Good morning, and welcome to Telstra's Half Year FY21 Results Presentation. My name is Nathan Burley, Telstra's Head of Investor Relations. I respectfully acknowledge that I am joining today from the lands of the Kulin nation. On behalf of Telstra, I would like to acknowledge and pay my respects to the traditional custodians of country throughout Australia and recognize their continued connection to land, waters and culture. We pay our respects to their Elders past, present and emerging.
This morning, after presentations from our CEO, Andy Penn And our CFO, Vicki Brady, will be taking questions from Analysts and Investors and then Media. I will now hand over to Andy
Penn.
Well, thanks very much, Nathan, and good morning, and welcome, everybody, to Telstra's results announcement For the half year ended 31st December 2020, this morning, I will make some introductory remarks and take you through our overview of our results. Vicki will then step you through the numbers in more detail before we move to Q and A. 2021 is a significant year for Telstra. It represents a turning point for the company in our T22 journey, a turning point in our financial outlook. For the last 4 years, every year, we have had to face the confronting challenge of the financial headwinds Which arise from the transfer of a material part of our business to the NBN.
This has meant that we have started each of the last 4 years With our EBITDA going backwards by up to $800,000,000 this has been occurring in a market Where competition has led to material reductions in both fixed and mobile ARPUs as well as technology disruption and significant structural change Across the industry. In many ways, it was these dynamics that provoked our T22 strategy that we announced almost 3 years ago. It was these dynamics in conjunction with a conviction about how technology innovation was going to continue to accelerate That led us to understand that we needed to radically transform. Now we are substantially through the T22 program, And it is delivering significant benefits leading to a financial turnaround. And that is why I say 2021 It's a significant year for Telstra.
And I will demonstrate this in my presentation shortly. In summary though, today, We are reporting underlying EBITDA for the first half of FY twenty twenty one of $3,300,000,000 Against this, we're also announcing guidance for the second half of the year of $3,300,000,000 to $3,600,000,000 Now we do not usually provide explicit half year guidance. However, we thought it was helpful to do so this time around To illustrate the turning point that we are at. The turning point is also illustrated by our ambitions for FY 2022 And FY 'twenty three. Now these are not guidance, but they do demonstrate our aspiration for mid to high single digit growth In underlying EBITDA for FY 'twenty two and for underlying EBITDA to be in the range of 7.5 To $8,500,000,000 in FY 'twenty three.
This range is important, of course, to support a $0.16 dividend Inside our dividend payout ratio. And it's also important to deliver a ROIC of around 8%. We know how important the dividend is to our shareholders, and that is why the board expects to pay a total dividend For FY 'twenty one of $0.16 per share, including an interim dividend of $0.08 per share. We also know how important the group restructure that we announced in November is to our shareholders. We are therefore committed to progressing this year, Including the monetization of towers.
So you can see the strategies that we have been deploying are paying off. We are performing well in the market And our T22 program is delivering. After a decade of disruption following the creation of the NBN And with its rollout now declared complete, we can clearly see the path to underlying growth ahead. Our investment in innovation and technology, in digitization and networks, improving customer experience And being disciplined in our capital management means that Telstra is in a strong position to grow. So with that, now let me turn to the results.
Total income from the year decreased 10.4 percent to $1,200,000,000 on a reported and guidance basis. After adjusting for lease accounting on a like for like basis, EBITDA decreased 11.7 percent to $4,000,000,000 Underlying EBITDA on a guidance basis, which excludes 1 off NBN income and restructuring costs, decreased 14.2 percent to $3,300,000,000 Excluding the in year NBN headwind, underlying EBITDA declined by approximately $180,000,000 And the estimated financial impact of COVID in the half was $170,000,000 Our underlying EBITDA in the half was consistent with our full year guidance of $6,500,000,000 to $7,000,000,000 And with our guidance for underlying EBITDA in the second half at $3,300,000,000 to $3,600,000,000 It follows that our guidance range for the full year has narrowed to $6,600,000,000 to $6,900,000,000 Net profit after tax decreased 2.2 percent to $1,100,000,000 on a reported basis, while free cash flow was up 88% To $1,900,000,000 This was due to working capital improvements related to reduced handset receivables from lower device sales, Improved inventory and creditors. The lower device sales follow the ongoing trend of customers Holding on to their devices for longer as they have become more expensive as well as from lower store traffic from COVID related restrictions.
This was also the main reason for lower income in the period. The Board has resolved to pay a fully franked interim dividend Of $0.08 per share, which will return approximately $950,000,000 to shareholders. And as I have already mentioned, the Board has also confirmed It expects the total dividend for FY 2021 to be $0.16 per share. Turning then to the operating highlights for the half. We continued to see strong customer growth in mobiles.
We added 80,000 net retail postpaid mobile services, including 58,000 branded and 22,000 from Belong. This is, in fact, the strongest branded performance in several halves, and it reinforces the benefits of our clear leadership in 5 gs. In wholesale, we added 163,000 services while we added a further 456,000 IoT services. Importantly in mobile, we saw our lead indicator, transacting minimum monthly commitment, or TMMC as we refer to it, And increased by $3 Fixed had a more challenging half where we lost 53,000 net new retail bundles, including 11,000 from Belong. While we had negative net adds for the first time, encouragingly, bundle and stand alone ARPU in Consumer and Small Business has stabilized Due to our focus on price, higher speed tiers, new add ons, improvements to WiFi and the Telstra Smart Modem.
In fact, the smart modem is now in over 2,200,000 homes, almost 80% of our consumer customer base. And it was key to keeping customers connected when they were working and studying from home last year and, of course, increasingly in this year, too. We have also launched our Adaptive Networks product in Enterprise during the period to mitigate downside risk from digital disruption And competition from the NBN and also to support its return to growth, which we have foreshadowed for FY 'twenty two. One sector where we have seen digitization accelerate dramatically is, of course, in health care technologies. And Telstra Health It's strategically very well positioned in this growing market with income up 17% in the half and further improvements in EBITDA.
In customer experience, some aspects of our service were impacted during 2020 as a result of workforce capacity challenges. These flowed directly from the COVID related working restrictions that were in force, particularly overseas. Pleasingly, service levels were recovered in the second half of the calendar year and episode NPS improved by 3 points in the half, albeit was down 1 point When compared to the 31st December 2019, I am conscious of the delays that some customers have experienced in trying to contact us, And I want to apologize for those. I also know that not all aspects of our customer experience are where they need to be And we need more we have more work to do in this regard. However, I am confident that the many initiatives we have taken under our T22 program In simplifying the business and in digitization, we'll further improve experience as we go forward into the future.
Also notwithstanding these specific challenges, strategic NPS has improved 5 points in the last 6 months And 11 points in the last 12 months. Finally on our operating highlights, we have made very strong progress in our productivity program. For the half year, Underlying fixed costs were down $201,000,000 and total operating expenses were down $876,000,000 This brings the total annualized cost reductions achieved under our productivity program to $2,000,000,000 on an annualized basis. And today, we are upgrading our productivity outlook for 'twenty one to $450,000,000 and for the whole program To $2,700,000,000 Before I talk more about the progress we have made on our T22 program in the half, Let me come back to the point that I made in my introduction about being at a turning point. The progress that we have achieved in our T22 program shows That we are building momentum and we are building financial momentum.
The left hand side of this slide shows the evolution Of underlying EBITDA over the last several halves with the guidance provided for the second half of FY 'twenty one Of $3,300,000,000 to $3,600,000,000 The chart on the right hand side shows the evolution of our full year underlying EBITDA, including guidance FY 2021. As well as the aspirations I've referred to for mid- to high single digit growth in FY22 And to be in the range of $7,500,000,000 to $8,500,000,000 in FY 'twenty three. Now as I mentioned before, The figures for FY 'twenty two and FY 'twenty three are obviously not guidance. They're aspirations or ambitions, if you like. So there are greater risks and uncertainties associated with them compared to our guidance statements.
Nonetheless, JT, with them compared to our guidance statements. Nonetheless, the charts clearly demonstrate why I say we're at a turning point. I also want to comment on what sits behind this and draw out some of the key underlying operating metrics that we have been focused on improving. The first is postpaid handheld TMMC, which as you know is the leading indicator for ARPU. TMMC increased by around $3 in the first half, and we expect it to increase by a similar amount in the second compared to its Prior corresponding period.
We are confident, therefore, that mobile ARPU has reached a turning point And we'll return to growth in the second half of FY twenty twenty one. Secondly, Consumer and Small Business fixed bundle ARPUs have stabilized. We expect this to continue into the second half as we focus on building value and achieving a mid teens NBN resale EBITDA margin By FY 2023. And thirdly, as I have mentioned, we have continued to make strong progress against our productivity target, Reducing underlying fixed costs by $201,000,000 during the half with another approximately $250,000,000 expected in the second half And $450,000,000 next year. At the same time, the major headwinds that we have been facing from the migration to the NBN Are coming to an end.
The in year NBN headwinds peaked in the second half of the last financial year. They reduced in this half And they will be substantially less in FY 'twenty two. We also expect the COVID impacts to reverse over time. After an estimated $200,000,000 impact in FY 2020, we expect a $400,000,000 impact in FY 2021. This will be weighted to the second half with an estimated $170,000,000 in the first.
So this is why I am optimistic that we are at a turning point financially. And with that, let me now turn back to this year and make some comments on our progress against their T22 strategy and initiatives. Firstly, to say we are on track to deliver more than 80% of our T22 scorecard metrics. Against the first pillar of T22, we now have more than 7,600,000 services on our 20 Consumer And small business in market plans. We also have 2,800,000 members signed up to our very successful loyalty program, Telstra Plus, and we are seeing very strong engagement from these customers.
For consumer and small business customers, Digital sales interactions are up 10 percentage points to 40% compared to FY 2020, which Self was already up very strongly on the previous year. Overall digital service interactions now account For more than 70% of all service interactions. Under our T22 strategy, our aspiration Had been to reduce the number of calls to our call centers by improving our service by 2 thirds by FY 'twenty two. With the acceleration to digital, we have already seen this run rate and achieved it more than a year before the end of the program. That means that over time, we will need smaller call centers for these customers.
