TELSTRA GROUP LIMITED — AGM Information 2003

Nov 13, 2003

14 November 2003

The Manager

Company Announcements Office Australian Stock Exchange 10th Floor, 20 Bond Street SYDNEY NSW 2000

Office of the Company Secretary

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

Telephone 03 9634 6400 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Chairman and Chief Executive Officer's presentations

In accordance with Listing Rule 3.13.3, I enclose the Chairman and CEO's presentations to shareholders, which will be delivered today at the Telstra Corporation Limited 2003 Annual General Meeting.

Yours sincerely

Pont Grati

Douglas Gration Company Secretary

Telstra Corporation Limited ACN 051 775 556 ABN 33 051 775 556

TELSTRA ANNUAL GENERAL MEETING 2003

MR BOB MANSFIELD, CHAIRMAN, ADDRESS TO SHAREHOLDERS

Introduction

• Good morning ladies and gentlemen.
• . I'm Bob Mansfield the Chairman of your company and I welcome you to the 2003 Annual General Meeting of Telstra Corporation Limited.
• I also welcome those shareholders viewing via the webcast from our Investor Relations website, which is becoming more popular every year as shareholders get used to these new technologies.
• A quorum is present and I declare this Annual General Meeting open.
• I would once again like to start by introducing the Telstra Board members, senior Telstra executives and the company's auditor, here today.
• From my left we have: $\bullet$
• William Owens a Director for two years.
• Sam Chisholm Sam has been a Director for three years.
• Catherine Livingstone also a Director for three years. $\bullet$ .
• Charles Macek a Director for two years.
• Donald McGauchie a Director since 1998. Ch. TCW.
• John Ralph a Director and Deputy Chairman since 1996. $\bullet$
• Ziggy Switkowski Managing Director and Chief Executive Officer.
• John Stanhope Chief Financial Officer, appointed in October this year. a 30+ year veteran.
• John Stocker a Director since 1996 and currently Chairman of the Audit Committee. $\bullet$ .
• Tony Clark a Director since 1996.
• Belinda Hutchinson a Director for two years.
• John Fletcher a Director for three years. $\bullet$ .
• Bruce Akhurst Group General Counsel.
• Douglas Gration Our Company Secretary.

• Welcome also to Mr Michael Watson, from the Australian National Audit Office, our external auditors.

• And I want to thank once again our Telstra Friends, who would have greeted many of you $\bullet$ when you arrived today. They do a wonderful job, volunteering their own time at numerous events every year. We very much appreciate their assistance here today.

• I will start by outlining the procedure for today's meeting before providing you with an $\bullet$ overview of your Company.
• * As usual, I will be followed by a report from the Chief Executive Officer, Ziggy Switkowski, who will discuss the company's operations for the financial year ended 30 June 2003, and some emerging business trends.
• At the conclusion of Ziggy's formal speech, the meeting will consider the remaining items on $\bullet$ the agenda, specifically:
• The election and re-election of Directors. $\bullet$
• Directors' remuneration.
• Amendment to Telstra's constitution.
• Consideration of the financial statements, and your questions.
• We have placed these three items before the discussion of the financial statements and that's so those who are not able to attend the entire meeting can exercise their right to vote.
• I will not be stopping the meeting for lunch, but after the poll, some of you may wish to enjoy the light lunch being served in the foyer. Please feel free to do so.
• We will announce the poll results during the discussion of the financial statements.
• Once again, in the interest of all shareholders, I'll be trying to ensure that the meeting $\bullet$ concludes at a reasonable time, but we are in your hands on this matter.
• We always appreciate your comments on improvements we can make for future Annual General Meetings.
• I invite you to complete the questionnaire you were given for this purpose when you registered $\bullet$ for the meeting, and place it in the questionnaire boxes at the exits. We appreciate your feedback.

Overview

• I would now like to move on to give you an overview of your Company. ۰
• Telstra's evolution as a safe, solid and progressive company continues in an environment that could still be summarised as emerging from challenging times for the industry, on a global basis.
• This progress is due in no small part to the company's capacity to confront and adapt to the very real competitive and regulatory pressures of the market place.

