capability, supporting improved performance and new functionality. We expect ARPU next year to benefit from price changes implemented in May 2026. Turning to Fixed Consumer and Small Business. While this remains a highly competitive product and market growth is challenged, we grew EBITDA by 13.5% to $412 million through strong cost management. During the year, we continued to invest in our product proposition, including the launch of our Internet Only plans in November and our Smart Modem 4. More customers are on high-speed tiers and fiber. However, SIO losses continued, and this remains an ongoing focus. ARPU grew 2.6% through price rises and plan mix. However, margin declined with price rises not enough to offset SIO losses and wholesale input cost increases. In Fixed-Enterprise, we've continued to make strong progress to reset this business and focus on core connectivity offerings. Our Data and Connectivity, or DAC, EBITDA declined to $48 million with a reduction in costs not enough to offset the impact of ARPU compression and customer service rationalization, largely in the first half. Pleasingly, we've had a positive reception to our product refresh, which we continue to scale. In Network Applications and Services, or NAS, we delivered a broadly flat EBITDA of $151 million. This is despite lower revenue, which reflected deliberate decisions to focus on areas aligned to our strategy, divestments and product exits. In addition, the ongoing decline in calling products continued. Our reshaping of this business and focus on portfolio management is ongoing. The sale of Alliance Automation and MTData completed in FY '26 and the sale of 75% of the Versent group is expected to close in the first half of FY '27. Together, these businesses contributed $430 million of revenue in FY '26. In our International Wholesale and Enterprise business, we've made significant progress to focus -- refocus on digital infrastructure. We announced the exit of selected NAS products, sold our wholesale voice business and London Hosting Centre. In addition, after the 30th of June, we agreed to sell our Hong Kong property assets with an estimated USD 60 million gain, which will be excluded from our underlying results in FY '27. We've also reviewed our portfolio and recognized non-cash impairments, which were excluded from underlying EBITDA. In addition, we had a number of benefits called out on this slide, totaling $33 million this year. Normalizing for these items, both this year and last year, as well as FX, EBITDA declined 9%. This is due to the sale of the wholesale voice business, higher off-net product mix, partly offset by strong cost management. We're continuing to position the business to benefit from the increased demand in digital infrastructure. During the year, we acquired capacity on several cable systems and have already on-sold over half of this capacity to customers, including hyperscalers. We're assessing further value-accretive investments, although new investments will take time to translate into earnings growth. Turning to Digicel Pacific. And while EBITDA declined 10% to AUD 293 million, largely due to FX impacts on a normalized constant currency basis, EBITDA grew 4%. Despite operating challenges in the first half, the recovery in trading momentum late in the second half was pleasing. Our Infrastructure business continues to grow, supported by rising demand in the AI era. For the year, InfraCo Fixed income grew 2.5% to $2.8 billion with growth from nbn receipts in addition to copper asset sales, ground stations and dark fiber. This was partly offset by lower commercial and recoverable works and internal revenue, reflecting efficiencies and lower power recharge. Vicki also announced organizational changes to bring together our InfraCo, International and Field teams under Telstra Digital Infrastructure, to create one trusted partner for our domestic and international customers to access our infrastructure assets. Following these changes and higher associated redundancy costs, EBITDA grew 3.3% to $1.8 billion. Amplitel, our mobile towers business, continued to benefit from ongoing demand, partly offset by MOCN-related impacts. EBITDA grew 3.9% to $323 million, and we expect ongoing growth from contractual escalations and non-mobile operator demand. Turning now to strategic investments, including our terrestrial fiber Aura Network. Over recent months, momentum has continued to build with a significant increase in the sales pipeline and more customer signings. This step-up in customer activity reflects the progressive rollout of service-ready routes. As Vicki said, we do expect total strategic investment to FY '28 of around $1.8 billion, up from $1.6 billion. This reflects sustained inflationary pressures as well as ongoing project-specific factors, including site and route conditions. We remain disciplined in the delivery of this long-lived asset, and we'll continue to apply the learnings we've gained from successfully completing more than half the build to date. Importantly, our strong progress and growing pipeline reinforce our confidence in delivering our mid-teens IRR target. Our focus on operating efficiency continues. The reduction in operating costs reflects portfolio simplification, productivity improvements and continued cost discipline. Around half of the cost reduction this year was a result of divestments and product rationalization in Enterprise and International. At the same time, we continue to deliver efficiencies across labor, technology and other operating expenses. Our investments in technology are translating into efficiencies across customer service, retail and support functions. And as Vicki outlined, these initiatives are also helping improve customer outcomes. As we further simplify the business and scale digital capabilities, we see ongoing opportunities to improve productivity and customer outcomes as well as supporting earnings growth. Lower sales costs were also a result of lower volumes in Fixed C&SB. Fixed costs were $129 million lower with lower labor costs despite higher redundancies and customer remediation and customer -- and compensation costs. Together, other productivity initiatives -- together with other productivity initiatives, cash EBIT costs reduced by around $530 million, enabling us to deliver positive operating leverage despite inflationary pressures and increased network investment. As Vicki said, stronger business performance enables us to invest in our future. As our profitability has grown, so too has our investment in networks and digital infrastructure, which was around $800 million higher in FY '26 than it was in FY '21. We maintained our strong capital position and liquidity supported by growing cash flow. On an underlying basis, net debt remained stable at 1.9x despite the completion of our buyback as higher debt was offset by EBITDA growth. We reduced our average cost of debt to 4.8% and grew underlying return on invested capital to 9%. Our balance sheet is strong, and we remain committed to an A band credit rating. This has enabled now a continued investment in our business as well as our buyback program with the announcement today of a further up to $1 billion on-market share buyback. Turning now to guidance, the basis of which is shown on this slide. We expect continued underlying EBITDA growth to between $8.5 billion to $8.8 billion, BAU CapEx of $3.35 billion to $3.65 billion with a lift in network investment, supporting leadership and ongoing growth. Our cash EBIT is expected to be between $4.75 billion and $4.95 billion, and strategic investment is expected to be between $0.2 billion and $0.3 billion. In short, we've continued to deliver growth and value in FY '26 in accordance with our strategy, with growth in core business cash flow, including 12% growth in cash earnings, portfolio and investment management where we continue to execute and invest in line with our strategy and disciplined capital management. We remain confident in our ability to benefit from the critical role of connectivity and our strategy to achieve our FY '30 financial ambitions. I'd finally like to thank the Telstra team for their ongoing efforts in delivering value for our customers, the community and our shareholders. And I'll now hand back to Nathan for Q&A. Thank you.

