TELSTRA GROUP LIMITED — AGM Information 2004

Oct 27, 2004

28 October 2004

The Manager

Company Announcements Office Australian Stock Exchange 4^th Floor, 20 Bridge 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 2004 Annual General Meeting.

Yours sincerely

Pont Gration

Douglas Gration Company Secretary

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

TELSTRA ANNUAL GENERAL MEETING 2004

MR DONALD McGAUCHIE, CHAIRMAN, ADDRESS TO SHAREHOLDERS

Introduction

Good morning ladies and gentlemen,

I'm Donald McGauchie, the Chairman of your company.

I welcome you to the 2004 Annual General Meeting.

I also welcome shareholders viewing today's proceedings on our Investor Relations website.

A quorum is present and I declare this Meeting open.

Let me start by introducing the Board members senior executives and the company's auditor.

Our aim is a less formal approach, so we have only four people on stage with the rest of the directors in the front row.

Directors have been available to meet with you before the meeting and, those who can, will do so afterwards.

Joining me on the stage are:

John Stanhope, our Chief Financial Officer

Ziggy Switkowski, our Managing Director and CEO

Douglas Gration, our Company Secretary.

In the front row, we have my fellow directors:

John Ralph, Deputy Chairman, John Stocker, Chair of the Audit Committee, Sam Chisholm, Anthony Clark, John Fletcher, Belinda Hutchinson, Catherine Livingstone,

Charles Macek.

Also in the front row are:

Bruce Akhurst - Group General Counsel, and

Telstra's Senior Leadership Team.

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

I also thank our Telstra Friends staff volunteers who greeted many of you when you arrived today. They do a wonderful job!

I'll now outline the procedure for today's meeting. Following my formal address, Ziggy will report on the company's operations for the financial year ended 30 June 2004 and make some comments on the immediate outlook.

After Zigqy, we will consider the remaining items on the agenda, specifically, discussion of the company's financial statements and reports and the election and re-election of directors.

This year, we invited shareholders to submit questions to be raised today. The response was veru good, with many shareholders submitting questions. Thank you. I'll be addressing the more frequently asked ones and the key themes raised later. Of course, I will also take your questions from the floor.

So that the meeting can conclude at a reasonable time, I won't be adjourning for lunch. You're very welcome to enjoy the light lunch served in the foyer from around 12.30.

We invite your comments on improvements for future Annual General Meetings. You will have received a questionnaire when you registered. I invite you to complete it and place it in the questionnaire boxes when you leave.

Overview of the board

Ladies and Gentlemen, it's a privilege to have been elected Chairman of Telstra.

I have been a Director of Telstra for six years and Chairman of the Telstra Country Wide Advisory Board since it began four years ago. I am thoroughly familiar with the issues, challenges and opportunities facing our company.

I thank the previous Chairman, Bob Mansfield, for his significant contribution.

I also thank John Ralph for his leadership of the Board as interim chairman.

I also note the resignations during the year of two of our directors: Bill Owens, who left the Board in May to head up Nortel Networks; and Sam Chisholm, who steps down from the Board at the end of today's meeting, but will remain associated with the company as

Chairman of Foxtel.

I sincerely thank them all for their valuable contributions and I wish them well.

Corporate Governance

You can be assured we will follow the highest standards in Corporate Governance, ensuring that transparency, accountability, and appropriate and expected controls are in place.

We complu with the ASX's 'Principles of Good Corporate Governance and Best Practice Recommendations'.

Our efforts have been recognised in the recently released Horwath 2004 Corporate Governance Report, where Telstra was ranked top of Australia's 250 largest listed companies.

We also received the Continuous Disclosure Awards at the 2004 Australasian Reporting Awards and Best Ongoing Management of Continuous Disclosure at the 2004 Investor Relations Magazine Awards.

This recognition is well deserved, and it's a demonstration of the seriousness with which we take corporate governance.

Executive Remuneration is another area that's always carefully considered by your Board.

We fully recognise the importance of community standards and remain very conscious of our stewardship of your investment.

I will explain executive remuneration in more detail when addressing the questions later.

A brief comment on our Ownership Structure, as the future of the Government's majority ownership is a significant consideration for all of us.

The relationship with our major shareholder is a key governance issue.

The decision to sell or retain that ownership rests with Parliament.

We will work with the Government in the best interests of all shareholders.

Let me now address Corporate Social Responsibility.

This issue goes to the heart of the sort of company we want to be. For us, Corporate Social Responsibility is not rhetoric.