• Competition has meant that our market share today is somewhere between 60 and 65 per cent. $\bullet$ But it's the view of Management and the Board that predictions of further market share erosion are misplaced. There is no law of economics or nature that says Telstra has to continue to lose market share.

• Indeed, we are very focused on putting in place further programs designed to not only stabilise $\bullet$ our market share, but also to recover ground lost to competition - this remains a permanent challenge in this very competitive industry.

• I'm pleased to be able to say that the regulatory environment has settled down considerably. $\bullet$ Requlatory issues are important in this industry, but many of the big requlatory decisions have been taken in the last year and a half.
• It is pleasing that, as this competitive industry matures, there is a recognition emerging on the $\bullet$ part of all industry players - Telstra and its competitors - that commercially negotiated and agreed solutions provide better outcomes for carriers and consumers alike.
• This is a robust industry and there will always be requlatory issues. You can be confident, that as we have in the past, your Board and senior management team will have shareholder interests at heart as they manage the Company through such challenges.
• As we continue our response to the ongoing competitive and regulatory pressures and in some ways as a direct result of them - Telstra is achievina new standards of technical excellence, commercial efficiency and customer service delivery.
• We seek to be Australia's connection to the future. Our mission is to develop, design and deliver great communications solutions to every customer.
• And we are convinced that the way to do that is as a full service, fully integrated provider. ۰
• It's the model that provides customers maximum choice and value through our suite of ۰ bundled products and services.
• It gives the Company diversity of income, margin protection and an improved bottom line. $\ddot{\Phi}$
• It's the model that will increase shareholder value in a sustainable way. Ġ
• And it's the model that has helped Telstra to be one of the strongest performing telcos in the ۰ world over recent years. Something we are very proud of during an extended period of Industry uncertainty around the globe.
• Let me just remind everybody that Telstra's contribution to the Australian community is wide d. ranging. We matter to Australia and, equally, Australia matters to us.
• $\bullet$ We believe that being a successful company is not just about financial performance, even though that is obviously a critical factor. It is also about being a good corporate citizen, living the Telstra Values in every decision we make, every day.
• To this end, we have decided to formally report on our performance in areas that fall into our ۰ definition of Corporate Social Responsibility
• o Community
• o Environment
• o Economy; and
• o Industry.

This first report has now been produced and copies are available in the foyer so feel free to take one.

We are also proud of the fact that we have produced this report because we felt it was ۰ important to do so - NOT because we were required to by any external authority.

• Ladies and gentlemen, this is a genuinely exciting industry. $\bullet$
• $\bullet$ And with communications being more a part of people's everyday lives than ever before, the outlook for the industry is positive.
• And so is the outlook for your Company, Telstra. ۰
• We do not claim to be perfect. But we have become very energised in our pursuit of excellence on behalf of our customers. They are our main game as we continually strive to improve our performance.
• The facts are, that Telstra today, is delivering the highest levels of achievement in the history $\bullet$ of the Company in the following areas:
• o Customer Service measurements
• o Profitabilitu
• o Levels of dividends paid to Shareholders
• However, looking to the future, it's simply not good enough to sit still and presume we will stay as successful as we are. To sit still, in the medium and long term, is to risk going backwards!
• In order to prevent simply being eaten away by Regulatory and Competitive realities in the ۰ market place, we have to actively pursue growth - well-considered, profitable growth through a range of initiatives. These include -
• Expanding the range of products and services we offer to all our customers, particular $(1)$ with the latest broadband and wireless offerings.
• $(2)$ Better exploiting our own intellectual property. We've always had good ideas - many of them born out of Telstra Research Laboratories, our world-leading research and development facility, which celebrated its 80^th anniversary a few weeks ago.

But we have often struggled to commercialise those ideas. We want to get more homegrown products to market over coming years - it would be great for Telstra and great for Australia if we can achieve this goal.

• $(3)$ We will be enhancing our relationships with partners, including our existing suppliers, and actively exploring joint opportunities.
• Developing infrastructure and investment strategies that are optimised for return on $(4)$ investment in the selection of technologies and platforms.
• At the same time, the disciplined financial management will continue, as will the costs $(5)$ rigour. We will continue to focus heavily on capital expenditure and productivity improvements.
• $(6)$ And we will continue our methodical approach to seek investments that can add to shareholder value - this will be an important element of Telstra's ongoing strategic challenge.
• The absolute key is to get these decisions right and that is what we are focused on. I am sure ۰ you all agree on that.
• I am confident that this strategy will enable us to build on Telstra's sound financial health -۰ something the Board and Management are absolutely committed to doing.