Thanks, Michael. We'll now start an investor-and-analyst Q&A. In addition to Vicki and Michael, we have a number of other Telstra Group executives on the call today. We have Brad Whitcomb, Consumer; Oliver Camplin -Warner, Enterprise; Amanda Hutton, Business; Kim Krogh Andersen, Network Product and Technology; and Steven Worrall, CEO, Telstra Digital Infrastructure. We also ask the analysts to keep themselves to two questions. With that, we'll go to the first question. And our first question is from Eric Choi.

My first question is just around probably the key short-term investor debate, which is what if postpaid mobile growth slows. And part of this is just mathematical, given you had an extra month of effective price increases in FY '26. But I'm just wondering if that debate maybe misses the forest for the trees because if I look at your guidance, you're guiding to $300 million of EBITDA growth in FY '27, which is exactly the same as what you did in FY '26. That suggests that you guys are pulling other levers or other levers that are accelerating. So I just wanted to check, to me, that could be prepaid, wholesale, maybe less cost step-ups. So I don't know if that's right. If so, could you elaborate on those and add any other levers that I'm missing?

Thanks, Eric. Do you want to give us your other question as well?

Sure. So my second question is a bit longer term. So probably the key long-term debates around satellites and mobile roaming. And I wanted to ask about two specific scenarios that investors are contemplating. So the first is if a satellite player picked up MSS spectrum and then became an MVNO for broader coverage. And then the second is if the ACCC declares that last 2% of population that MOCN doesn't cover. So I'd love for you to talk through the offsets in these scenarios. So could you save on CapEx? Do you get new roaming revenues? Is satellite going to remain pretty limited by FY '30? And ultimately, I'd like to understand when you guys war-game these scenarios, can you hold your implicit targets for low single-digit mobile service revenue growth and your 10% ROIC by FY '30?

Okay. Well, thanks, Eric. You've gone short term and longer term. So that's a good mix of two questions. Why don't I make a couple of comments on the short term, but Michael will have a lot more, I'm sure, color to add there, and then we can come back and I'll talk a bit more about the longer-term question because there's a lot in that. First, on the short term, just as we look at entering -- we're now into FY '27. First thing I'd say is we feel very confident in the mobile business. Again, you can see the strength of the mobile business in FY '26. As we enter this year, we enter with good run rates on ARPUs. And I think, of course, postpaid is a big driver in there, but we have a big portfolio of products and brands in our mobile business. And as you can see, we're seeing real strength across the board with mobile service revenue growth at 4.8% for FY '26, underpinned by ARPU growing across products and segments and obviously, customer growth overall as well. So I think on mobile headed into FY '27, feeling positive about that. There's obviously then outside of mobile, we've got our infrastructure business, which continues to deliver those consistent long-term infrastructure-related growth, particularly, obviously, we've got nbn contract in there with the CPI link. And then we're seeing good demand across the digital infrastructure business across the various assets there. I'd also say operating leverage is a big focus for us. We do enter the year. We made some changes. There are always difficult changes to make during FY '26. So we will have some flow-through benefits of those. That'd be some of the things I'd call out. Michael, there's probably a whole lot more maybe worth calling out lever-wise for Eric.