And in fact, many more will work from home. We are on track, therefore, to have our all inbound calls from our consumer and small business customers answered in Australia within the next 18 months. And last week, we closed our call center in Cebu in the Philippines. Today, we are also announcing Changes to another important part of our customer strategy with our intention to transition to full ownership for all of our branded retail stores across Australia. As more customers interact with businesses online as a result of COVID, we think now is the right time To bring back ownership to ensure a consistent and integrated customer experience across all of our online channels and entire store network.
At the height of COVID last year, in fact, we were able to redeploy frontline staff from Telstra owned stores to assist customers Through our digital channels or via the phone. And it's exactly this type of flexibility that we'll be able to unlock As Moa Retail branded stores are under Telstra's ownership. Currently, Telstra has more than 60 Telstra owned and operated stores With another 166 branded stores which are run by individual licensees and a further 104 that are operated by the Vita Group. Vitra Group and individual licensees have been notified of the plan with discussions and transition arrangements expected to progress over the coming months. Importantly, though, we know that in many regional and rural towns, the local Telstra store is a valued part of the community, Providing support and connectivity to a range of businesses and industries.
And that's not going to change and neither will our commitment To ensuring current licensee store customers continue to receive the excellent level of service that they have. Turning then to InfraCo. We have continued to make progress in the establishment of InfraCo. It is now a fully operational business function With separate accountabilities and reporting. For InfraCo Towers, we are finalizing the intercompany agreements and are now setting up separate IT systems.
We are also undertaking the necessary significant due diligence across the asset classes to ensure that we have fully documented inventories of an acceptable standard to 3rd party investors. Now one of the reasons that we set for setting up InfraCo Was to provide for an increased level of operational and commercial focus on these assets through a dedicated CEO and a management team. And encouragingly, we are starting to see the benefits from this. In the half, total passive income was up 2.3% to 1,300,000,000 EBITDA after leases was $904,000,000 for a 68% margin. Our new dark fiber products have been very well received by our customers With more than 20 services now ordered or complete, and we also won 2 significant government contracts for tower services in Tasmania and New South Wales.
We have also started simplifying our field infrastructure and maintenance with a goal of reducing for more than 20 vendors To 5 and driving operational efficiencies. On the group restructure that we announced in November, we have commenced Detailed consultations with key stakeholders, including government, regulators and the NBN. And we've also appointed advisers and are working with them On a detailed implementation timetable. And we anticipate making a further announcement in March to set out this timetable for the market, Including the major steps that we will need to go through to give effect to the restructure. It remains our intention to complete the restructure By the end of the calendar year.
On towers, as outlined at our November Investor Day, once established, InfraCo Towers will own and operate The largest mobile tower network in Australia. We have been conducting detailed due diligence and documentation to support launching the monetization process With potential investors in the Q3 of 2021 and with binding offers to be submitted in the Q4. Turning to Pillars 34. Our workforce continues to change significantly. Since June 2018, when we launched T22, We have reduced 22,000 roles, including 6,000 from our direct workforce and 16,000 from our indirect workforce.
Now this does need to be put in the context of a very significant part of our business and its associated work being transferred progressively to the NBN over the last few years. Indeed, NBN today is itself a very significant employer. At the same time, we have recruited more than our planned 1500 new roles with new skills in new areas such as software engineering, Data analytics and cybersecurity. We have also further progressed our journey to introduce agile ways of working. And today, We have around 11,000 people across the business working in Agile, and we anticipate being fully Agile right the way across the business By the end of the calendar year.
Last year, we announced a pause on our T22 job reductions to give our people as much certainty as possible During the very challenging time we all experienced through COVID, we extended that pause to February this year, which is obviously where we are today. And so last week, we did announce the next wave of proposed organizational changes. With these and subject to appropriate consultations, By June, we expect to be more than 90% of the way through our T22 target to reduce our direct workforce by 8,000 roles And to have completed it by the end of the calendar year. In terms of reductions in indirect headcount, it was initially our to reduce by around 25% or 10,000. However, we have already reduced 16,000, and we expect to make further reductions to our indirect workforce Due to the significant progress we have made in digitizing the business, the majority of these roles have been offshore.
Needless to say, these changes have been difficult for our people on top of the challenges presented by COVID to them personally, Particularly as they directly impact members of our team and their families. I'm proud, therefore, that our employee engagement has remained high With a score of 80, reflecting a concerted leadership effort to support everyone during this time. Also under Pillar 4, We have now exceeded our target of monetizing up to $2,000,000,000 of assets to further strengthen our balance sheet. Announcements in the half year included The sale of the Clayton Data Centre, the Pitt Street Exchange in Sydney and the Velocity and South Brisbane Fibre Networks. We also sold the business of our e commerce subsidiary, Neto, which we acquired 6 years ago but no longer fits our strategy.
And we are currently in the final stages of negotiating contracts for the sale of our remaining stake in Sensors. You will also recall that we restructured Telstra Ventures through a partnership with HarbourVest 2 years ago. That move has paid off with Telstra Ventures performing very strongly. Since the inception of Telstra Ventures, the team has completed 73 investments and achieved 25 liquidity events, Which have increased the value of the portfolio substantially. In the past half year alone, some of the portfolio highlights include the Big Commerce, CrowdStrike and Skills IPOs as well as the Rancher Investment and Cumulus Networks acquisitions.
The valuation of investments held by Tencent Ventures is in our accounts recorded in reserves, and we recorded one $187,000,000 increase in the valuation of these investments in the half year period. On 5 gs, We're not just leading in Australia, but we are also among the global leaders. We have expanded our 5 gs rollout to selected areas in more than 100 cities and towns across Australia. And the network now provides 5 gs coverage to more than 50% of the population. It is our intention to increase that to 75% by June.
In fact, today, we have around 1,000,000 5 gs denied prices connected to the Telstra network. And our average combined 4 gs and 5 gs mobile speeds are faster than our competitors. In fact, we recently achieved a world first 5 gs peak download speed record on a commercial network using millimeter band wave spectrum of greater than 5 gigabits per second. Not surprisingly, therefore, we continue to also lead the market in the major mobile industry network performance benchmarks, including Oomlat, Where we were ranked number 1 for best in test and best in data. Before I close, a few comments on our T22 scorecard.
Now as you heard me say earlier, we have delivered or are on track to deliver over 80% of our T22 scorecard metrics. Needless to say, some of the measures, of course, are rated either amber or red, and I want to take a moment to explain why. Firstly, underlying ROIC. As announced at our FY 'twenty results, we will not achieve our T22 ROIC target of greater than 10% in FY 'twenty three. I know that is disappointing, and I want to reassure shareholders that we are pulling all levers available to us to improve that performance.
As outlined at our investor briefing in November, our new target is 8%. And with the ambitions I spoke to earlier, We can see our path to achieving this in FY 'twenty three. On NPS, we are on track with strategic NPS. But as I explained earlier, we are slightly behind on our episode NPS results. The building out of our new technology stacks is also very well progressed.
But as in any IT project of the magnitude and scale that this one is, there are, of course, always a few things at Right Shift. However, the enterprise stack is now live as are the agent facing components and mobile products in Consumer and Small Business. Product launches onto the new stack have been accelerating in the first half of this year, and we expect that to continue in the second, enabling us also to accelerate The migration of customers. On active app users, these have grown by more than 400,000 to 4,400,000. It's below where we had planned it to be, but it reflects good progress on FY 'twenty.
We also need to build more momentum in the average services Customer, and we are continuing to target increased multiproduct holdings through entertainment, mobile assurance and gaming add ons. Our announcement last week with Kayo is a key to doing this. Let me summarize. The last 12 months Have seen us navigate the profound disruptions from COVID. COVID has also highlighted that connectivity has never been more important.
We have seen a huge acceleration in adoption of digital ways of working and living. And these things are also going to be crucial To a fast economic recovery for the country. It is interesting to reflect on how seamlessly Australians were able to move to working from home, how quickly people adopted digital ways of working and living, And how we were able to support them with the necessary bandwidth, products and services. None of that happened by accident. It happened for us Because in 2016, we knew we would see a further acceleration in the use of technology, so we invested $3,000,000,000 to build the networks of the future And completely rebuild our digital environment.
It happened for us because in 2018, we launched our T22 strategy To simplify and further digitize the business. And it happened for us because we continue to make excellent progress in implementing this strategy. Those investments are transforming Telstra. We are now less than 18 months from completing T22. We've achieved an extraordinary amount and Telstra today It's a leader, more responsive and more agile company than it has ever been before.
I said in my opening, 2021 is a significant year for Telstra. I know we have more to do, but we have reached an important turning point financially, and we look to the rest of the year We've great confidence in our ability to deliver our strategic ambitions. Our priorities for the next 12 months include: firstly, Making sure we drive the key operating metrics that I highlighted earlier, which will be instrumental in delivering the financial turnaround. Secondly, finishing the job on T22, including the final stages of the digitization program and the migration of customers at scale to our new technology platforms. Thirdly, delivering our group restructuring plans, including the reorganization of the company Into 3 separate entities: InfraCo Fixed, InfraCo Towers and Servco as well as the monetization of towers.
Fourthly, further extending our leadership in 5 gs and rolling out to 75% of the population by June. And finally, further improving our customer service by bringing our retail experience in house and onshore. This means meeting our commitment to answer all inbound calls from our consumer and small business customers in Australia within the next 18 months And commencing the process to bring back our licensee stores in house. And with that, we will have truly transformed Telstra Through our T22 program and set the company up for success in the digitally driven and very exciting future that lies ahead. We will have built the capabilities to take advantage of the opportunities this presents, and we will announce how we're going to leverage these and what comes after T22 at our Investor Day in November.
Can I close by acknowledging that the progress that we have made is due to the combined efforts Of our many dedicated employees, despite the disruptions and impact on them personally from COVID, every day, They have focused on working for our customers and keeping Australians connected? And for that, I want to sincerely thank them. Thank you. And with that, I will hand over to Vicki before we open for Q and A.