One example is our unique Telstra Friends volunteer program. In the past year, more than 4,000 of our staff donated some 19,000 hours of their personal time at more than 300 community events raising more than \$185,000 for charities. The community initiatives

supported include Clean Up Australia Day, Walk for Diabetes, and the Victor Chang Healthy Heart Day.

Also, part of our Corporate Social Responsibility is Telstra's active promotion of work/life balance, equal opportunity, maternity leave, flexible work arrangements, career fulfilment, fair treatment, leadership opportunities, workplace diversity – they all demonstrate our commitment to building a better workplace.

The Telstra Foundation was established in 2002 with a mission to make a positive and lasting difference to the lives of Australian children and young people.

Whilst funded by Telstra, it operates with an independent Board.

The Foundation comprises two funds:

• . The main fund is the Community Development Fund. It provides substantial grants to support innovative programs tackling serious issues affecting children and young people;
• The other is the Telstra's Kids Fund. It makes small grants to groups involving children in the families of Telstra employees. It's a great way for employees to be involved in philanthropy in their local communities.

So far, the Community Development Fund has supported 203 projects with grants totalling \$8.9 million. The Kids Fund has funded more than 1800 not-for-profit community groups with grants totalling nearly \$1.7 million.

So, Ladies and Gentiemen, how has our company performed this past year?

It has performed solidly.

Profit has continued to grow.

We have a strong balance sheet.

Shareholders will benefit substantially from the Board's decision to increase the ordinary dividend to a payout of 80%.

And, we intend to return an additional \$1.5 billion in each of the next three years through a combination of special dividends and share buybacks.

These solid results have been achieved against considerable competitive, regulatory, technological, and commercial pressures.

It's not going to get any easier.

We can expect our competitors to become even more aggressive.

We remain in a demanding regulatory environment.

Customers' expectations continue to grow. They are more knowledgeable, experienced, and willing to change providers. We can't presume customer loyalty. We have to give people good reasons to stay with Telstra. We have to earn their loyalty each and every day.

And new technology brings its own challenges - for instance, the implications for existing products of Internet Protocol Telephony and other new technologies.

Our over-arching challenge is to ensure that we meet what are often conflicting demands of greater efficiency, lower costs, new technologies, and increasing levels of customer service and satisfaction.

Let me now turn to strategy.

I'm very confident that our strategic plan is the right one.

The plan sets out our corporate objectives for the next three years.

We will continue to focus on maximising performance across our portfolio of existing and new businesses.

We will invest in new platforms and technologies, while maintaining and optimising the performance and returns from existing products and networks.

Investment will align with the growth drivers of wireless, broadband, IP telephony, web and managed services, and it will support our commitment to continuous improvement in service delivery.

Board and management agree that the company's focus should continue to be on existing Australian, New Zealand and Asian operations and providing global services to our transnational customers.

The Board continues to work closely with Ziggy and senior management to refine our strategy.

Telstra is on the verge of completing the move from Australia's telecommunications monopoly to the provider of choice in a competitive customer driven market.

Service is how we will differentiate ourselves from our competitors and build credible relationships with our customers.

Service is how we improve our financial performance by making the customer experience a better one.

Service is how we improve our competitive position by ensuring that people deal with us and don't go elsewhere.

Service is how we will deliver sustained value to shareholders.

Another key element of our strategic plan is our Capital management programme

Customer loyalty cannot be presumed nor can shareholder loyalty.

We well understand there are many alternatives for your investment. You need to be able to believe in the company's future and be rewarded for your investment and your support.

When our 3-year capital management program is completed, we will have returned a further \$4.5 billion to you or, if you started counting from last year, about \$6 billion. You are benefiting from significant growth in ordinary dividends and ongoing 'special dividends', as well as another share buy-back.

This year's share buy-back is very similar in design to the one we conducted last year.

We urge all shareholders to seek your own financial advice if you require assistance on the important decision of whether or not to participate. The Board believes the buy-back is beneficial for all shareholders. For shareholders who do participate, part of their buy-back proceeds will be treated as a fully-franked dividend. Those of you who don't participate are expected to benefit from increased returns on equity and earnings per share.

So, in summary, your Company will be focusing on:

• long term strategic thinking;
• relentless customer focus;
• competitive cost structures; and
• excellent capital management.

Earlier, I mentioned my Telstra Country Wide experience.

Telstra established Country Wide 4 years ago in recognition of our need to have a more meaningful engagement with regional Australia. Our customers and our Company have benefited from the increased and focused management. We've seen a significant lift in service performance across Telstra Country Wide's operations and we're also hearing this from our customers.

Telstra Country Wide represents no less than a reinvigoration of our service organisation in regional Australia.

Sensis falls into the same category - a reinvention of a somewhat staid print directory business into a dynamic new online business with a very exciting future.