Yes. I mean I think you covered most of them. I would -- Eric, I'd call out and reinforce Vicki's points on mobile. We think about that the mobile business as a portfolio, and we're confident in our proposition, and we're confident in our ability to continue to grow mobile service revenue, as you point out. I think the infrastructure business growth. The other one I would call out is just to give a little bit more on costs. So if you look at the '26 result, we've called out higher-than-usual compensation and remediation costs that we called out at the half as well. We also spent around $206 million in FY '26 in redundancy. And if you look typically, our redundancy spend has generally been closer to $80 million to $100 million. And then we'll also see the benefits of that redundancy spend come through. So on the headwind side, though, I think international is probably worth calling out. We talked about $33 million of benefits that we saw in international and normalizing for those, the performance was different in international, and then as well as the sale of the wholesale voice business will play through into '27. And then other EBITDA was a bit higher than normalized due to the bond and FX revaluation impacts in there. So I think there's a few puts and takes, but very confident around that $300 million. Think about mobile as a portfolio overall, infrastructure growth, and then we are confident on, when you look at FY '26, confident on continuing operating leverage contributing to earnings growth in '27.

Yes. Thank you. Thanks, Michael. Good question, broad ranging. And let me go to the longer term, Eric, and there's quite a lot in that one. And I think it really does reflect this moment in time where we're at, at the moment. You think about just how quickly technology is changing. You think about how quickly the market is changing. You spoke about satellite as one of those new technologies that's driving change. So let me address it in a couple of ways. The first thing I'd say, just on satellite itself, we obviously made the choice to invest in bringing satellite to mobile services to our customers back in June last year with the texting or messaging service and, more recently, expanded that to Select Satellite applications. Why did we do that? We could see the benefit for our customers when they're outside the mobile footprint or as an extra layer of resilience. And we're definitely seeing our customers enjoy that. It is -- again, it is outside the footprint or it's not dominating our use by any stretch. It's still relatively small in the scheme of our overall mobile business. And I would say one of the things we're focused on because this technology keeps moving. And today, the technology is providing benefit to customers outside our footprint. But it is a little bit of a clunky experience. It's not a seamless one. And there are other players in this space. The technology is moving fast. We're engaged with a lot of those players. And we're really focused on how do we make sure, obviously, in light of we've got the universal outdoor mobile obligations, the proposed legislation from the government that obviously puts the obligation on the three mobile network operators to provide that outdoor service, which will mean outside our footprint, we do need access to satellite to mobile technology. We're really focused on, as this technology evolves, staying very close to the various players in it. And we are focused on making sure we can find solutions and technology that makes that experience a seamless one for our customers. So that's very much front of mind for us. I would say our view right now, we do still see it as complementary. It is playing that smaller role at the edges outside of our footprint. We think it's an important role, particularly in a country like Australia. And we did make the choice to invest in bringing that to market because we could see the propensity for our customers, particularly those in regional, rural and remote Australia, it could bring real benefit to them. And I think we'll see it over time. We need -- we'll need different layers of connectivity. We still use a lot of fiber. Mobile keeps getting better. I'm sure we'll keep seeing satellite getting better, and that will just continue as demand and needs change as the technology evolves. On the broader point, you mentioned the ACCC. They've obviously announced they're going to conduct an inquiry, and it is a mobile services inquiry. It is a broad look at the mobile industry. Obviously, the discussion paper is not out yet with all the finer detail. But certainly, from what we can see, it is going to be a broad look at the mobile industry, including looking at new technologies, and satellite does get mentioned in that context, and they are going to engage widely. The other thing I would call out, and we, of course, have been thinking about this. It comes into how we think about our business over the long run and the different scenarios we run. The ACCC Chair did make a speech last week, and I think there were some really important elements in that speech. And she spoke about that as a regulator needing to find that balance in terms of how regulation can make sure it can keep supporting good outcomes for consumers, but also at the same time, give businesses and investors confidence to keep investing in long-term infrastructure and needing that confidence that, that will be recognized and reasonable returns will be made on it. And I think that's an important point as we reflect on the mobile industry, you look at the Australian mobile industry over the last two decades, there has been a very competitive market and a lot of competition in infrastructure investment. And what has that driven for our country? It's absolutely driven us as operators to invest, to innovate, to try and differentiate, whether it's on coverage, on speed, on value. And that's got great outcomes. I mean our mobile networks in the country benchmark globally in the top few. It's meant Australians have got 3G, 4G, 5G amongst the first few countries in the world. So we think it is timely that the ACCC inquiry will happen. That will be a broad look at the mobile industry. They will do that in a very structured framework. And we think it's timely, given the technology change, given what's going on, the various dynamics. And I would call out in that sort of infrastructure-based competition in mobile, as I spoke about earlier, in the last 5 years, as Telstra, we've invested $9.5 billion in our mobile network. $3.8 billion of that has been in regional, and we've had every incentive to do that because that's part of how we differentiate and compete in the market. So I know, clearly, there's a lot of feedback. Regional Australia have high expectations as do all of our customers, and that's why I do think it is timely that the ACCC conduct this inquiry. To be clear, we do not support mandated domestic roaming. We support commercial roaming, but we believe mandated domestic roaming would take away that incentive for infrastructure-based investment and competition and would likely lead to worse outcomes in Regional Australia.

We'll go to our next question, which is from Entcho Raykovski from Evans & Partners.