Thanks, Andy, And good morning, everyone, and thank you for joining us. I'd like to begin by recognising that I am joining you from the land of the Gadigal people Of the Eora Nation. I acknowledge their ancient and ongoing connection to this land and their culture. And I welcome any Aboriginal and Torres Turning to the details of our financial performance for first half twenty twenty one Which you can see on Slide 13. The numbers on the left of this slide are our reported statutory results.
The numbers on the right Our reported lease adjusted, which includes depreciation of mobile handset lease expense as OpEx. This provides a like for like year on year view given the exit of mobile lease plans. It is the view we use when managing the business And which this presentation will focus on. For first half twenty twenty one income was $12,000,000,000 down 10.4%. On a reported lease adjusted basis, EBITDA declined 11.7 percent to $4,000,000,000 This decline included a $268,000,000 reduction in net one off NBN receipts And a $297,000,000 increase in restructuring and other guidance adjustments.
I'm pleased to say that our underlying EBITDA during the first half was in line with our expectations and our FY21 guidance. We are also pleased today to be upgrading our free cash flow guidance. Underlying EBITDA was down $550,000,000 or 14.2 percent. The largest two contributors to this decline Of estimated impacts related to COVID-nineteen. Our estimate for COVID-nineteen is based on international roaming declines, Delayed cost out, additional customer support and deferred NAS professional services.
If both the in year NBN headwind and estimated COVID impacts were excluded, underlying EBITDA was broadly flat. Our total operating expenses declined 9.8 percent including a $201,000,000 or 6.6 percent Decline in underlying fixed costs. Depreciation and amortisation declined 4.6% On a reported lease adjusted basis, this is consistent with the expected full year decline of around $300,000,000 due to assets associated with NBN completion and legacy IT assets fully depreciating. Net finance costs declined due to lower average borrowing cost, thanks to recent refinancing at lower rates. Income tax expense declined 60% on a low effective tax rate associated with M and A and asset sales As existing capital losses were used to offset capital gains.
Excluding these one off factors, our underlying effective tax Right, it was close to 30%. Reported NPAT was $1,100,000,000 down 2.2%. Looking now at income by product, which you can see on Slide 14, which reflects the new product reporting framework we announced in January. Of this decline, over 2 thirds were due to a reduction in hardware. There is detail in the appendix on each product, But I will touch on the most significant points.
Mobile income declined $645,000,000 in first half twenty twenty one. This was largely due to hardware revenue, which has minimal impact on EBITDA and international roaming declines. Handset and tablet volumes were around 450,000 lower than first half twenty twenty. The average price was also lower, helped by the higher Australian dollar. The reasons for the decline in volumes versus the PCP Well, firstly, impacts of COVID slowing down sales, including foot traffic in retail stores, down around 30%.
Secondly, customers holding handsets for longer. Thirdly, higher outright purchases through independent retailers. And finally, a later release date for the iPhone. Of these reasons, impacts of COVID on sales and the later iPhone release drove outcomes materially different to our estimates when we set guidance. We anticipate these impacts to continue in the second half.
Profit generating domestic mobile service revenue, Which has been in decline since FY17 was broadly flat, excluding international roaming declines. In postpaid handheld, net adds remained healthy across all segments. Pleasingly, our lead indicator of postpaid handheld ARPU, Transacting Minimum Monthly Commitment or TMMC continued the positive momentum we have seen since 2019, Up by more than $3 in first half twenty twenty one versus PCP. We expect a similar increase in second half Versus PCP. The sustained increase in TMMC as well as pricing changes are flowing through into ARPU.
However, reported postpaid handheld ARPU in first half twenty twenty one declined 8.6 percent, including a decline of around $140,000,000 in international roaming. Excluding this, ARPU declined 3.2% with uplifts from pricing changes more than offset by the continued downward impacts from Accounting for new plans which allocate more revenue to hardware, lower out of bundle excess voice and data fees and finally, Dilution from a higher mix of Belong customers, despite Belong, TMMC and ARPUs growing in first half twenty twenty one. These impacts on ARPU will continue, but the thing that gives us most confidence in the outlook Is the flow through of pricing changes we are now seeing. In prior periods, ARPU has had a negative drag in second half twenty twenty one. Turning to other mobile categories.
In prepaid handheld, An increase in unique users and voucher value returned the product to growth. Mobile broadband remained broadly stable sequentially, With declines in prepaid offsetting postpaid growth. And our wholesale business achieved strong revenue, SIO and EBITDA Growth. In Fixed, Consumer and Small Business, our focus is on improving the long term economics End customer experience. Income declined 7.5% in first half twenty twenty one Impacted by NBN migration, Legacy Voice and Foxtel from Telstra declines.
However, The decline in income from bundles and data was only 0.6%. This reflects ARPU stabilising As we hit a turning point, thanks to customer migrations to in market plans no longer being dilutive. Around 70% of our customers are now on in market plans and we are almost 90% Through migration of customers within the NBN fixed footprint. We remain focused on increasing ARPU Through differentiation, add ons and plan mix, turning to fixed enterprise where income declined 6.4%. Fixed Enterprise has 2 main categories.
Firstly, data and connectivity, where revenue was down 7.2% As we transition from providing virtual private corporate networks to integrating over the internet technologies Such as SD WAN with Telstra Fibre or NBN Access. Total SIOs declined as copper exits were not fully offset by growth in NBN Services. We are now around 65% through the migration of enterprise services to the NBN. Importantly, fiber silos were stable and ARPU decline slowed as we focused on retaining and adding Higher bandwidth SIOs. Secondly, NAS, which has been reclassified following of our new product reporting framework to enhance transparency and align with our strategy.
NAS income declined 6%. Single digit growth in managed services, including security and cloud applications, It was insufficient to offset structural declines in calling applications, including ISDN, As well as equipment sales and professional services. The resulting fixed wholesale is attributable to legacy products, NBN headwinds and commercial works declines. The ongoing portfolio, which accounts for almost half of the revenues And includes passive infrastructure, GRU. There is other information on InfraCo consistent with Investor Day included in the appendix.
Finally, in other, our health business continued to scale with revenue growing 17%. Turning to our operating expenses, which you can see on Slide 15. We are very pleased to have achieved a significant reduction in costs During first half twenty twenty one, total costs declined 9.8% and underlying costs declined 7.8%. An increase in NBN payments of $136,000,000 was more than offset by the productivity gains we achieved. Other sales costs declined $463,000,000 on lower hardware costs.
Underlying fixed costs reduced by $201,000,000 and we are now tracking to achieve a full year reduction In FY21 of around $450,000,000 First Half twenty twenty one productivity was predominantly enabled by simplification And adoption of digital channels. Ongoing focus on vendor costs and increased workforce efficiency. Our proposal to move ahead with job reductions, which we paused until February this year, will deliver a run rate reduction into We have now achieved a $2,000,000,000 net reduction in underlying fixed costs since 20 Steen. However, to have a world leading cost base, we have more work to do. Based on our strong progress to date and outlook, We have lifted our net productivity target from $2,500,000,000 to $2,700,000,000 by the end of FY 'twenty two.
Further reductions in FY22 are expected to be delivered from IT and network infrastructure costs, Realisations of benefits from digitisation, including product simplification and customer self-service tools, As well as ongoing labor efficiencies, we anticipate that delivery of this new target will get us to the top quartile A global benchmark for full service telcos by the end of FY22. With the increased Moving to EBITDA by product on Slide 16. Mobile EBITDA declined $127,000,000 versus PCP, but would have been broadly flat excluding the international roaming decline. Mobile EBITDA also returned to growth sequentially in first half twenty twenty one. Our mobile business is Clearly building positive momentum.
We have strong 5 gs leadership and differentiation. TMMC is up with a higher proportion of customers choosing plans of $65 or higher. Digital engagement is increasing. 2 thirds of mass market postpaid customers are on in market plans And our loyalty program continues to scale and we see value accretion across our multiple brands. These factors give us confidence that mobile EBITDA will grow again sequentially in second half twenty twenty one.
We also expect full year FY21 growth on a PCP basis and then further growth that will support our FY22 and FY23 financial ambitions. Fixed consumer and small business EBITDA declined $230,000,000 This includes a revenue decline of around $200,000,000 And an increase of around $130,000,000 in network payments to NBN, partially offset by cost reduction. Our NBN reseller EBITDA margin was around 5% in first half twenty twenty one and our ambition remains To grow this to mid teens by FY23. Our strategy to include this To achieve this includes a combination of initiatives targeting improvements in gross margin such as speed tier mix and add on services Along with cost to serve reductions and delivery of productivity, legacy EBITDA has continued to decline With diseconomies of scale, we remain excited by 5 gs home internet opportunities to drive future on net growth, Including 3 millimetre wave spectrum increasing capacity. Turning to Fixed Enterprise.
Data and Connectivity EBITDA declined 15.4% due to reduced revenue on high margin products And largely stable costs. Our adaptive network strategy launched during the half is targeted at maximising long term economics. NAS EBITDA declined due to reductions in higher margin legacy calling applications and professional services. Along with the announced pause on job reductions and one off costs negating the benefits of cost reductions, This was partly offset by growth in managed services and cloud applications. We expect NAS EBITDA to be broadly flat versus PCP in second half twenty twenty one and then grow in FY22.
We remain committed to achieving mid teens margins from FY 2022. Global EBITDA, excluding one offs in the PCP And in constant currency grew 2% as cost initiatives and mix offset the revenue decreases In Data and Connectivity and NAS, the commitments we've made about the future financial performance of our products Are included in a slide in the appendix. Turning to free cash flow, which you can see on Slide 17. Free cash flow after operating lease payments increased close to 90% to 1,900,000,000 Largely due to working capital improvements, the improvement reflects reduced hardware revenue with reduced handset Receivables and improved inventory on lower handset volumes and average rate. We have also managed our creditors and receivables position To deliver the favourable outcome, some of the increase also reflects timing.