Share Buy-back

• In 2003, the Board declared:
• $\circ$ a final 12 cent dividend
• o which when you add to the 12 cents in the first half
• o and the 3 cent special dividend, makes for a 27 cent dividend for the year
• That's some \$3.5 billion in total.
• This figure is one of the largest dividend payments of any Company in Australia, another benchmark of which we are proud.
• The strong cash flow position of the Company also provides the directors with the opportunity to return capital to shareholders in the form of an off-market share buy-back, in the range of \$800 million-\$1 billion.
• You should have all received a booklet in the mail recently that carefully explains the process $\bullet$ of an off-market buy-back, the rationale behind it, and how the buy-back may affect you as shareholders.
• There are a number of points I would like to emphasise: $\bullet$
• The Board recognises that the considerations in making a decision can be somewhat $\bullet$ complex, and primarily depend on an individual shareholder's own particular circumstances.
• We urge all Shareholders to seek their own independent expert advice if they require assistance on this important decision.
• . As shareholders you have complete flexibility in determining whether you would like to participate in the buy-back. The board of Telstra believes the buy-back is beneficial for all shareholders, whether or not you participate.
• For those who retain their Telstra shares, earnings per share and return on equity are expected $\bullet$ to increase, while participating shareholders will receive a tax effective dividend component as part of the buu-back price.
• Telstra's buy-back has been specifically designed with our smaller shareholders in mind. ٠
• . Any share scale-back that may be required has been structured to protect smaller shareholdings, and participating shareholders do not need to appoint a stockbroker.
• $\bullet$ As I have mentioned, the buy-back will affect all shareholders differently, depending on factors such as:
• o the price at which you purchased your shares
• o the price at which you tender your shares
• o and your personal, company or superannuation fund's tax rate.
• So once again, it is important that you receive individual advice in relation to this matter.

• Shareholders should also understand that the buy-back is a vote of confidence in Telstra's ۰ future. It is a conservative and appropriate response to the strength of your Company's cash flows and its success in controlling capital expenditure and costs.

• The Board is confident that the buy-back is complementary to the company's growth strategy, $\bullet$ and that we have retained sufficient flexibility to pursue attractive opportunities as and when they present themselves.

• If you haven't already done so, please take the time to read all the materials, and consult your financial adviser as required.
• . There is also a help line number listed in the documentation you have received if you need any assistance on this important matter.
• * As you know, the tender period is open until 7pm on Friday 21 November that's next Friday. If uou have completed your buy-back forms and have them with you today, please feel free to leave them with the registry staff outside the meeting.
• We will be communicating the results of the share buy-back tender no later than 25 November $\bullet$ 2003.

CEO Re-appointment / Executive Remuneration

• I was very pleased to recently announce that the Board has reappointed Ziggy Switkowski as Chief Executive Officer for a further term until December 31, 2007.
• Ziggy has developed an outstanding executive team, and made great strides in the $\bullet$ transformation of the company into an organisation dedicated to high level customer service.
• He has Telstra well positioned for future success, and the Board and I look forward to working $\bullet$ with him on the next stage of Telstra's development.
• Consistent with best practice corporate governance the details of Ziggy's contract were fully $\bullet$ disclosed at the time of his re-appointment. The details are also available on our corporate website.
• There are well-defined performance hurdles in Ziggy's package. ۰
• That is, Ziggy's package is structured to give him every incentive to deliver outstanding long-۰ term returns to you as shareholders. He will only receive his maximum package if he delivers truly exceptional performance.
• I would also like to address the question of termination benefits. There has rightly been significant scrutiny and some criticism of "golden parachutes" and other devices in executive contracts that are perceived to reward failure.
• There are no such devices in Ziggy's contract or the contracts of any other Telstra executives. We have fully disclosed the termination arrangements in Ziggy's contract.
• As with other very senior executives in the company, Ziggy is entitled to 6 months' notice of termination, or pay in lieu, together with a maximum termination payment equal to 12 months of his fixed remuneration.