So, to conclude:

Be in no doubt that the future will be both challenging and demanding, but immense

opportunities remain in telecommunications - and Telstra is going to pursue them vigorously.

Few communications companies have the capacity to meet the challenges and capture the opportunities.

We are the only provider that looks after all Australians, not just the more profitable segments - and this is an obligation we take very seriously.

We have a proven capacity not only to adapt to technological change, but to actively drive it so that the company, our customers and shareholders all benefit.

The industry has never been more competitive, but we are committed to delivering our strongest performance to date.

We will achieve this

• by knowing exactly who and where our customers are;
• by focusing on achievable, practical service improvements that will make a demonstrable difference for customers;
• by maintaining a prudent and conservative approach to managing the business, though not at the expense of innovation and inventiveness; and
• by striving to deliver solid returns to shareholders.

Thank you all for listening and for your continued support of Telstra.

I would now like to welcome our Chief Executive Officer, Ziggy Switkowski.

TELSTRA ANNUAL GENERAL MEETING 2004

DR ZIGGY SWITKOWSKI, CHIEF EXECUTIVE OFFICER, ADDRESS TO SHAREHOLDERS

Thank you Chairman.

Good morning, ladies and gentlemen.

The business of Telstra sees more than forty thousand dedicated Telstra staff coming to work every day determined to serve our ten million customers efficiently and helpfully, leaving them satisfied with the way we meet their needs.

It further involves delivering products and services profitably, where technology is moving quickly, competition is fierce, the rules of the market are heavily requlated, and customers increasingly more demanding of quality and value.

So, the joint themes of my report to you today are constancy of purpose and steadiness of performance by Telstra.

Let me start by picking up where the Chairman left off.

Our drive for improved service remains our number one priority.

While our customer service results have improved considerably, there is still some distance between where we are today, and flawless performance.

But we are bridging the gap by:

• upgrading our networks and reducing fault incidence;
• putting more trained people into our call centres which deal directly with customers;
• improving our technology of voice recognition and call direction;
• upskilling our people to be specialists in our 'new wave' offerings in broadband, wireless and the internet:
• getting customer appointments right, and reducing our response times and queue ٠ lengths, and
• making increased efforts to meet the special needs of our customers who live or work outside the main metropolitan markets in regional and rural Australia.

These steps are making a difference to our staff, to our customers, and to your company.

We understand clearly the equation where improved service produces more satisfied customers and better business results, which then deliver better outcomes for our shareholders - and we will work hard to get that equation right.

Highlights of 03/04

Let me turn to the highlights of this past year.

The industry has resumed a more normal character after the upheavals of recent years. That doesn't mean new technologies and companies and programs don't sometimes still burst on the scene - some with more success and longevity than others. But the overall industry is growing robustly and in a healthy way.

Telstra continues to shape the future by our initiatives such as :

• the stimulation of the broadband market earlier this year with innovative pricing offers for high speed residential access to the internet;
• . the formation of an infrastructure sharing Joint Venture with Hutchison that will see Telstra introduce its 3G mobile offering during 2005;
• the announcement which paves the way to bring internet telephony into the home from Telstra:
• the availability of digital entertainment from Foxtel launching an era of exciting multichannel interactive entertainment;
• important acquisitions -
• the Trading Post which extends Sensis into classified advertising and online availability;
• KAZ Computers as Information Technology and Telecommunications converge for our corporate and small business customers; and
• . endorsement by the Telstra Board of a capital management strategy aimed at returning to shareholders the free cash flows that our businesses continue to produce with a constancy that shareholders can bank on.

We continue to give effect to our vision as connecting Australia to the Future, and operating as a full service integrated telecommunications company from which customers should expect to get every communication need satisfied affordably and efficiently.

Financial Performance

We reported our record net profit of \$4.1billion on revenues of \$21billion.

We ended the year in excellent financial shape. Free cash flows, to support the Board's capital management program, are strong, having lifted 20% last year; and our return on shareholder funds has increased.

Our credit rating at A+ is both strong and appropriate to this stage of the Company's development.

At last year's AGM, I made the point that it was not acceptable that Telstra should be expected to concede market share year in year out. From 100% of the market in 1990, we now account for near 60% of the total Australian telecommunications spend, but in important segments our share is lower still.

I said that we would stiffen our defences and recover our positions in key markets over the next couple of years, and return to industry growth rates between 4-5% during 2006.

We are now on that trajectory. The last three quarters have seen our domestic revenues lift by 3% or more, and in the crucial businesses of mobiles and broadband, our market shares are at least holding.