This means we are tracking ahead of our FY21 free cash flow guidance range and are lifting the range to between $3,300,000,000 $3,700,000,000 CapEx is tracking consistent with guidance. M and A disposals in the period included the Pitt Street Exchange property and Telstra's Velocity Network. We look forward to participating in April's Millimetre Wave Spectrum Auction and note that payment terms include the option for 5 annual installments Rather than all payment upfront. Moving to dividends. The Board has resolved to pay an interim dividend For first half twenty twenty one of $0.08 per share fully franked, including an ordinary dividend of $0.05 per share And a special dividend of $0.03 per share.
The first half twenty twenty one ordinary interim dividend represents 125 percent payout ratio of underlying earnings but is well supported by cash flow. The total interim dividend represents a 60% payout of free cash flow after operating lease payments, less net finance costs paid. The Board understands the importance of dividend to our shareholders and remains committed to the objectives of the Capital Management Framework. As stated at last year's AGM, the Board is prepared to temporarily exceed the framework's principle of paying an ordinary dividend of 70% to 90% of underlying earnings in order to maintain the current dividend. The Board stated it would consider the following factors in determining if it continues to do so.
1st, If our ambition for underlying EBITDA of $7,500,000,000 to $8,500,000,000 in FY23 is achievable. 2nd, if the full year free cash flow dividend payout ratio remains supportive and we retain a strong financial position. And 3rd, if there are any other factors that would make the payment of the dividend at that level imprudent. Based on this criteria, the Board expects to pay an FY21 fully franked dividend of $0.16 per share. Turning to our capital position, which you can see on Slide 19.
Under our T22 strategy, We have monetized over $2,000,000,000 in assets and our balance sheet and liquidity position remains strong. Net debt declined around $700,000,000 in first half twenty twenty one and we remain within our comfort ranges for all our credit metrics. We have also updated our capital management framework consistent with the outlook for CapEx provided at the November 2020 Investor Day. Principal 3 now states target CapEx to sales ratio of approximately 12% Excluding spectrum from FY23. As discussed at Investor Day, our revised T22 ROIC target is for underlying ROIC of around 8% by FY23 with a long term ambition to grow ROIC.
Turning now to our revised FY21 guidance, which you can see along with the assumptions and conditions upon which we have provided them on slide 20. FY21 income guidance is now $22,600,000,000 to $23,200,000,000 reducing approximately $1,200,000,000 at the midpoint from prior guidance. The large majority of the change is due to mobile hardware. I spoke earlier to how differently trading conditions have played out in the first half Compared to our expectations when we set guidance, our outlook is also a few $100,000,000 lower than prior expectations In global, largely due to exchange rate outcomes, these changes have minimal impact on EBITDA. Underlying EBITDA is now expected to be in the range of $3,300,000,000 to $3,600,000,000 in second half twenty twenty one, Which compares to $3,300,000,000 in first half twenty twenty one.
We have therefore narrowed FY21 underlying EBITDA guidance To be between $6,600,000,000 $6,900,000,000 Our underlying EBITDA guidance continues to assume An in year NBN headwind of approximately $700,000,000 Due to timing of disconnections, we Expect to be at the low end of the net NBN one off range. The estimated COVID-nineteen impact in FY21 is unchanged At approximately $400,000,000 Free cash flow after operating lease payments is now upgraded To $3,300,000,000 to $3,700,000,000 up $450,000,000 at the midpoint. For clarity, any acquisitions from licensees under our strategy announced today to transition to full ownership of branded stores is excluded from guidance free cash flow. To conclude, first half twenty twenty one was an inflection point For the financial performance of our business. Our underlying results remain challenged, including from ongoing NBN headwinds, Legacy declines and financial impacts of the COVID-nineteen pandemic.
However, our continued focus On T22 is delivering simpler, better outcomes for our customers and greater productivity, enabling us to increase our cost out targets. Product margin improvement is also imminent and already occurring in mobile. We see Clear positive indicators of an improved financial trajectory, which we expect will return us to underlying EBITDA growth in FY 'twenty two And put us on the path to achieving our FY23 financial ambitions. We therefore look forward with confidence. Finally, I would like to take this opportunity to add my thanks and recognize our dedicated teams right across Telstra.
We will now hand over to Nathan to take us through Q and A.
Great. Thanks Vicki. So we'll now take questions from analysts and investors. Our first question will be from Kane Hannan of Goldman Sachs.
Good morning, guys. Just three questions for me, please. Firstly, just on that mobile subscriber growth in
the half. Just talk about how
you were able to grow your postpaid subs in the half despite putting up pricing when the industry didn't follow? I suppose what that tells you about the The nature of your customer base. Secondly, just given the increase in productivity to 2,700,000,000 Obviously, nice to see, but should are we still thinking about that 100 of 1,000,000 of dollars of productivity savings in FY 'twenty three, 'twenty four that was spoken about at the Investor Day? Or is that a little bit of a pull forward in some of those savings? And then finally, just in terms of the free cash flow outlook, how should we be thinking about the FY 'twenty two, 'twenty three EBITDA targets translating into free cash flow.
And could you just comment on some of the moving parts that we should be thinking about there? Cheers.
Thanks very much, Kane, and good morning. I should mention as well that we've got Michael Ackland, who runs our Consumer and Small Business Division, David Burns, who runs our Enterprise division and Brendan Reilly, who's the CEO of InfraCo on the line as well today. And so I think I'm going to let the team respond to some of the questions. But I'll get Michael maybe to comment on mobiles, Vicki to talk about productivity and free cash flow outlook as well. But My point on mobiles would be, I think it just it's a function of the continued focus on value and differentiation and 5 gs leadership, but I don't want to take anything away from Michael.
So why don't I give Michael the opportunity to make a comment?
Great. Thanks, Andy. And hopefully you can hear me. I think Your lead off, Andy, is exactly right. So there was less activity in the market and Less movement between carriers, which obviously helped.
But the major drive for us Was really around cementing that 5 gs leadership and we saw that through the iPhone launch and we've seen that through now Where all of the major handset vendors are ranging 5 gs phones almost And I think as Andy mentioned, we've now got a 1,000,000 5 gs, phones on the network. And so we're Pretty confident as we move forward now that our coverage is getting to a point where it's a very significant Advantage and lead over competitors. And it's a meaningful coverage for many, many customers that is influencing their decisions. So it has been strong. I mean, I think the other point I would make is we've seen changing dynamics In prepaid, with somewhat the removal of travelers and some of the other sort of International student flows that created a lot of noise and excitement in prepaid, but we now have a very Strong base of prepaid customers that is growing in both value and unique uses as well.
Thanks, Mike. I'll pass over to Vicki. In the process So I just did a quick speed test before you came and just got 800 down and 75 up. So over to you, Vicki.
Thanks, Andy, for that. And thanks, Kane, for your questions. So let me take, the last two questions. So firstly, on cost out. Yes, as you said, we have upgraded our cost out to $2,700,000,000 by the end of FY22.
What does that mean? We made those broad comments at Investor Day that we would expect future cost out beyond FY 'twenty two. And Yes, you remember correctly. I think we did say in the range of 100 of 1,000,000. What we have completed Last half is we did complete our update of the global cost benchmarking work.
And Beyond FY 'twenty two, we do still see opportunities. For example, as we complete digitization, we still have the opportunity To decommission future legacy IT systems, and that'll take some future costs out of our business as well. So There are still areas beyond FY22, and so we do believe that cost out and efficiency and that productivity We'll continue to play a role in the business beyond FY22. Then, your second question was on free cash flow. How do you think about free cash flow into FY 'twenty two?
Well, I guess a couple of the key components of that. Firstly, We've been clear about our ambition in terms of underlying EBITDA growth, so that mid- to high single digit growth. That's an important factor in thinking about free cash flow. Obviously, we've been pretty clear also around CapEx and how we see that evolving from here Through to FY23, so 2 of the major factors. Obviously, working capital, we've seen a significant Shifting that in this half.
And I would just say, hardware volumes do play a really significant part in that as we've seen In the upgrade to our free cash flow outlook for this year. So working capital is the one, obviously, We'll be dependent on what happens with hardware volumes. And obviously, there's always a little bit of timing in that. But Kane, I would probably point you towards Our outlook on underlying EBITDA and our comments around CapEx probably give a good basis to start thinking about free cash into FY 'twenty two.
Thanks, Vicky. But maybe just on the productivity, is it still right to think about 100 of 1,000,000? Or With no sort of comment around what we should be putting in there for 'twenty three and 'twenty four.
Look, the comments we made at Investor Day right now are still consistent. Obviously, their ambitions and as we come and provide future guidance into FY 'twenty two,
Okay. Thanks, Kane. Our next question will be from Eric Choi from UBS. Go ahead, Eric.
Morning, guys, and thanks for the questions and good execution against targets so far. So well done. I've got 3 as well. I might go through them all at once. First question is, just what have you assumed in terms of roaming impacts reverting In your FY 2022 ambition, my guess is you wouldn't be assuming much.
So let's say you do the midpoint of your 2022 EBITDA of say 7 Point 2, a little bit infers getting to 7.5 by FY 'twenty three. It doesn't seem like much of a stretch, given might have a couple of 100 of roaming coming back and you just confirmed there's more cost out to come. Then obviously, there's no more or not much NBN drags in FY 'twenty three. That's Kind of the first question. 2nd question, just on the cost out upgrade.
I guess $200,000,000 of extra cost out should have lifted your ROIC by about 50 basis points, and it looks like we're still saying 8%. It might just be rounding, but I guess 7.5% ROIC implies 7.5 year EBITDA, Whereas 8% ROIC implies a number above. My question is, have you actually upgraded your internal budgets For that $200,000,000 cost out upgrade or is it just offsetting a weaker outlook elsewhere? And then The third question is on postpaid revenues. They're sort of sequentially down $50,000,000 first half twenty twenty one versus second half twenty twenty.