• The Board is confident that these arrangements are conservative and appropriate, and that they compare favourably to peer group companies which represent the market place we have to deal with.

• On the general matter of Executive Remuneration, shareholders understandably have concerns $\bullet$ in some areas.

• $\bullet$ Let me make some summary comments in relation to Telstra's position on these matters:
• o There has, just in the last couple of weeks, been considerable analysis and commentary in the media on Executive Remuneration comparisons.
• o I was further reassured that despite being the largest, and I would suggest to you, possibly one of the most complex companies in the country, Telstra salary levels were conservatively positioned relative to any objective comparison one would like to make with our peer group.
• Yes, the salary figures are large the market place realities are something we have to deal with, whether we like it or not.
• o We must be able to attract and retain the right calibre of management to run this company.
• o However, I assure all Shareholders that the Board gives these matters considerable focus in order to strike the right balance.
• o Finally, in the next few months, we are undertaking a fresh review of our Remuneration matters to see if we can achieve the goal of simplifying them somewhat - we know this would assist Shareholders as they evaluate these important issues.

Corporate Governance

• Telstra continues to follow the highest standards in corporate governance and transparency issues that are very much in the news these days.
• . We do so not because we have to but because we genuinely believe it's the right thing to do.
• . As I have mentioned in previous years, the first two sell downs of Telstra shares by the Commonwealth brought with them wide ranging due diligence, assurance and review of Telstra's processes. These things are now a natural part of the way we do things at Telstra.
• Our accounting practices are conservative, and our audit arrangements are robust and $\bullet$ independent. We certainly don't see corporate governance as simply a box ticking exercise.
• In October, the Treasurer released for public consultation, a draft Bill continuing the work of $\bullet$ . the government's Corporate Law Economic Reform Program (also known as CLERP).
• The Government's stated underlying objective of the draft Bill is to "improve the operation of the market by promoting transparency, accountability and shareholder rights".
• Telstra generally supports the enhanced corporate governance initiatives in CLERP 9, and we $\bullet$ are well positioned to meet the new requirements as they currently stand, most of which are consistent with Telstra's existing practices.
• We do, however, believe that a number of elements of the draft require further consideration and have expressed our views in a submission on the draft Bill.

• Another item of interest to Shareholders is that in June this year, we introduced the Telstra Whistleblowing Service in accordance with a new whistleblowing policy.

• This policy provides a confidential and anonymous process through an external service provider for Telstra employees to raise any concerns they may have with illegal, unethical or improper business behaviour within Telstra.

• The Audit Committee receives regular reports as to the operation of the policy. $\bullet$
• This year we have also established a new Board Sub-committee to focus on technology an $\bullet$ absolute key priority for the company.
• The Board reqularly reviews its own performance and the performance of its committees. $\bullet$
• In 2003, the Board again engaged an external consultant, Rosemary Grieve and Associates, to $\bullet$ meet independently with each of the directors to assist in evaluating the performance of the Board and its committees.
• This is one of a number of initiatives utilised in this area of Board evaluation.
• The consultant's independent review concluded that your company has a well functioning and focused Board, and I can assure you all that directors will be working hard to maintain that performance.

Directors' Remuneration

• $\bullet$ Directors' remuneration is one of the items of business for discussion later in the meeting. Prior to that discussion, I simply want to make the point that Telstra clearly recognises its responsibility in this area that is understandably receiving so much Shareholder and Media attention right now.
• The fact is, we are positioned conservatively amongst the corporate community we are part of, in relation to any of the remuneration metrics.
• . At Telstra, we haven't asked shareholders to increase directors' remuneration since 1999.
• We are seeking approximately a 15% increase the Board feels this is a very reasonable and ۰ warranted increase over a 4-5 year period, given the significant responsibilities that the position of Director involves.
• In fact, this increase has really only accounted for movements in inflation and general wage increases - again, very conservative.
• I look forward to discussing this question with shareholders when this item of business is covered later in the meeting.

$\mathbf{L}$

• I have repeatedly told Shareholders that the Telstra Board supports the sell down of the $\bullet$ Commonwealth's remaining shareholding in Telstra. But T3 is a matter for the Government and the Parliament. So there's not a lot I can add, as the Board's position remains the same.