So my first question is around mobile. I'm just curious where you think we are at the moment in the postpaid market cycle? And what I mean by that is, do you think the postpaid market as a whole can continue to absorb higher prices from here? I mean I'm conscious that the other MNOs have also increased prices recently as well. But then obviously, your Telstra-branded subs are down, I think, about 47,000 SIOs in 2H. So then given that you're seeing growth in wholesale, can you perhaps talk about the margin differential between postpaid and wholesale, just to give us an idea of the wholesale growth that's required to offset any postpaid declines, given that portfolio approach that you've spoken about? So that's my first question. And then the second question around the Aura Network. So the increase in Aura Network spend by $200 million, you've obviously spoken about confidence in returns. But just how do you think about the returns on that additional spend? And is there some compression given the inflationary pressures? But I suppose just to be clear there, I don't know if it's just inflation or whether there's any expansion factored into that increase? And just as part of the answer to that question, if you're able to talk about how you think about the timing of free cash flow coming from the project.

Great. Thanks, Entcho, for that. Just on mobile, I'll make some comments, and then Michael may want to jump in as well. I think the thing I'd say, overall, our focus in our mobile business is always how do we keep investing, innovating, delivering great outcomes and experiences and value for our customers. And that goes to the network. It goes to how customers engage with us, whether it's in store, online, over the phone, whether it's our brand and our propositions. So look, I think overall, the thing we keep seeing mobile more broadly, obviously, the utility and the reliance on that continues to grow. You've seen, yes, we have recently put pricing changes through. Obviously, that's important when we're continuing to invest to be able to deliver for our customers. And as you said, we do look at a portfolio of our business. Michael, I don't know if you want to add some more comments around mobile and the portfolio.

Yes. I mean -- no, thanks, Vicki, and thanks, Entcho. I'd probably point to a couple of things, Entcho. One is, I think, the trend that you point out, it's not recent. It's been -- we've seen that trend with the growth being at the lower end of the market for some time. And we're seeing considerable growth in our prepaid business off the back of that, as well as in our wholesale and as well as in our Boost and Belong business. But we still remain very confident in the proposition that we're offering in postpaid. And we continue to invest in that proposition as we have with offering satellite, as we have with the benefits with the loyalty program across our branded offerings with the store network and our investments in our digital channels and the improvements there. If you do -- however, we are seeing strong growth in wholesale and -- but that is on price and volume. And you see the wholesale ARPU growth 8.8% this year compared to our postpaid handheld ARPU growth of 3.8%. So we're continuing to manage that portfolio. I think it also points to our vision around NaaP. And NaaP, one of our objectives there is to provide reasons, more reasons and other reasons and different reasons around network experience for customers to choose us and to choose to buy plans that give them better and different experiences for their needs. And that is a core to our CF30 strategy. So absolutely, we recognize the trend. We are seeing ARPU growth at the bottom end that's going quicker than at the top end. And we are looking at part of our CF30 strategy, and NaaP is about helping to create that differentiation and new differentiation into the future.

Thanks, Michael. And then Entcho, your question on the Aura Network, as you call out, we have spoken today about that additional $200 million, up to $200 million to complete the Aura Network. And just to be clear, we did announce this. It was back in February '22. We announced that we would embark on the Aura build. And through it, we've learned a lot. And through that, we've had to be disciplined and make choices and trade-offs. There are no additional routes, just to be clear inside that. It is inside the scope of the build we announced back in February '22. It's fair to say, yes, inflationary pressures have been there, higher than we would have anticipated. We've obviously talked very openly about the ability to have to navigate a lot of approval processes and dynamics when you're rolling out a build of this scale, almost 14,000 kilometers of fiber getting laid across the country. We've taken those lessons, the team have managed it in a very disciplined way. But as we've got to just over the halfway mark, it was the right point to say, okay, we think it is going to take a little bit extra to complete that build. But importantly, we have seen, particularly the last 6 months, it is a significant lift in terms of our sales pipeline and the level of demand we're seeing. And so we remain very confident in those mid-teens IRRs and around the 9-year payback. The incremental $200 million free cash flow will depend on deals. I don't know, Michael, if there's anything more to add on that?

No, not really. I mean I think what we've seen, Entcho, is that significant uplift in pipeline is more than enough to deliver the returns that we need on the additional CapEx. As Vicki said, the cash flow on these can be very lumpy. The free cash flow can be very lumpy on these deals as you probably understand in the way they work, much like subsea cable. Many of these deals will involve a onetime charge in the first few years of ready for service, that would represent a reasonable proportion of the total contract value. So the cash flow could be a little bit lumpy as it comes in, and we'll have to -- we'll manage that as those deals get signed, and we can disclose them.

We'll go to our next question, which is from Siraj Ahmed from Citi.

I have two questions as well. The first one, just on mobile, just following up, right? I mean, have you actually seen the churn trends stabilize in FY '27? I guess, second half, not surprising given the price increase. And second part to that, a bit surprised that postpaid ARPU is actually down half-on-half. Can you just elaborate on that? And how you think about ARPU growth next year, in '27? And second part, Vicki, just on that whole -- on the LEO sat and, I guess, the threat from [ Yomojo ], would you be able to split your -- I mean, you have an ARPU premium over your competitors. Keen to understand if you can actually split that premium into how you think about network coverage versus quality versus brand or trust? Would network coverage be the key part? And given -- and is your view that network coverage part could compress over time, but you can potentially expand the other parts?