Can you just help me out with how much of a drag free things out of bundle roaming and new plan accounting impacts were? Because my back of the envelope suggests 3 together were easily over $100,000,000 so your underlying sequential growth was actually positive. And then going into the second half, is it fair to say those sort of roaming and new plan impacts sequentially become not much of a drag anymore? Sorry for the mouthful. Thanks very
much. No, thanks very much, Eric. And firstly, thanks for your kind words of support. That's appreciated. Ordinarily, we wouldn't provide those sort of, I guess, as specific an outlook in relation to EBITDA in FY 'twenty two and FY 23, and I made the point that they're not guidance just obviously because they're going to be subject to more Uncertainties and impacts as we look out into that time.
Nonetheless, I felt it was an important moment in time as we've sort of reached this Turning point that we do try and lay out a little bit of a roadmap as to how we potentially get to that $7,500,000,000 to $8,500,000,000 because I know just How important that is for shareholders because of partly because of how it sort of supports an underlying dividend at $0.16 on our current capital management Policy. So I'll hand over to Vicki and see if Vicki wants to involve Maybe Michael or David in any of her comments, but she can talk through the Give some indication of what we're doing on where we sort of see roaming, I guess, I mean, and how we're thinking about that as well as The cost out and how that benefits. I mean, I think the only thing I would say just in relation to ROIC, I know that the market was disappointed when we reduced our ROIC outlook from 10%. And I acknowledge that and we're pulling every lever. We've set the target at 8%.
We can see a path to get there, but I don't want to be sort of overly literal about Whether it's precisely 8.2% or 7.9% or whatever the number is, we're clearly focused on getting to Around 8%. And given that's at least a couple of years away, yet 2.5 years, I don't want to be sort of too Literal on the precise number. But Vicki, with those introductory comments, are you happy to try and tackle Eric's three questions?
I sure can. Thanks, Andy, and thanks, Eric, for those questions. So firstly, your first question around on international roaming in our outlook for FY22. The comment I would make that mid to high single digit Growth in underlying EBITDA is an ambition. The comment I'd make is international roaming could have No recovery from what we're seeing now, and we'd still be in that range.
I won't comment any further on Where we sit in that range because, obviously, we haven't given guidance yet on FY 'twenty two. It is an ambition. And so I would just say make that comment, Eric, that maybe is helpful. So no international roaming recovery and we would, still be within that range in how we think about that ambition for FY 2022. In terms of the cost out upgrade, I would just echo Andy's comment, remembering our ROIC target That we talked about at Investor Day is approximately 8%.
So to your point, there can be movements, small movements on that, but it remains Approximately 8%. And then, I know you had a detailed question on postpaid handheld and the component parts of it. Those things you mentioned around out of bundle revenue, the impact of the accounting changes, the belong dilution, the first comment I'd make on a PCP basis in the second half, we would expect that to be pretty consistent. Now I know you were asking a Sequential question. And I guess if I just look at what we've said today, firstly, we've said that postpaid handheld Our reported ARPU, we expect to return to growth in the second half.
And I'm pretty sure that will mean sequentially growing In terms of postpaid handheld reported ARPU, when you look at, what second half was last year. So, Maybe that helps just frame it up. I know you wanted to get into the details of the sequential movements in all of those component parts, but Perhaps that helps a little bit, Eric, with those questions.
It does help, Matt. Maybe we can take some of it offline. But appreciate the feedback is Vicki and Eddie.
Thanks, Eric. And if I could ask the analysts just to limit their questions to 2, that would be helpful. The next question is from Sameer Chopra from Bank of America Merrill Lynch.
Morning. I had just two questions. One is just on when we think about the sale of the towers business or the divestment of part of the towers business, What's the thinking in terms of capital structure? Do you think that will be that the proceeds will be used for debt reduction? Or do you see some way for the proceeds to find their way to shareholders?
That's kind of one. The second question is, Again, on the asset sales historically, as these assets are sold and then leaseback, how does that change Your operating cost structure, because I presume there's leaseback, which then means that your OpEx starts to go up over time.
Thanks very much, Samir. Again, I'll get Vicki to add her comments As well, but I mean on the sale of towers business, I think you can assume that we will look at the full sort of spectrum of options available to us partly Around strengthening the balance sheet, partly around investing in the future and partly around returning value to shareholders as well. And I would be surprised if There wasn't some element of returning some of the proceeds and value to shareholders. We know that would be an important element of this process. We'll obviously talk about more of the specifics of that when we get into the process in the second half of the year.
And then on the asset sale and Leaseback, I'll refer to Vicki because I know there's probably some complexities in the accounting there as well.
Thanks, Tammy. Thanks, Andy, and thanks Sameer for that. Just in terms of the asset sales and the leasebacks, firstly, yes, our outlooks obviously factor in those costs Sit below the EBITDA line in D and A now under AASB 16, but all of that is factored in as we think about those ambitions into
The next question is from Quohai Guang Peng from CLSA.
Good morning. First question, just on the Belong Postpaid net adds, I mean, there was only 22,000 added in the period. Just wondering that's a lot lower than sort of previous periods. Any particular reason for that? And then second question, on the changes to your retail footprint, could you make any comments about what that means for your CapEx or costs?
Thanks.
Thank you. Maybe I'll get Michael Ackland to Comment on both sides, Michael?
Yes. Thanks, Andy. On the first one on Belong, We removed the $10 price point from market, which represented a significant Proportion of net adds in previous periods. And so we're very happy with our Belong Net adds and as Vicki said, as well as the ongoing impact on ARPU from the changes we've made in market. I might refer Vicky back to you on cost and CapEx impacts of the retail announcement if that's okay.
Yeah, absolutely. Thanks, Michael, and thanks, Craig, for that question. So, Craig, just to pick up, in terms of the retail footprint changes, we obviously I'm not talking today about the financial aspects of that because, the announcement has been, obviously, That, we're not renewing the licensee agreements and looking at that transition of the stores back in. The things I would call out though As you start to turn your mind to it, through that transition, we obviously pay commissions to our channels today For the activity that happens in those stores, that will move across and obviously becomes, operating costs for us as we Transition store leases and staff to be directly employed by us. And then, obviously, the other factor that we will come back and talk more about, Given we've only just announced it today and there's many discussions and negotiations and things to be worked through is, obviously, there will be cash involved in the buyback Of those stores.
And so we'll come back and talk more about that at the full year.
Okay. Thank you.
Great. Thank you. Our next question is from Entre Rakowski from Credit Suisse.
Good morning all. So my two questions. Firstly, on TMMC. Interested in whether you've seen any significant An improvement in TMMC at the end of the first half. I'm just conscious that you were guiding to a $2 increase back in November at the Investor Day.
It's now up $3 And then if you can make comments around what you're seeing into the second half so far and whether your expectation Genev, the $3 increase into 2H includes some moderation. I guess what I'm trying to get to is, Are you being somewhat conservative given there seems to be that acceleration towards the end of the first half? And then my second question is A broader question on industry structure. I mean, Andy, in particular, I'd be interested in your view on whether you think returns in the industry as a whole Can you improve from here? Obviously, you've got your own right target, but talking about the industry as a whole, or whether you think the NBN means that Those that much lower returns are likely to persist.
Thank you.
Thanks very much, Ensho, I might refer to Michael and Vicki on the TMMC thing. I think a lot to do with our success in 5 gs strategy. But Michael and Vicky, do you want to comment on that? And I'll come back and make a comment on the industry structure point.
Sure. Why don't I go first and then Vicki can add detail. I mean, I think from a market and competitive Position, we absolutely saw an acceleration in the back half of the 2nd quarter, post the iPhone launch particularly, where we saw A strong uptake as we talked about at Investor Day that we're expecting around the $65 and above plan with people taking 5 gs plans. So We saw that continue. As we look into the second half, there are further device launches such as the Samsung Device and we're seeing continued strong demand around those 5 gs plants.
So I think The strength of the 5 gs story was definitely an acceleration on that in the second half and obviously late in In that second quarter, given the delayed iPhone option.
Yes. And if I just add Michael.
And sorry, Encho's question is, are we being conservative with our $3 outlook for the second half?
Do you want me to answer that one, Andy? Or Michael, do you want to Yes, please. Yeah. Why don't I talk to that? I think as Michael has highlighted and show, there's no doubt TMMC across Can move around month to month, just dependent on launches of devices and mix of plans.
What I would say is, in terms of that second half, It is another $3 lift, PCP. We are confident in that, and it is consistent with what we're seeing in the Early part of this half in trading conditions. So, I wouldn't say we're conservative. I think we're confident though that, that another $3 increase is reasonable and certainly accords with what we're seeing in early trading for this half.
Just, Ancho, to your comment on industry structure. I mean, obviously, it's not just us that's faced the headwind of The migration to the NBN, I mean, others in the industry have also faced it as well. We It's been more significant for us partly because of our scale, but also of course because we were the wholesale provider of fixed broadband services in Australia. So We lose the wholesale business and a very different margin on our retail business compared with the other players typically in domain. It's Just a different margin on their retail business.
As we sort of talked about, that is still washing through. For us, The NBN headwind will be it's obviously lower this year than last year. It will be quite a bit lower again Next year, and there's no reason why it wouldn't sort of follow a similar pattern for the rest of the operators in the market. And of course, Enterprise as well, it's probably coming through at the tail end of the rollout of NBN In terms of the impact relative to perhaps consumer and small business, so I think there will continue to be pressure on ROICs For the industry as that happens, and then hopefully from there, certainly we're Our forecasting that our ROIC will start to improve. That's probably more to do with mobile than it is to do with fixed, although as you know, we are targeting A mid teens reseller margin on fixed as well.
And so we will see, I think, some improvement in Roark, and I guess others will as well. But I do still think my comments that overall industry economics are challenged Remains, and I do think that with the NBN rollout now complete, it is the right time To as I've spoken about before, to review the pricing structure because Stephen Brewer, I think, and his team have done a good job in terms of I want to acknowledge that in terms of the rollout. And we saw NBN's results obviously Yesterday, and I think it's important that we get the economics of the whole industry right, because it's going to be the infrastructure is going to be crucial To obviously underpinning the growth in the digital economy for the whole of Australia.
Thank you. Our next question comes from Fraser McLeish from MST Marquee. Go ahead, Fraser.