• $\bullet$ This is a great company and we look forward to the day when Telstra can also be a "normal" company, free of the political commentary and associated microscopic media attention that we are currently subjected to - unlike any other company in the country.

• $\bullet$ But I do reiterate what I regard as a critical point. Telstra's performance as a service organisation has nothing to do with who owns it.

• $\bullet$ Controls on Telstra and its service delivery won't collapse if the Commonwealth sells Telstra. Nor will the industry watchdogs suddenly disappear. And nor will Telstra's unwavering commitment to all its customers.
• The Government can control Telstra as it does to some extent other companies in the industry, $\bullet$ through a regulatory environment that covers such things as:
• o the provision of standard telephone services throughout Australia
• $\circ$ repairing faults
• o supplying services within a certain time, and
• o containing price increases.
• Such regulations would remain in place.
• The Government doesn't need to have ownership to require us to do these things.

Shareholders

• We announced earlier in the year that we are moving away from payment of shareholder $\bullet$ dividends by cheque, in favour of paying all our Australian and New Zealand shareholders by direct credit.
• It's fast, efficient and cost-effective exactly the short of change we search for in all aspects of $\bullet$ . the Company's activities.
• This move will result in savings for the Company and ensures shareholders receive their dividend swiftly and securely.
• It will mean that we don't have to pay millions of dollars each year to the government in $\bullet$ unclaimed moneys as a result of unpresented cheques, or incur thousands of dollars in share registry fees to re-issue lost and stolen dividend cheques.
• . In fact, most shareholders already receive their dividends by direct credit. We paid just under 80 percent of our 1.8 million shareholders their October dividend this way.
• Your payment information will only be used by Telstra for the purposes of making shareholder ٠ payments - and we assure you once again of that important security consideration.

Electronic Communications

• We constantly look for ways to better meet our shareholders' needs and that includes online $\bullet$ communications. More than 190,000 of Telstra's nearly two million shareholders have now elected to receive important information about the company online since the company established an email alert communication service in 2001.
• The increasing number of shareholders electing to use the service is reducing the associated $\bullet$ cost to print and mail this information.

• Electronic services to our shareholders are continually improving. Shareholders can lodge their $\bullet$ proxies on line or download an electronic dividend statement at any time. This year we sent our Annual Review to shareholders in an interactive format directly to their PCs, a move much appreciated by shareholders.

• We believe we are one of the first companies to offer this level of service to our shareholders $\bullet$ and it is a good example of the way Telstra is harnessing technology to provide enhanced and efficient services for shareholders - and save money at the same time.

• The share registry staff outside the meeting would be very happy to give you a demonstration of the online services we currently provide.
• We appreciate the cooperation of Shareholders on these matters and we welcome any suggestions you might have as to how we can better meet your needs.

Share Price

• As fellow shareholders themselves, the Board acutely recognises that the share price position $\bullet$ today is marginally improved from what it was some 12 months ago.
• Believe it or not, that is a position envied by many telcos around the world but I accept that's $\bullet$ of little comfort to our own shareholders.
• To keep a balanced view on such matters, it needs to be remembered that Telstra has outperformed the World Telecom Index in the last 12 months - the problem is, though, that the index itself is in negative territory.
• One cannot disregard that this issue is certainly complicated by global perspectives on the $\bullet$ industru, but I want to assure all shareholders that we do not accept that as an excuse and we will continue to work to address this factor.
• I believe the key ingredient we need to recapture in order to make the desired progress, is a ۰ growth element, and I have touched on that challenge earlier in my speech.
• The Board clearly accepts that this factor of increasing shareholder value is their ultimate ۰ responsibility to shareholders.

Service and Shareholder Value

• I conclude on this point. Change in this great industry is unrelenting and quaranteed. But one ۰ thing that will never change as our number one business priority - is service.
• It's pivotal to the equation. Improving customer service and the whole customer experience $\bullet$ earns the loyalty and respect of our customers. Customer satisfaction grows the Company's revenues, which in turn impacts on shareholder value.
• Achieving shareholder value that is sustainable remains a primary focus of Telstra's Board and $\bullet$ management.
• There is no doubt that Telstra is one of the world's best performing telcos that's not rhetoric, that's fact - and our strategy is directed at ensuring that this remains the case and that we build upon this excellent position in the years ahead.
• Thank you, Ladies and Gentlemen for the opportunity to update you on these matters. ۰

TELSTRA ANNUAL GENERAL MEETING 2003

DR ZIGGY SWITKOWSKI, CHIEF EXECUTIVE OFFICER, ADDRESS TO SHAREHOLDERS

Introduction

Thank you Chairman.