Thank you. Well, why don't -- I might take the second question first, and then I'll hand over to Michael. And I presume Brad as well might be good to contribute into the discussion, too, around what we're seeing in mobile, particularly churn, ARPU, various things. So just in terms of the -- I know it's a big topic of conversation, obviously, LEO satellite. You're right. I mean we are the premium provider in the market in terms of mobile and have been over an extended period of time. Of course, we do monitor that. We understand our customer needs. We're always looking at making sure we're investing and delivering to be able to really demonstrate the value. And obviously, more customers continue to choose us and stay with us. So getting that balance right is obviously critical alongside our portfolio. So we have the Telstra brand. We then have brands like Boost and Belong, and we have our MVNO. So we do have a portfolio of brands because we know the premium Telstra experience may not be for everyone. And so to reach the parts of the market, we definitely need that. We also have different products, postpaid, prepaid, even under our branded portfolio show up differently. In terms of what drives that premium in our customers' minds, network plays a part, absolutely, those other things you mentioned, brand, trust, security. So the level of investment we put into our networks and keeping our customers safe and the protections we put in around scams and fraud. There's a bunch of things that play into that. Michael referenced our Network-as-a-Product layer of our strategy. That's a really important one because we know that customers are depending more and more on their network and their connectivity and their mobile services. So how we keep making sure as we help create more value for them, we're also sharing in that through our reinvention of commercial models. That's an important element. So coverage plays a part. There are a lot of other elements, and that's our constant focus to make sure we're really delivering value. Why don't I hand to Michael first on mobile, and then we'll get Brad to add in.

Yes. Why don't I comment quickly on ARPU because I think -- and Brad will as well. But just to your specific question, in the second half, we did see more of those higher-than-usual remediation and compensation costs go through as revenue reversals. So refunds in the second half, and that did impact ARPU. Without that, I think ARPU was broadly consistent as we went through. And then we should see the ARPU lift as we go into FY '27 from the May '26 price changes. So maybe, Brad, I'll hand to you to talk more broadly.

Yes. Thanks, Michael. And maybe just to build on that a little bit. We talked about the impact of the price changes that we had. And just as a reminder, this year, we had two price changes. We had one that we put -- we announced back in May of 2025, and that came into effect in July. And then we had a second one, which we announced in March of 2026. That one didn't come into effect until May. So in terms of an ARPU uplift, it's just a very small piece of the year that, that would be into effect. Just kind of referring back to the earlier question around the SIOs. Just as a reminder, when we put through a price change like that, we communicate to our customers. That then puts us in a period where we're dual quoting. We're establishing the price in market. And while we've gotten very good at that, it does limit our ability to trade and put offers on a price that's about to change in the market. So that does tend to suppress our acquisition a bit. Also, whenever we communicate about price, that gives customers an opportunity to sort of reappraise and decide whether they want to stay with Telstra, whether they want to stay on the plan that they're on or move to one of our sub-brands or indeed move someplace altogether. So that would have an impact on our SIOs. We look at all of that, and we factor that into a yield, and we're very pleased with the yield. And in fact, the yield on price changes over the last 2 or 3 times we've done them has been improving. So less spend down and more of that ARPU is actually dropping back into the business. If I think about our confidence going forward, the first place I would look is customer sentiment and how they're feeling about us. And as Vicki mentioned, we have seen our episode NPS increase by 2 points. We're now at a record high. We've also seen our strategic NPS increase by 2 points as well, and that's at a new record. So our customers are telling us that they're happier than they've ever been with us. We do have more mobile customers than we've ever had in the retail business. If we look across pre and post and across our various brands. And we do look at this as a portfolio. As both Vicki and Michael have said, that portfolio is becoming more and more important when we think about NaaP. It's not just which brand, it's not just which product, but it's also the attributes that are associated with each of those. And we're starting to tile that out, I think, more and more effectively. So we've seen an increase in ARPU. We've seen an increase in number of customers. The customers have never been happier. And I think to me, that speaks to our overall value proposition. Probably the hallmark of that is being served by an absolutely brilliant professional frontline staff, which has got an eye-watering employee engagement score of plus 86. And from my experience, there's nothing better than being served by an agent who truly loves what they do and really cares about you. And then that is underpinned by our ongoing investments in our network, world-class cybersecurity, the satellite messaging, which now includes apps. And I know from personal experience, being able to send a photo on WhatsApp on the Larapinta Trail in the middle of nowhere is actually quite cool. So if you haven't had a chance to check it out, I would give that a try. Our channels have never been stronger from our brilliant and beautiful retail stores to our very intuitive digital experiences. And then, of course, our -- the customer experience you get when you call us, which in many cases, now you can get access 24/7, which I think is an industry first in Australia. So we're continuing to grow that value proposition. That's why we have confidence in the overall mobile business. And I would expect that, that ARPU would continue to rise as the price changes that we put through in May flow through the business.

We will go to our next question from Lucy Huang from UBS.