Great. Thanks. And thanks So the comments on FY 'twenty two sort of aspirations, very helpful. But 2 for me. First, Andy, just on InfraCo monetization, you've obviously got a firm commitment on the towers.
But after that, I know there's no commitments. But is it fair to say there's a kind of broad aspiration to monetize the other parts of InfraCore? Or is or am I reading too much into that at this stage? And then my second one is just maybe for Michael on the 5 gs point you got on 5 gs, that $65 price point. NAR, Optus or Vodafone are charging a premium for 5 gs and they're obviously going to kind of narrow that network gap with their coverage.
Do you think that 65 Fuller, price point is sustainable. Thanks.
Thanks, Fraser. I'll let Michael come back To the $65 price point, they're not narrowing it at the moment. I think we're broadening it. And I think our plans are to continue to Lead with our superiority in 5 gs. So I'm confident that Michael can continue to sustain that for a while anyway.
So but I'll let him speak Specifically on it. On the InfraCo monetization, I mean, obviously, as you guys all know because you're very experienced with these things that The group restructure is pretty complex exercise. We'll talk about the steps that we need to go through When we come back and talk a bit more about that in March, that's our fundamental focus for now on that. With towers, I think towers It's following a sort of a parallel path, if you like, and that's a little bit more straightforward. So we're confident we can move forward on the monetization there.
Suffice to say, we wouldn't be doing this on InfraCo if we weren't looking to try and maximize value for shareholders. And so Setting it up in this way really does that. I think gives us the potential to do that as well as create transparency and increase optionality. And We've talked about the different types of optionality on that. So without sort of going as far as saying, yes, we're committed to do a monetization initiative On InfraCo fixed when we've set up the restructure, I would say that obviously we'll be looking at ways in which we then Crystallize and maximize that value once we've done that.
But we want to go through the steps of actually setting the thing up first because there's quite a bit of complexity in doing that. But Michael, do you want to anything you want to add on the 5 gs, our continued leadership over the rest of the industry and The wonders of the Telstra 5 gs network and population coverage and all those great things.
Yes. No, absolutely. And I think we talked about this at Investor Day, which is that we remain confident that we can continue to demand that premium for the 5 gs experience. I mean, Largely driven about around coverage and as Andy pointed out, the speed experience we've got across both our 4 gs and 5 gs network. So It's one thing to not charge a premium for 5 gs if you're our competitors, which I think is probably reasonable from their perspective given We're sort of at what we feel like to a consumer in order of magnitude difference in coverage.
So I think our target to get to 75% population coverage by the end of the financial year, which we've talked about before is incredibly Significant in terms of doing that. All of that said though, we do not rest on our laurels there and we are continuing to work on The network experiences and the other experiences we can give to support that premium, we recognize that continues to be important. But I agree with Daniel. I don't think where the gap is yet narrowing. And coverage in mobile networks It is absolutely the critical differentiator.
If you can't get access to that very fast 5 gs network, then there's not much Good morning, Gaynor. So we're focused on it. I think we can maintain it. But we're not resting on our laurels and we have a pipeline of activity to continue to All that, Premier.
Great. Thank you. Our next question is from Roger Samuel from Jefferies. Go ahead, Roger.
Hi, good morning guys. Thanks for the questions. First one is around fixed enterprise. I'm just concerned that this division keeps on declining Over time, and I'm just wondering when it was stabilized. It looks like in dollar and connectivity, there's still a lot of SIOs on copper.
And also on NAS, you mentioned about some legacy calling applications. Yes, I'm just wondering when This division will stabilize in terms of EBITDA. 2nd question is on tax rates, which is Lower in the half just passed. And I'm just wondering what's the sort of guidance for the tax rate in the second half? Do you still expect to use any of the capital losses?
Thanks, Roger. I might get David, who's with us, as I mentioned, who's recently taken over heading up the Enterprise division to comment on your question on Enterprise. And Vicki may have a comment to add, but then Vicki can definitely take the question on the tax rate. So thanks, Roger. David?
Thanks, Andy. Look, firstly to acknowledge it was a pretty tough half in the fixed enterprise segment. So don't want to shy away from that. We have so we break down your question as you asked Roger into 2 areas, data and IP. In at Investor Day in October, we did talk about that this is a space that we will continue to disrupt.
The market is being disrupted, we'll disrupt ourselves. And so we do expect some of this declining activity through to FY 'twenty four. We talked about that we'll have portfolio back into growth in the FY 'twenty four period of time. So from an but we did, as Andy also mentioned, launch Later in the year, our adaptive networks portfolio of offerings, which is designed around our own Telstra Fiber and NBN offerings, Which we're very excited about. We're late in the half, so we're looking forward to the actions and improvements from that area.
Secondly, in and around the NAS questions that you had, we did see an acceleration in the decline of the Application calling platforms, and that had started pre COVID and it continued through that period of time. We also saw some pretty some expected milestones, but impacts in costs in and around some of our major contracts, They're one offs and we're confident and comfortable with that. And then lastly, as mentioned, the delay in some of the cost activities In supporting our employees and organization. And so, but there was also some fantastic green shoots in amongst That NAS performance, which is in line with our strategy around our managed services portfolio and our cloud portfolio, which are Very much part of our strategic direction. We call it our next generation growth or NGG in the NAS portfolio.
And then the other comment I'd give you is, we've announced in literally last week some of the actions around cost and cost management And reorganizing the enterprise business and the flow on activities that support those two portfolios. And as Vicki said, We're reaffirming that we'll have our NAS business back into the mid teens EBITDA margin in FY 'twenty 2. And lastly, I'll reconfirm what we talked about at the Investor Day was that as a portfolio of The enterprise business that's mobility data and IP NAS and international, we will get ourselves back to growth at both a revenue and an EBITDA line In totality in next fiscal year. So whilst it was a tough Half, again acknowledging that there are the green shoots that support our strategies and actions and even some actions of the last couple of weeks that I think Reaffirm where we've said we will hit in the next years to come. I don't know, Vicki, whether you've got anything you add to that?
Thanks David and thanks Roger for the question. The only I think David's covered it exceptionally well. Roger, I would just in the appendix There is a slide that does, summarize all of our product commitments and ambitions. It's updated from the one we showed at Investor Day. It's page, I think, 29 in the slide pack that we've issued called Building Momentum and Confidence.
So all of those things David just spoke about for the enterprise business plus more covering mobile, fixed wholesale, fixed NSB, etcetera, is all there summarized. So that may be a helpful one too just as you're working through your thinking. And then on your second question in relation to effective tax rate, yes, in the first half As you've rightly seen, our effective tax rate was low. That was purely due to some of those M and A and asset sales That resulted in us using, capital losses. And so our underlying effective tax rate, excluding those things, was close to 30%.
We obviously, for the second half, we don't give guidance on M and A, but I would continue to expect the underlying business To have an effective tax rate around that 30% mark, so, they might be helpful comments as you just think that through.
Yes, that's great. Thank you.
Great. Thank you. Our next question is from Ian Martin from New Street Research.
Good morning. Look, encouraging results. Just a couple of questions. Turning to mobile, I noticed on your website, you've got An upfront plan. And I've seen a few industry reports that suggest that might become the main form of financial Arrangement, particularly with the postpaid market.
I wonder if you can comment on that and whether that's got an ARPUL implication. Secondly, Looking at fixed, particularly fixed consumer, but also fixed enterprise and your expectations of declining headwinds, That seems contrary to what we've heard from NBN yesterday. They want about $800,000,000 in revenue next year, With I think about a $4 increase in blended ARPU and a $10 increase over 4 years, I don't know how realistic that is. But even the ambition to achieve that must create some uncertainties about what you might achieve In relation to better outcome once we get through this Indian migration.
Thanks very much, Ian. I'll get Michael just to talk about the upfront plan That you referred to in a second. Just a quick comment for me on the sort of the NBN ARPU point and the headwinds. When I'm referring to the headwind, I'm being sort of relatively well, not relatively, I'm being very literal in the sense of how we have defined The headwind, which is a function of the process of the migration to the NBN and the Previous calculations that we've and estimates that we've provided on that, I. E, up to sort of approximately $3,500,000,000 ultimately Of impact, and then we try to sort of update that every year or at least provide you the in year headwind.
So that sort of reflects the Migration, what you're obviously referring to is the ongoing plans of NBN to lift their ARPU, Which is effectively the cost that gets imposed on the rest of the industry and will flow through into our economics, you're absolutely spot on. Now you know my view on wholesale prices. They are too high, and you can see that playing out. And so therefore, that's why I think we believe now is the right time, particularly with the end of the rollout of the NBN to Review that pricing structure, and so we look forward to consulting with the NBN on that. As far as what it means for us Financially, certainly in our mid teens, NBN EBITDA margins, we are looking to Achieve that with what against the background of we've known what NBN's corporate plan is and what their ARPU Plans are certainly, I think, wherever that was going to get to about, I think, dollars 49 or so over the next period of time.
I think the challenge will be is that ultimately, part of that is probably going to mean that consumers are going to have to pay more. They're certainly going to have to pay more If ARPUs go up $10 that's for sure. But look, it is a further economic Headwind in that sense, but it's not part of the headwind that I was sort of referring to, which occurs in the process of the migration, if that makes sense. And we've got line of sight of it. So but with that said, why don't I hand over to Michael just to take that point on the upfront plan, and I'll see if Vicki has anything to add on what I just said around MBN impact on ARPUs and how that flows through into our outlook, etcetera.
But Michael, on the upfront plan?
Yes, sure. So, as both Andy and Vicki talked about, we've been progressively migrating our customer base On to our in market plans where we have one of our 20 plans, the no contract plans and no back book. So we Once you're on those plans, we don't have a back book and went to 70% of the way through the base. The next step of that was Is then moving those plants onto the new technology stack. And what we're seeing on the website with the upfront plans is some different constructs around The new technology stack and I probably refer to it as the next step in moving to that subscription model For service plans and giving customers absolute price certainty.