Good morning, Ladies and Gentlemen.

This is the fifth Annual General Meeting at which I have had the privilege to address Telstra shareholders.

And it is the sixth anniversary of Telstra as a partly privatised corporation.

Back in 1997, at the time of T1, the Internet was in its infancy.

Fewer than one in five households owned a computer.

There wasn't any Spam, or junk email. In fact, very little email at all.

Only one in six Australians owned a mobile phone,

SMS - short message services sent via mobiles - did not exist.

In 1997, DVD players and disks hadn't arrived in our stores.

Today, nearly four out of five Australians own a mobile phone, and most teenagers could not function without SMS.

More than 300 million messages are sent every month across all networks.

Spam (and worms, viruses, hacking) is a very modern, very real problem.

Back in 1997, Telstra was a company with 70,000 staff producing \$16 billion of revenues, and one billion dollars of free cash flow.

This year, 36,000 staff will generate \$21 billion in revenues and more than \$4 billion of free cash flow for distribution to shareholders, new investment, and reducing debt.

But of course, the evolution of our industry has been anything but smooth.

We have endured the dotcom meltdown, and the pause, even reversal, in global and domestic IT and telecomm spending.

But the industry downturn and contraction phase probably ended early this year.

Global investor sentiment has improved; telecomm valuations are edging up.

Confidence is returning, and innovation and entrepreneurial activity are once again very evident.

Review of the 02/03 Operating Results

The 02/03 year played out for Telstra in two distinct halves.

A steady beginning, and an improved second half.

Industry revenue growth remained at about 4% - roughly at GDP level.

With continuing flat revenues in our Company, we concentrated on achieving operating efficiencies and protecting economic returns.

As a result:

• Underlying operating costs came down by 1.8% or \$187 million;
• Underluing EBITDA margins improved from 50.1% to 51.2%, a record level; and
• Free cash flows surged to \$4.6 billion from our continuing operations, improvements in capital deployment, and asset sales.

As the Chairman has indicated, shareholders have been rewarded with an increase in normal dividends to 24 cents for the year, a special dividend of 3 cents, and the initiation of a share buyback of up to \$1 billion of equity, in a total return amounting to \$4.5 billion of cash.

A number of substantial achievements stand behind Telstra's financial numbers.

• Our commitment to continuous improvement in service which saw us achieve better than 90% compliance to Customer Service Guarantees in all categories over the past three months.
• The growing coverage and success of Telstra CountryWide across the regional landscape.
• Thoughtful sponsorships Naming rights (such as Telstra Stadium and Telstra Dome), sporting promotions (eg Rugby World Cup), as well as cultural, community, scientific, and philanthropic partnerships.
• An increasing pipeline of relevant new products, now backed by a unified Technology, Innovation and Products organization with an innovation mandate - to bring relevant, understandable, and desirable products to market in a timely fashion.
• Effective deployment of our strategy to harness the power for our customers and $\bullet$ shareholders - of our unrivalled breadth of activities: in fixed lines, mobiles, the Internet and broadband, subscription TV, directories; and
• The strength of the Telstra brand as one of Australia's most powerful and valuable brands continues to grow.

These are qualities that led a recent international survey to place Telstra fifth among the world's strongest carriers!

Few Australian companies enjoy Telstra's position sitting at the top table of their global industry.

But it would be wrong to suggest that there remains little left to do. Patently this is not the case. There is no room for complacency.

For example, even as our service performance is at historically high levels, we still fall short of flawless delivery.

As recently evidenced, our BigPond email platform proved inadequate in withstanding all the attacks of Spam, viruses and worms.

Although, true to our Values, we moved voluntarily to offer our customers rebates and commit to building a completely new, more robust email environment.

Overall, the Company is still ceding wireless market share.

And in the last operating year, we took a write down in our international joint venture, Reach.