I've got two questions as well. So just on the mobile business, I was just wondering if you guys can flesh out the enterprise landscape a bit more. In the past, it's been a bit of a drag on ARPU. Just wondering whether there's been a slight impact this time. And just given the competitive landscape, just any color on how some of the SIO trends are tracking in enterprise as well. Should I ask my second question or just...

Yes, if you ask both, Lucy, that would be great.

Okay. Wonderful. And then just my second question is on the slightly higher BAU CapEx guide. And I think on the call, you mentioned kind of the next focus is the rollout of 5G stand-alone. So just wondering if you guys can kind of give us some ideas as to what better capability will 5G stand-alone provide for Telstra? And how could this impact, I guess, ARPU upside, like what can truly monetize out of 5G stand-alone?

Excellent. Thanks, Lucy. So I'm going to get a couple more of the team up actually. So I think on the mobile business, that focus around enterprise and also, I think mid-market is important in that context, what's happening in the enterprise and our mid-market space. So I might get Oliver and Amanda up. And then on the CapEx side, 5G stand-alone, I'm going to get Kim to come up as well and just talk about what that capability delivers, how that helps moves us forward and obviously sits under our broader strategy. So Oli, why don't I hand to you first?

Yes. Thank you, Vicki. So I'm pleased to share that the mobile business and enterprise grew in the year. We're very pleased with that outcome. As you said, historically, enterprise hasn't always been set up for win. We've been distracted too many priorities. But we put in place a number of changes, commercial guardrails, absolute focus, extra discipline in a few areas, and we're now starting to see that shine through. So we're really pleased with the mobile growth. And also, if I may, maybe Vicki talk about enterprise more broadly. We've -- with enterprise reset, been facing into a number of challenges. We've reset the cost base. We've made a number of divestments. We've seen huge change across the board. But the way I think about that is we're not at the finish line by any stretch of the imagination. We're just at the start line in some ways. And all the changes that we've made so far, this is all about setting us up for the next chapter and really growing moving forward. So as pleased as I am with the mobile performance, I'm excited about what's ahead. We've launched new products in market. Vicki and Michael spoke about Adaptive Network Centre on the fixed side. We've spoken a little bit about satellite to mobile. Brad, we've got a similar offering in enterprise. Some of our customers who have remote workforces are loving that capability now where their employees can connect in areas where there may not be a mobile network. So we've had fantastic response on the mobile side, and we can't wait to get the next generation out there as well and be able to offer critical apps to those individuals in critical times. In terms of wins, we're winning in market as well. Maybe just share a couple of quick customer wins. I love winning. And I thought I'd share Bendigo Bank is one name that comes to mind. Bendigo is going through an incredible digital transformation at the moment, and I'm absolutely thrilled that they've chosen Telstra to be their strategic connectivity partner. So very excited to go on that journey together. And then mobile specifically, one that comes to mind will be Salesforce, where they've decided to award their mobile business to us, that has not been with Telstra historically, and we're in the progress -- in the process of migrating those services to Telstra as we speak. So I'm really pleased with the mobile performance last year. But as with the whole of the business, we're only just getting started and there's more ahead, and we're looking forward to the next chapter, and I think that opportunity is there for the taking.

Thanks, Oli. Why don't we get Amanda just -- I think it's important. I know we talk about enterprise a lot, but the mid-market side of our business also is an important and dynamic part of the market. So Amanda, do you just want to touch on the dynamics there?

Yes, sure. I might just also start with small business, which we've had a really strong year and very, very pleased with the performance in small business. And many of the dynamics that play out in that segment mirror the commentary that Brad made a little bit earlier. But we have seen also really strong performance in our mid-market customer base. So these are customers who typically have employees of about 500 or so or less. And we've started to bring some of the dynamics and focus that we have in small business, including price rises into that area, which we haven't typically done, and really targeting very specific propositions to that part of our customer base and seeing quite good responses already from customers. And we've also spent in FY '26, a large focus on bringing together those propositions and products specific to that segment. And we're also seeing really positive momentum and feedback, particularly in our DAC side of our business. So some of the features that we brought to market, particularly through our Adaptive Network Centre. So the ability for customers to change the bandwidth on demand or observe how their products are performing are really important features. So imagine one of our key customers runs large-scale sporting events, and they need high-quality bandwidth, but they only need it a few times of the year. But when they do, they want it to work superbly, but they can now observe that and they can dial that up and down. And what's most exciting, typically, these sort of products and features were really those really in the enterprise domain, highly customized, but now we've been able to bring that down and start to scale that more into that mass medium and larger business customer segment. So that's super exciting in our mid-market space. So lots of exciting things, especially to come.

Thanks, Amanda. I appreciate that. And Kim, do you want to just touch on 5G stand-alone, those capabilities, what it means for customers?