So our view is that that will not have an impact on ARPU and that the price and inclusions We'll be exactly the same as our in market plans as we move forward. But it is the next step of moving to that absolute price certainty, no back book, Simplified plans on the new technology stack. So what you're seeing is the digitization program really move into Absolute scale rollout as we start to talk about those plans. But I would think about it as this is the next step on the move to
And what's the time frame for that?
So we will start as we're piloting now, we'll be piloting and then over the next, I think 6 12 to 18 months, we will be migrating and moving customers Across onto the new technology stack as we've talked about previously, and from the Q4, we will be transacting On our new technology stack for new and We're contracting customers.
Thanks, Michael. Vicky, anything to add on my comments on The NBN ARPUs.
Yes. Thanks, Andy. Just I'd only add one comment, Ian, to what Andy said. As we look at those NBN headwinds that we estimate, A key input to that is the NBN corporate plan and their assumptions around wholesale pricing. So that's certainly an input and factored in As we look at those headwinds, but I think Andy has covered it very well.
So that's all I wanted to add, Andy.
Thanks, Ricky. Thanks, Ian.
Our next question is from Brian Han from Morningstar. Go ahead, Brian.
Thanks, Nathan. Andy, Given Optus' purchase of Amazing and the launch of GoMo and Felix by your competitors, How do you see the competitive landscape developing this year in that value end of the mobile space? And how do you think that will influence the pricing of all the mobile operators' main brands over the next couple of years? And if I could, second question in terms of the upcoming 5 gs spectrum auctions issue. Have there been any rumblings from the regulators in terms of Limits as to how much Telstra can bid for?
And how do you think the prices will compare this time around This is the 3.5 gigahertz a couple of years ago. Thanks.
Thanks, Svein. Thanks very much for your questions, Brian. On the second one first, just to knock that over. I cannot comment on views or pricing or anything else In relation to the Spectrum auction, ahead of the auction for governance Reasons, and I am not aware of any communication in relation to competition limits. So that's probably as much as I can say on 5 gs Spectrum not wanting to be unhelpful, but I am constrained because of our position.
On the value end of the market on The various different activities. I mean, I what I would say is I think it validated, frankly, our strategy that we employed 3 years ago, when we launched Belong, where we do see a little bit of a bifurcation in the market between the value end And the premium end. And so that's why our wholesale business and our Belong business, we're able to Complete at that end of the market, and we've done so successfully. I have another 160,000 odd subscribers on our MVNOs, which come under Brendan Reilly, who's here, and Brendan may want to comment on that in a second. But then also, obviously, with Belongers continue to grow Strongly, we took, as Michael said, the $10 plan out of the market.
That's reduced the activity a little bit, but we're doing that to endeavor to lift ARPU both at that end as well as at the premium end as well. And I think providing we continue to offer a premium differentiation, which is exactly what our 5 gs strategy and all of the other service aspects of the Telstra branded proposition provides, Then I think on the one hand, we can compete successfully at the value end for customer numbers and subscribers, but yet continue to Grow our branded end of the market as well, which we absolutely did in this half. And so I think It validates that strategy playing out. And I think what we're seeing is actually our competitors recognizing that too And looking to compete at either end of the market from their perspective as well. How that continues to play out, always hard to predict these things, but I think it's been exactly the right strategy for us and enables us to protect our premium on the one hand and offer Customers are very differentiated service at a different value point and yet continue to serve customers at the value end.
And Brendan, I'm not sure if there's anything else that you wanted to add, what you're seeing sort of in the wholesale side, but you had another successful half there.
Yes. Thanks, Andy. And to Brian, look, the MVNO part of the business is performing really well. Our trends over the last couple of years have been very, very consistent. They continue.
And we're ready to For our MVNO providers in market with whatever changes and adjustments they need to make to respond to all the market activity. But I think we're in a good position. We've got good momentum and I'm confident we can sustain it.
So Brendan, and then obviously and I think you know that we differentiate our network for the Telstra branded as well as Belong and the MVNO, so we not only we're differentiating obviously at the brand level, but we are actually differentiating at the customer experience level as well. Well, look, thanks very much, Brian. And Nathan, back to you.
Well, there's no more questions on the line. So with that, I will close the analyst and investor Q and A. We'll pause for a short break and then my colleague Nicole McKechnie will lead an M and A, sorry, a media Q and A. But before we do that, Andy, do you have any closing comments?
No, thanks very much, Nathan. Thanks to you. And just look, thanks to everybody for hooking in. And thanks to my colleagues, Vicki, David, Michael and Brendan. And next time we'll be talking to you will be in March, when we talk a bit more about the group restructure, and we'll have Brendan there.
I noticed we didn't get as many questions on that today, but that's probably because we foreshadowed making further Questions on that then and so we'll get to hear more from Brendan then as well. But thanks, David. Thanks, Michael. Thanks, Brendan, and thanks, Vicki. And thanks to the investment community for your support.
And good morning and welcome to the media part of our presentation this morning. Thanks very much for joining us. We do have Some media on the line. And just a reminder that if anyone does have questions to make sure you register and let us know that you're online and ready to ask. I think we do have one question so far from Lucas Baird from the AFR.
Go ahead, Lucas.
Hi, guys. I just wanted to ask about the T22 progress. I think you said You're still 20%, but you're still sort of behind the targets at the moment, not really on track to get to at the moment. I was just wondering what's the strategy to make sure you do reach those? And then Andy, specifically, what happens to you If you don't reach this sort of last 20% of T22, is 80% of T22 good enough for you?
Is your job on the line if you don't achieve 100% of T22? Is there any sort of perspective you can give us on that?
Thanks, Lucas, and thanks for joining us this morning. As you can imagine, with any large complex Transformation program, the nature of T22, it's there's a lot of measures. In fact, on our scorecard, I think we've got something like 60 measures, Which basically are tracking our progress in relation to digitization, customer experience, the financial returns, the Realization of assets, strengthening the balance sheet, transformation of our workforce, adopting agile ways of working. So it covers the whole spectrum. And pragmatically, you're not going to hit 100% of everything.
The most important thing though Is that we're holding ourselves accountable and we're measuring our progress. And I would say that being on track or having achieved 80% Of the goals that we've set ourselves is pretty good progress. And we will continue to focus on the ones where we're not. And I already touched on Some of those some of the stuff on digitization is right shifted a bit, but ultimately I'm very confident we're going to get the benefits from the digitization program. And again, In a systems build, we are spending $1,700,000,000 I challenge anyone to sort of deliver everything that they thought they were going to deliver exactly as On time and to budget.
And one of the things that we're doing with our T22 scorecard is it is externally audited so that we are very, very sort of literal in terms of Our progress. So I would say it's a good discipline. It's a good overall measure of how we're tracking. And ultimately, what's going to matter most As we transition to the completion of T22 and we announce what comes after T22 is actually how that translates into results For our customers, for our shareholders and for our people. And for our customers, we had some challenges with customer experience last year, but We're building momentum there.
Again, strategic NPS is up 5 points episode in sorry, for the 6 months, 11 points for the 12 months. And as we complete the digitization program, the migration, that's going to further continue to improve. We've talked about the other areas. We've upgraded our productivity targets. So I think in terms of how we're going to deliver our customers, I can see that coming through.
How we're delivering for our shareholders, I think, is very much embedded in the aspirations and ambitions that I talked about today about Mid to single high digit growth in underlying EBITDA next year and hitting that $7,500,000,000 to $8,500,000,000 EBITDA range for the year after. And for our people, our engagement scores are at very high levels at 80. So I think we're in good shape. And as far as my own plans, as I said, we look to announce at what comes after T22 in November and I Look forward to doing that.
Thanks, Lucas. Anything else from you? You all good?
Yes, I think that's it.
Okay, perfect. Moving on to Zoe Samios from The Sydney Morning Herald. Good morning, Zoe.
Good morning. And thanks, Andy and Vicki for the presentation. Just two questions from me. One is just Around the NBN COVID headwinds, I know you spoke about that before. But I just wondered if the worst of the NBN impact is now Behind for Telstra, just given the rollout pretty much near complete or I think there's only a couple of 1,000 I'm just that they have to fix things in.
And the second question was just around that announcement on the retail stores. Does that have anything to do with What occurred with some of the licensees and indigenous customers and the ACCC case last year?
Thanks very much, Zoe. Look, on the NBN headwinds, there's probably a couple of elements to it. The first is that Structurally, what the creation of the NBN means is that the NBN was created to effectively provide a service That Telstra used to provide. And so at a practical level, what that means is that we have been progressively transferring over to the NBN That part of our business. And because it's happened transitionally over time as the NBN has been rolled out, the financial consequences of that Have obviously been happening as it rolls out.
Now because NBN is they're technically complete, but that element of the headwind Doesn't change until everybody is connected. And so there's still some flow through of that to happen, which will go into our next financial year. But that element of the NBN headwind is largely behind us. So we can see the light at the end of the tunnel. And by the end of this calendar year, that's going to be largely Behind us.
Going forward, of course, every operator in the country Has to pay NBN for essentially the fixed infrastructure access to the fixed infrastructure, which sits behind the broadband services That they're providing our customers and providing to us, and then we resell that to our customers. If the NBN ARPU continues to increase. What that effectively means is that how much the operators are paying NBN for access to that Is increasing. And I think you heard from one of the analysts say today that NBN I didn't see this person myself. I haven't actually had a chance to go through it, but NBN Foreshadowing that ARPU to increase $4 in the next period and up to $10 over the next 3 to 4 years.
I think That's going to translate directly into cost into the industry. And unless the industry obviously increases retail prices and passes that on to customers, That does create an element of a headwind, and that will continue to be the case if that ARPU continues to increase, which is why I say I think now is the right time to very much review That pricing, I know that NBN are considering a pricing consultation. I think they may have even announced it or Certainly, it has been referenced yesterday from what I can observe. And then on the second point, about bringing the retail stores back in house, Fundamentally, this is about really thinking about what's the next stage of the retail experience and how do we really integrate that with what we're doing Digitally as well, it does give us much more control and consistency over the retail experience That we provide. And yes, there's no doubt that it will also help us, I believe, mitigate that type of situation that we do refer to where Some of our licensee stores unfortunately missold postpaid mobile handheld plans to A small number of indigenous customers, and it will enable us to have better control of that dynamic Within our network as well, but it's not the reason we're doing it, but it is one of the benefits that come from it as well.