The write down of \$965m was non-cash, and had the effect of reversing the booking of profits of \$995 million at the creation of the JV Reach.

But the need for such an adjustment emphasized the dearee to which we overestimated the growth and profitability of the global internet business.

Of course, we hold ourselves accountable for the highest standards of strategic decision making, even if our write-downs have been dwarfed by those from other companies in the global Telco industrų.

One important area of good progress in 02/03 has been in the series of regulatory outcomes.

Our processes with key regulators - the ACCC, ACA and TIO - have been cooperative.

Today, for the first time, Telstra adopted the ACCC's wholesale prices for PSTN interconnection, Local Call Resale, and Unconditioned Local Loop.

This outcome is contemplated within Telstra's existing financial forecasts.

The wholesale industry is presently free from disputes, and sound commercial agreements are increasingly the norm.

The regulatory framework is working.

Shareholder Value

The present share price is well below where we would like to see it, though this company represents a very sound long-term investment for shareholders.

Through all the upheaval in our industry in recent years, Telstra's market value is today \$17 billion higher than when the company first listed in 1997.

Many of our global telecomm peers have lost significant value during this time.

In addition, we have distributed more than \$20 billion in normal and special dividends since 1997!

Our overall cash yield for investors has been consistently higher than for the average of other large Australian stocks.

And we've produced this outcome during a time when requlatory policy has facilitated a loss of overall market share from about 80% to about 60% - 65%.

Our Direction

In our Vision, we see ourselves as Australia's connection to the Future.

Telstra is now more confident and certain about the future path of our industry.

Not because there is no room for surprise - clearly there is.

And technology continues to move very quickly.

Let's contemplate the end of this decade, that is the year 2010.

Video telephony and video email will be common - on the normal, ie fixed, network as well as wireless, and with camera mounted Personal Computers.

Communication devices will proliferate, not converge.

Each of you will own more than one wireless device - for voice, emails, directory services, health monitoring, alarms etc.

Today's 15 million wireless handsets could easily double in the next 10 years.

Keyboards will give way to voice activated commands via speech recognition systems.

This development will attract whole new customer classes that will join this revolution when unchained from keyboards, menus and icons.

Security, firewalls, spam, viruses, filtering will remain huge issues.

Passwords will give way to biometric identification - that is, identification and accreditation via individual physical characteristics, such as fingerprints or eye scans- the stuff of movies.

Privacy, and the need to protect individual rights thoughtfully, will still be tough social issues, and ones we will continue to take seriously.

Bandwidth will be abundant and affordable - as will computing speed, storage capacity, and display media.

.. Entertainment, education, information ...will be delivered over cable, copper, satellite, wireless with all systems serving important parts of the diverse market.

The implications for the future of Telstra are clear.

We must always be a leading world-class network-based carrier - in every technology. Engineering will remain a core competence.

But so, increasingly, will customer service, brand management, marketing, product innovation, applications and, of course, content.

Our mobile networks will evolve to much higher bandwidths.

Today, 70% of Australian households own a Personal Computer, and about 70% of these are online - mainly dialup narrowband.

These percentages will grow.

Broadband will have largely replaced narrowband as the decade closes, and hi speed, alwaus-on delivery of online services will be the norm.

Progressively, homes will have a single umbilical connection to our main network, but your connections internally within a home will be wireless - for telephony, fax, emails, broadband, television, standard and hi definition etc.

Convergence may turn out to mean seamless interconnection between fibre and wireless - for voice, data, entertainment etc.

Most importantly, we are heading for an all Internet Protocol network environment – for which we are well prepared.

• Technology will continue to move faster than the ability of most of us to absorb and utilise except of course in the case of youth.

This market is hotly contested, and is a key segment of special interest to us.

Share of spending - by consumers and by corporates on communications - will continue to increase.

This industry's relevance and size will only increase in our lifetimes.

But unit pricing will follow well-established laws - down - making attention to productivity, process optimisation and costs critical factors in continuing success.

Our commitment to Six Sigma to drive process improvement and accelerated learning across the Company - will assure our achieving best in class capability over time.

Our footprint within Asia is a good start.

We see in Hong Kong evidence of the high class of our mobiles business, CSL, recognised as the leading brand and service innovator in what is probably the most competitive market in the world.