Yes. Thank you, Vicki. Thank you, Lucy. I think it's always great when we get network questions on these calls. And this one is a special one because the stand-alone, the 5G stand-alone, that is such a critical part of our strategy. Our NaaP strategy is really about making it more tangible, what is premium, what is not premium and also ensure that we can move away from best effort to actually have network experiences that is fit for specific use cases. And that's exactly what stand-alone do. We get that opportunity to service-defined network for specific use cases. And you can imagine that you already have the dynamic 5G for our enterprise customers that have specific needs, but it could also be the premium-branded experience versus the more discounted solutions. We can make it very clear what you get and which connectivity you need for the specific use you have. That's the capability of the 5G stand-alone. It is a broader part of the modernization we do in the network and our overall network leadership. To ensure you can have the stand-alone experience and you can do that separation of the experience, you both need the radio to be modernized and you also need the core to be modernized. So one of the things Vicki talked about was our overall network modernization where we actually take the 5G basebands we were introducing back in 2019 and upgrade that to the newest baseband and then at the same time, transform our core, so we can ensure all our customers, they can get to stand-alone experiences. That is critical now, but it's even more critical in the future where the use cases become more sophisticated, AI become more sophisticated, not only being generative AI, but also agentic AI. That's where you need to have that ability to ensure the connectivity fit to the use case. We already now see that our uplink, for instance, grow more than our downlink. That's just one example of the change in demand going forward. And the modernization is a critical part of that because there, we actually utilize the spectrum in a different way, the FDD spectrum we have plus the massive MIMO we are putting in, plus the standalone, that's exactly what set us up not only to be a leader today, but also to be a leader in the future and ensure we can create these differentiated network experiences that underpin the premium experience and also our branded proposition in market. So stand-alone is very critical for our strategy and also one of the promises that have been that long time for 5G, that's finally getting to market now, and we are super keen on bringing that to our customers in all our segments. So 5G stand-alone is here to really underpin our strategy.

We will go to our next question, which is from Liam Robertson from Jarden.

Two from me. Unfortunately, not much variety mobile and strategic investments. Just firstly, on mobile, hoping to pin you down on this one. I'm comfortable with the commentary around the multi-brand proposition holding up. I just want to get a sense of if you're concerned around the level of decline across all postpaid. I mean, is that sustainable moving forward, particularly the second half number, down 47,000 for the second half? And then secondly, on strategic investments. I appreciate the color on elevated costs. I mean the elevated signings and sales do sound promising. But maybe one for you, Michael. I guess when can we actually expect to see that come through the P&L or some form of upfront cash realized? I'm just conscious that to deliver that mid-teens IRR probably needs to be sooner rather than later.

Okay. Why don't -- Michael, we might go to you first on Aura, if you're comfortable. And then just in terms of mobile and that postpaid performance, I wonder whether Brad, in particular, might want to comment on the retail side. That feels like that might be a useful way to go, Michael?

Yes. Thanks, Liam. So we've got a number of routes that are now ready for service. So that was the first sort of milestone before we start collecting cash, is that we had to have routes ready for service. So we're in a good place there. And then as we sign customers, we should see that -- we should see cash come in over the next couple of years. The P&L impact could -- is more likely to be a smaller impact over a longer period of time. But we'll be able to talk to more of that over time, Liam, in terms of when we expect that cash, but we will do that as we announce very specific signings and projects rather than being able to forecast that exactly right now, but I hope that helps.

It might even -- after Brad spoken, if Steven wants to add a little bit more color on Aura and where we're at, might be useful as well. So Brad, we'll go to you first.

So on the question of SIOs, again, we do look at this as an overall portfolio. And so that is both post and pre and looking across the brand. So I don't look at that in isolation when we're making decisions around pricing. If you look at it overall, we did have on a branded perspective in the second half, as you pointed out, for postpaid, we did have a reduction in the number of subscribers. Belong actually grew. In fact, Belong grew both halves. So that we're very pleased with that. So again, on the back of two price rises within the 12-month period of time, the fact that we have that price establishment period that came in between March and May. And in a generally quiet period, we have end of financial year sale, but that's about the only big trading activity in the year. I'm comfortable and confident with where we sit right now. And again, I think what we've done to add to our overall value proposition provided we continue to create more and more value for our customers, and it does start at that postpaid branded, that's what we look at to be able to offer the maximum value, and then we tier down from that. The other thing I'd say is if you look at the increase, whether it's the prepaid ARPU or the Belong ARPU, both of those in this year rose faster than the overall postpaid ARPU. So the gap between those two offerings or three offerings in the market is closing, and that was part of our strategy this year as well.

Thanks, Brad. Why don't we go -- Steven, do you want to just add a little bit on Aura. I know we've talked about the sales pipeline, confidence and significant shift there over the 6 months, maybe a little bit more.