Great. Thank you very much.
Thanks, Zoe.
Thanks, Zoe. We're going to move to Dave Swan. But just before I do, just a reminder, if you have any questions to press And make sure you register them. So Dave from The Australian, over to you.
Thanks, Nick, and thanks, guys, for the time. Couple of quick ones from me. Firstly, wanted to ask a bit about the dividends. And Obviously, for you, Andy, it's always a decision that needs to be made. Can you give us some color maybe just in terms of, I guess, The decision to keep it where it is, a bit of like sort of what went into that.
And secondly, I wanted to ask a bit about just You've had a couple of executives. The part of the last sort of 6 months to a year, Muffler Bede, Hawke and Ericsson, I wanted to ask if you're Sort of satisfied with the level of talent that you've got around you at the top.
Sure. And thanks very much, Dave, look, firstly, on the dividend, just a couple of comments. I mean, I think the first thing to say is that we understand and know and appreciate how Important the dividend is to our shareholders, to all shareholders, but we have a very large retail shareholder base as well, probably the largest of any company In the country, I think somewhere in the order of 1,300,000 shareholders, and we know that the dividend is particularly important to those retail shareholders as well. So we take any decision on it Very seriously. We know that to achieve $0.16 purely out of underlying earnings, We need our EBITDA to be in the range of $7,500,000,000 to $8,500,000,000 At the moment, it's not in that range.
However, we're able to afford the dividend because also got the benefit of the one off payments coming from the NBN, and we committed to provide 75% of those going back to shareholders as well. And as those run off, We need our underlying earnings to increase to that $7,500,000,000 to $8,500,000,000 range to make sure we a $0.16 dividend is sustainable in the context of the current Dividend policy and what I outlined today was the pathway for us to get there, which is why the directors were Happy to and believed it was important to communicate not only the interim dividend today, but confirm that we will pay a 0.16 dividend or we expect to pay a $0.16 dividend for FY 'twenty one even if we're outside of our range. The other thing that we can also actually point to It's a strong underlying free cash flow. So whilst our dividend policy is a function of underlying EBITDA, obviously, it needs to be funded out of free cash flow. It's $950,000,000 for an $0.08 dividend, so it's obviously $1,900,000,000 for a $0.16 all up for the year.
We had very strong free cash flow in the first half, up 88% to about 1,900,000,000 And as you heard, Vicki has increased the guidance for the second half to, I think it was $3,300,000,000 to $3,800,000,000 or in that Roughly in that range. And so therefore, whilst we're out of dividend policy in FY 'twenty one, the Board has the discretion to Make that decision to continue to pay. So that's some of the thinking and the factoring in. And I think it's unusual for the Board to Provide an outlook, if you like, on dividend even for the second half, which is what they did today, but that's just really in recognition of understanding the importance of that as well. In terms of the team, I'm incredibly pleased with my team.
They each of my direct reports, particularly those that are running A business unit, you need to put this in the context of Telstra, which is incredibly large business. Each of the businesses that they run is as big as any other pretty much Most of the companies in Australia, and so they're very, very senior executive. They are very challenging and demanding jobs. Just the enterprise business itself is an $8,000,000,000 business Going through technology and other disruption with very significant competitive dynamics, our retail business likewise very, very big business As well as of course our wholesale and InfraCo as well, they're all the biggest of their kind in the country in the sector. We've got very, very significant talent.
Not everybody is successful in those roles and not everybody It's not necessarily for everybody all of the time. It's an intense and demanding role, but I'm very pleased with the team. We've got very good talent in the team. And we've got some really good additional and new hires coming in as well. So I've never been happier with the team here at Telstra.
So thanks, Dave.
Thanks, Dave. Okay. Thank you. Next up, we've got Simon Dux from Commsday. Go ahead, Simon.
Hi there, Andy.
I just wanted to ask about the TowerCoast potential sale. And the key thing around there is, there's obviously a lot of institutional investment into tech at the moment. We've Got the news from Macquarie Meyer on Vocus. Aware Super have also had a couple of cracks and have talked about potentially a 200,000,000,000 Fund, they're looking to put somewhere. My question is, are you comfortable with the timing?
Or is there a fact That you could potentially accelerate the timing of bringing Talaco to market. And The reason I'm asking is also there are potential threats around the tech bubble burst with an antitrust case Starting to kick something off a bit later in the year. And does that have you in danger of potentially not maximizing the return?
Yes. No, look, thanks very much for the question. Firstly, no, I'm not concerned about the timing, and I don't necessarily think we should accelerate it. I think What we have seen, I mean, I think it's been a trend over a decade or so. But in particular, over the last 4 years, we've seen very, very strong interest in Underlying infrastructure assets, as interest rates have come down dramatically globally, and notwithstanding all of the challenges of COVID and the economic consequences of it, The weight of capital that is available that is looking for secure returns, albeit lower returns than maybe historically, It's very, very significant.
And infrastructure assets stack up really well in the context of that. And of course, the reason telco infrastructure assets are so in demand, if you like, is because people know that Regardless of the sort of, I guess, the fortunes of the various different competitors in the telecom industry, the one thing that's not going to change It's the demand for growth in connectivity and the ground for growth in coverage and mobile connectivity. And We've got a as I said, we've got the largest mobile tower business in the country. It's incredibly strategically important to us. It's very much intricately linked with the success of our mobiles business, which is not only the best in Australia but one of the best globally As well.
And so we need to set this up in a way that we maximize the value of the towers for our shareholders, but we also ensure that we Maintain our strategic competitive advantage and differentiation and all the things that we've invested in from the point of view of Telstra. And I commenting on a tech bubble burst or not, I mean, I wouldn't make a comment on whether there would be 1 or isn't That sort of thing, there's people that follow this more closely than I do from the investment point of view to be better informed. But I don't think That's going to change any of the underlying dynamics regarding ultimately the demand for infrastructure assets and their importance Going forward into the future, if that helps. So our timing is we're well progressed. There's a lot of work involved, a lot of due diligence and stuff I need to get ready, but we expect to launch the necessary documentation and the process of the actual Engaging with potential investors in the Q3 of this year, which isn't very far away, obviously, and then with binding offers in the final quarter.
Thanks, Simon. Okay. And next up, we've got Jen Hewitt from the AFR. Hi, Jen.
Good morning. I know that you've talked about this before, Andy, but I'm just still perplexed By this kind of seems to be very, very different approach by NBN and by you, you say the time is right for Renegotiating the price structure, but that seems to be absolutely not in NBN's repertoire In terms of raising its own ARPU, so do you think that there is any alternative but really for consumers To be paying more for their services. And then on the mobile market, again, I can't I think you said 70% or so were on the $65 plan at least. Do you think Can you see prices for the mobile market in the premium end either declining? Or are they going to go or staying flat?
Or are they going to just continue to increase 2, along with Services.
Thanks, Jen. Look, on the first one, Ultimately, you're right. If EMEA and ARPUs continue to increase in line with the pricing structure, Consumers will have to pay more. That is the bottom line. In fact, if you model it out to the second half of this Decade, in fact, and they continue to use the same structure.
Wholesale prices will be higher than current retail prices. So that's obviously Not as sustainable. It doesn't matter how much the operators reduce their costs. That's just obviously not going to be sustainable. So something has to give.
And I believe that NBN have foreshadowed that they will enter into A pricing consultation. They obviously are not committing to where that's going to end up, but I hope that through that pricing consultation, we can start to see Some reasonable changes that actually lead to an industry where consumers can win and so they don't have to face Significant increases or increases to access. The operators can win, so they can actually make a return on capital that Means that they can satisfy their shareholders. And then ultimately, the NBN, which I accept and I know, and this will be Stephen's point, needs to generate Free cash flow to focus on upgrading the network over the long term as well. So that pricing consultation discussion is going to be very important, and I strongly encourage That to occur.
On the second point on mobiles, in fact, what we call sort of mobile ARPUs, which is a bit of a function of The weighted average of pricing has in fact been coming down over the last few years since Since about 2015, 2016 and at the same time customers have been getting more For the price, if you like, by virtue of the they're getting more data. And if you think about 3 or 4 years ago, we were talking about Data volumes or data packages, if you like, on some of the higher value plans of about 1 or 2 gigas of data Per month now, we're not allowed to call out data plans unlimited. But at a practical level, there are no excess data charges on our Plans, new plans in the market for mobile customers. So they are getting more, and prices have Come down. I think they probably come down too much to basically be able to afford the reinvestment in 5 gs and stuff.
So We are seeing a little bit of a change in a move to customers paying a bit more at the moment, but they also Going to the higher value plans because it's giving him access to 5 gs and some of the other services as well.
Okay. And just on that last point, the idea that you'll get a margin get back to a margin of mid teens Reasonably quickly, again, I can't quite see that seems to be overly optimistic, doesn't it, given you're only on 5% now?
We've Jim, we've got to take more cost out. That's what we've got to do to get there as well as move customers up some of the higher Tier plans and try and monetize some of the other aspects of the service. I mean things like the smart modem that we provide, which is in 80% of our customers' homes, it's actually quite an expensive Device, and it offers a great service because when the NBN goes down, which it does, it basically makes Customers continue to be connected. So we've got to find ways to monetize the other value that we provide, the Wi Fi guarantee that we're providing as well, increasingly Entertainment, Telstra TV. So overall, we can see a path to getting to midteens EBITDA margins, but you're right, that will continue to be challenged if the MB and ARPUs just relentlessly keep going up every year.
Thank you.
Thanks, Jen.
Thanks, Jen. We don't have any further questions. I will just do one quick call to make sure that No one else has anything burning on Star 1 but, if I don't have anything come back in the next couple of Seconds or so then we might call it. No, we're going to call it. Alright.
Thanks everyone for joining today and have a great day. Appreciate your time. Cheers.