Our revenue growth goal requires us to pay simultaneous attention to margins. As always, this translates into continuing attention to costs throughout the company. This is a familiar challenge to us - something Telstra has been managing well for more than 10 years.

As promised, we will take out \$800m of annual costs from our fixed cost base, and use part of that to reinvest in new products and improved service. That formula will see revenues lift profitably and provide the room for Telstra to either lead, or react, to technological or competitive changes in our marketplace.

Current industry dynamics

Let me take a moment to interpret the various changes occurring around us in this industry and business.

Australians are now using nearly 17 million mobile phones, in a population approaching 21 million people. Uptake of new phones by all sections of the community continues.

Virtually every household and business maintains a fixed phone still, but voice calling patterns are slowly shifting to wireless calls.

More than half of all households, and virtually all businesses, have an internet connection. One in six households now have a high speed broadband link.

Progressively the technology will enable calls to be made over the internet via broadband connections.

If we thought that the surge of interest in the internet in the late nineties, followed by the dotcom crash of 2000, might have moderated the importance of this new IP environment, we were wrong. We are much nearer the start than the finish of the internet era.

The volume of internet traffic over Telstra's domestic and international networks is surging with broadband usage. Videoconferencing, music downloads, peer to peer file sharing, movies on demand are all becoming huge drivers of traffic.

Voice call volumes - adding both fixed and wireless - continue to grow slowly - but each of you will have observed the ever-increasing use of SMS text messaging (especially among the young) as well as email, as supplements to the traditional forms of staying in touch.

So what are the implications for Telstra?

We have invested in two excellent wireless networks with the capability to deliver an increasingly rich array of non voice services.

We have provisioned our fixed networks for broadband and recently announced connecting our one millionth customer to use our broadband network.

We have defined our near term plans to introduce internet telephony to Australian homes next year.

We continue to spend about \$3billion every year on network improvements, new technologies, computer sustems etc as well as improving our reach to Australians remote from major population centres.

We have access to a wide range of applications and content across your company - Foxtel, Sensis, BigPond and Mobiles.

In fact, as these products are launched in the year ahead, the richness of our offerings could surprise many of our observers.

For example, within a few weeks, we will be making iMode products available to our mobile customers with scores of relevant, interesting new services delivered to your mobile phone.

On the state of competition in our market, I've described it previously as 'white hot'. Every day reveals new promotions and lower prices for mobile and broadband services.

The Christmas season ahead promises to be great for consumers, and very demanding for service providers such as Telstra, But probably even more so for our competitors.

We will not be taking a step backwards in striving to win in the market place and being innovative, creative and competitive in all our dealings with customers.

Shareholder Value

I expect we will get questions from shareholders about the Telstra shareprice and its future trends.

I can't speak to the shareprice itself, but can comment on the contributions management can make to help underpin the market's valuations of Telstra.

Our strategy to improve shareholder value rests upon:

• Execution of a consistent strategy targeted at the domestic market, pivoting around improved service and thoughtful, timely investment in emerging technologies;
• Successful implementation of this strategy will drive profitable revenue growth especially in new generation services. We have an obligation to run this company for today's shareholders, tomorrow's generation of users (ie, your children and grandchildren), and for the overall competitiveness of our institutions and national economy. Success will be seen through our market shares and delivery of relevant innovative products - themes to which management is committed.
• $\bullet$ Financial performance does not stop with revenues. We continue to have a focus on costs, margins and therefore, EBIT. We have set ourselves demanding goals for the year ahead on top of the solid results achieved last year.
• All the above will generate free cash flow growth sufficient for the Board to continue its active capital management program to reward shareholders with dependable and attractive rates of return on their Telstra investment, as emphasized by the Chairman in his speech.

The combination of these components should provide the Market with growing confidence in the valuation of Telstra.

Conclusion

We approach the next two years with a mixture of realism and cautious optimism.

No company has better assets, more skilled or dedicated people, or financial resources, to thrive in the environment ahead.

But in an environment with T3 on the horizon, important requlatory decisions ahead, and aggressive competitive tactics, little can be taken for granted.

Telstra expects to navigate these times successfully. Certainly management and staff of your Company will do all in our power to ensure success.

In conclusion, may I thank all shareholders for your support of the Company.

In particular, I would like to acknowledge all Telstra staff and my Leadership team for their contributions. The controversy and criticism that sometimes swirls around Telstra should never be interpreted as a reflection of our people whose commitment, loyalty and dedication to your interests every day is simply outstanding.

Along with the Board and my team, I lead this Company with a sense of pride in our people, humility in the important mission required of Telstra, and resolve to succeed on behalf of all our constituencies.

Thank you.