Opportunities are emerging to carefully build upon that valuable asset.

Already, the Beijing 2008 Olympic organizers have contracted Telstra for support based upon Sydney Olympics technology successes.

In the long term, Asia remains an incredibly attractive target for Telstra, given the high growth rates of its markets, the sophistication of its users, and their early adoption appetites.

Our International Division will continue to look for relevant investment and partnering opportunities offshore - but with fiscal discipline.

Growth...profitable growth...balanced growth......value creating growth.... is our Number 1 priority.

Everywhere we look, Telstra has assets, investments, products, services and great people to ensure that we are the preferred suppliers to all our customers and, as the Chairman emphasized, competing aggressively from the front foot is our style.

Staff - Customers - Shareholders

The Company runs on a simple enough formula - serving customers consistently well, over a long period of time, creates shareholder value.

This requires skilled employees working with modern tools in a friendly, encouraging, safe environment, and focused upon continuous improvement and innovation.

It is an operating formula, a philosophy of work unified by shared Values across our organization.

Over more than a century, Telstra and its predecessor organisations, have built a solid bank of trust among our many communities.

We've delivered mission critical, lifeline services to Australians for generations.

Telstra's management and Board well understand that our business is built upon trust.

The last year has seen reason for the community's trust to be reaffirmed.

Our people were tested often, and they've responded heroically, as they always do.

The tragic Canberra bushfires earlier this year were an example where Telstra men and women on the ground rallied to restore damaged services quickly.

Indeed, our team was recognised with an excellence award from the Institute of Engineers in Canberra.

It is a fact that crises always bring out the best in our people - and that includes the extended Telstra family many of whom are the core of our community volunteer group called Telstra Friends - a number of whom are assisting us here today.

I would like to thank, again, all the staff at Telstra for their many contributions and for combining to make our Company such a special one.

Outlook

After 4 months trading in the 03/04 year, there is no change to our previous comments, reiterated at the recent 1Q results announcements, as to our outlook.

Our revenue growth remains less than industry growth at present.

But we are confident in our strong cash flows.

And our costs will track lower to ensure improved margins, and that we are building shareholder value.

But coming up, as shareholders you should see important, strategic changes in key areas:

• As stressed by the Chairman, there is no law of nature that we should suffer annual market share losses as the incumbent market leader.
• $\bullet$ Our goal is to return Telstra to annual profitable revenue growth approaching 4% over the next 2-3 years in the domestic market.
• $\bullet$ After 12 years of declining market share, our approach is changing:
• This will be reflected in our programs for the wireless market;
• It will be seen in the corporate and government arenas and complex managed $\bullet$ services:
• as well as in the small and medium enterprises sector the engine of our national economy; and
• world class digital entertainment will be introduced by Foxtel, and added to the services Telstra offers, early in 2004.

Our absolute commitment to quality of service remains our top commercial priority to underpin profitable growth.

This applies to both our telephony and Internet infrastructures.

The extension of our skills will accelerate. More Internet trained people will be added. Capital investment will continue to shift into this area.

The promotion of a more contemporary, diverse, empowered workforce will gather pace.

Strategic partners will emerge with whom we will join as we move quickly into the next phase of this extraordinary industry.

Conclusion

So, it is clear that Telstra stands apart from most other Telcos in the world because:

• We have invested in, and built platforms and networks, products and services, in every part of our industry, and remain better positioned to switch to the commercial fast lanes as they appear.
• The underlying demand for our products and service is high. Internet traffic grows at 4% per month, wireless traffic increases at double digit rates per year, the younger generation is approaching adult years encoded with digital DNA and are already intensive users of communication services.
• We have the number 1 market position in every telecommunications category in Australia.
• . Our balance sheet is strong; our free cash flows at the top of most tables.
• We are a high yielding stock with many attractive growth options.

As shareholders, you have cause to be proud of your company, our history, and the contribution we remain poised to make to Australia's future.

As a management team, we at Telstra are committed to

• Capturing the exciting opportunities from the revolution underway in communications services:

• Driving a lean, efficient and productive organisation;
• Delivering outstanding service to our customers no matter where they live in Australia.

This will make Telstra not only a great company to do business with, but also a great investment
for our shareholders.

Thank you.