I would be happy to. And Liam, thanks for the question. And it sort of connects with the question that Entcho asked earlier as well. There's nothing more to say other than what Michael and Vicki have said in relation to the free cash flow projections that we've made for Aura and what we've reconfirmed today in terms of the mid-teens IRR. But I would love to add a little extra color in terms of what we're seeing. It's quite remarkable when you think about the beginning of the Aura program was 2022, and it was November 30, 2022, as you may recall, when ChatGPT was first launched. And so that's only 4 years ago. But in the tech world, that's a generation. And so a lot's changed. And indeed, the profile of the demand that we were looking at back then when we put that business case together has changed dramatically to the one we see today. As both Michael and Vicki have mentioned, that demand profile is substantially larger. It's also different in terms of composition because the profile of data center demand is changing literally in front of our eyes. Back when I was at Microsoft, the sorts of contracts that we would have seen continue. But of course, we're also now seeing a new type of demand for what I'll describe as an AI factory, gigawatt level type demand, which is a step change in the sort of data center capacity that the country is going to need to contemplate. And of course, we know that, that's an issue for governments and communities around the country. But it also connects with the Google transaction that we completed earlier this year that we think was highly consequential, in that Google in acquiring and now becoming our single largest client on Aura and then, in turn, us acquiring capacity on their subsea network points to the future of where you're going to see Australia play, I think, an increasingly important role in the information flows that we see around the Southern Hemisphere. And of course, it highlights just how important international route diversity is becoming, not just for the future of AI inferencing and, of course, low latency cloud delivery, but of course, in relation to what sovereign digital infrastructure might look like in the future. And so we think as the government has pointed to recently, we think there's an important role for us to play in the delivery of that sovereign digital infrastructure. And as those data center projects that we see all around us come online, you'll start to see the revenue flows that will follow from Aura. So thank you again, Liam.

Thank you. We'll go to our next question, which is from Ware Kuo from Bank of America.

Just two questions from me. One actually related to the previous question, so on InfraCo. I think outside of the new fiber builds, to what extent is there an opportunity to, I guess, recontract some of the existing InfraCo assets, given that we are seeing growing sort of AI demand, more distributed workloads. So I think the question is, could you recontract for higher pricing? And what role do you think some of those assets play in this environment? And secondly, just on capital allocation, with cash flow visibility effectively, you've got strong line of sight to FY '30. Is there anything preventing the adoption of maybe a more explicit, let's say, FCF-linked distribution policy that might give a little bit more visibility for the market to sort of model out distributions over time?

Yes. Thanks, Ware. Two very good questions. On InfraCo, why don't I make some brief comments, and I'll get Steven to jump in again, and then we can go to Michael on your second question. Just on the first one, I think it's a really great point. And over a number of years, we've talked a lot about the broad array of assets we have in our infrastructure business. And as Steven just referenced, the world of AI is moving fast. And for a lot of years, there's been discussion about needing to put things closer out to where customers are out on the edge of the network. It's something we continue to monitor, engage in and understand. And it is fast moving. We've seen some of our peers around the world move and invest quite a lot of CapEx early that probably hasn't been, in hindsight, the right move. So it is something we keep a close watch on, and we do engage with many, many partners and customers to make sure we're set up to be able to move if the time is right and our assets line up to be able to deliver that. But Stephen, you've been doing lots of work with the team since you joined us almost a year ago now.

Indeed, I think coming up to the anniversary later this month, Vicki. So two thoughts there, I think, I'd like to share. The first is FY '26 was an important year in many, many ways, not the least of which being that we, in Telstra Digital Infrastructure now have our single largest client as nbn. And what that represents, I think, is a turning point in how we continue to think about externalizing the assets that we have within the Telstra Group. In part, that was why we created Telstra digital infrastructure so that we could house in the one entity, the international assets we have, but of course, the broad range of assets we have here domestically. And those assets, we talk a lot about fiber, but they, of course, include many other categories in the digital infrastructure world, data centers for argument's sake. Physical footprints actually become important as you think about edge capability, towers, satellite. And so there's a broad range of assets in the portfolio that we are increasingly thinking about how to best arrange those to meet the changing profile of the demand that I mentioned earlier, which sort of brings me to that second thought. There is so much change. And our clients, many of them from offshore looking to establish a footprint and a presence here in the region. We're continuing to work very closely with them in regards to how best to meet their changing demands because the data flows that I referenced earlier are subject to the use of the AI services that will ultimately be delivered. And this is a work in progress. As I mentioned, we're really 4 years into what is going to be a profound shift in the way in which technology is used around the world. And so many of these questions are still being answered. But to the heart of your question, we think there's great opportunity for us to arrange the assets we have to continue to release value. And we think importantly, for us to play the crucial role that we believe we play here, which is to deliver sovereign infrastructure that will allow economic value to be delivered here and retained here in Australia as we work with partners across the entirety of the digital supply chain.

Thanks, Steven. And Michael, are you happy to take the second question?

Yes, sure. I mean on capital allocation and is there anything stopping us with doing a cash flow linked distribution? I would refer us back to our capital management framework, which is we're committed to the balance sheet settings. We think that's important. We're committed to disciplined BAU CapEx, making sure that we're continuing to support business growth and growing cash flows and then sustainable and growing dividend. And I think that where -- that ability to have a sustainable dividend that continues to grow and to provide that consistency is a very important part of our capital management framework. We'll be disciplined on portfolio management and strategic investment and obviously -- and we're using some balance sheet capacity for returns. I think when we think about that capital management framework, I think we are focused on retaining that flexibility, and our balance sheet strength and earnings growth does give us that to both invest and to return value to shareholders and to go after opportunities. Our payout on our DPS was an 82% payout on cash EPS. We're not targeting a payout ratio at this point, but we remain committed to our capital management framework.

Excellent. We'll go to the next question, which is from Andrew Gillies from Macquarie.