TELSTRA GROUP LIMITED — Annual Report 2007

Aug 8, 2007

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9 August 2007

Office of the Company Secretary

Company Announcements Office Australian Stock Exchange 4[th] Floor, 20 Bridge Street SYDNEY NSW 2000

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

Telephone 03 9634 6400 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

CEO Letter to Shareholders and Full Year Newsletter 2007

In accordance with the listing rules, I enclose an announcement for release to the market.

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Douglas Gration Company Secretary

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

Office of the CEO 242 Exhibition Street MELBOURNE VIC 3000 Mail to: Locked Bag 5639 MELBOURNE VIC 3001

9 August 2007

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Full year financial results ahead of guidance and earnings momentum gathers pace.

Dear shareholder

It is my pleasure to write to you today about the job your team at Telstra is doing. The men and women of Telstra have delivered truly market-leading results…again. Our team is focused on the job at hand and determined to be world class as we continue into the 19th month of our 5-year transformation journey. We are not there yet, but I can assure you that we are fully committed to reaching the high standards of performance we have set for ourselves in the work we are doing for you.

I am pleased to send you this letter because our team at the New Telstra has delivered for shareholders and the consumer – including the businesses and communities that rely on us to help them stay connected to each other and the world around us.

What’s the bottom line? Over the past 12 months the New Telstra has achieved world leading performance across the business. Even though we are only 19 months into our five-year transformation, I am encouraged and pleased about our progress. Think about the following:

• Earnings are up: sales revenues are up; and we are winning in key, highly-competitive markets;

• Full year revenue and earnings came in ahead of guidance – and second half earnings before interest and tax (EBIT) are up a whopping 42%;

• We report market share gains and revenue growth in broadband;

• We had strong revenue growth in mobiles;

• We now have positive residential PSTN (fixed home phone) customer growth;

• We have slowed the decline in overall PSTN; and

• We are creating market-leading innovative new products and services.

When our transformation plan was announced back in November 2005, it was considered by some to be too ambitious, involving too many moving parts. It is ambitious: The scale and scope of the transformation to the New Telstra are unprecedented amongst telecommunication companies around the world. The world is watching us, and now – less than two years after we started this journey – we are setting the new global benchmark. We’ve had ups and downs – and we have done better in some areas than in others. But, the benefits of transformation investment are starting to materialise and the results are clear for all to see.

During this period, many analysts and media commentators reflected negative sentiment toward Telstra’s performance and future prospects…and every reporting period we exceeded the predictions of the sceptics. Our focus on customers and shareholders is the key to our steady improvement. Our people know what Telstra is about and they are delivering.

Our transformation investment peaked this financial year, as we highlighted in the T3 prospectus and again at the half-year results in February, but the pace of change will continue. As I said in November 2005 when we outlined the transformation strategy, we are on a 5-year journey – and we have a way to go yet.

Telstra Corporation Limited ABN 33 051 775 556

Let me turn to some details of the financial year that ended 30 June 2007. During this year, we continued to win in the key markets – mobiles, broadband, Sensis and more recently PSTN – despite strong competition. We built on the solid operational and financial momentum generated in the first half of the financial year – and accelerated growth in the second half.

We have already achieved major milestones including the launch of the world-leading Next G™ mobile broadband and Next IP™ core networks. In addition, our second half included other world-class performances. Consider the following:

• world-leading revenue and margin performance in our directories business (Sensis);

• rapidly-increasing benefits of customer segmentation from market-based management (MBM) has improved both loyalty and satisfaction of customers as they buy and use our products and services;

• we achieved a double in broadband – growing market share by two percentage points to 47% and growing average revenue per user (ARPU) by 7.7% in the second half;

• we maintained the post-paid $20 per month 3G versus 2G ARPU premium on a larger, and market leading, 3G customer base of 2 million, including 1 million Next G™ customers.

• growth in residential PSTN customers – the first time residential PSTN customers have grown in several years – as PSTN revenue decline slowed even further to just 2.5%;

I am most encouraged by our ability to innovate as we transform into an integrated media-comms company. We recently launched mobile BigPond TV and BigPond i-Pond, and we are the first major Australian company to enter the new internet world of Second Life. We boosted our Sensis online asset portfolio with the acquisition of a controlling stake in SouFun, a leading real estate and home furnishings web site in China. We also launched a number of “small screen” innovations – such as Sensis search by mobile, Yellow by mobile, Yellow@Home and entered into a partnership with ninemsn.

Financial Results

We announced a full year profit after tax of $3.3 billion, up $92 million or 2.9% on the prior corresponding period. Our earnings before interest and tax (EBIT) grew 7.1% (excluding the Trading Post write-down) to $5.9 billion, which beat our full year guidance of 3% to 5%. We restored positive earnings growth.

Our sales revenue grew 4.2% for the year, ahead of our full year guidance of 2.5% to 3.0% as we continue to win in the key markets of mobiles, broadband, Sensis and PSTN. Our Australian operations were strong, with underlying sales revenue growing 3.5% to $21.7 billion.

• Mobiles : we continued to take a disproportionate share of 3G customer additions, adding 1.7 million 3GSM customers or growth of 532%. As a result of the strong mobiles customer growth, increased voice and data usage by our 3G customers, and handset sales, mobiles revenue grew 13.9% to $5.7 billion;

• Retail broadband : our retail broadband customer base grew by 60% to 2.4 million, and revenue grew 66% to exceed $1 billion for the first time. Our retail broadband customers spent 7.7% more per month (on average) in the second half, using our leading broadband applications, services and content;

• Sensis : total revenue grew by 8.0% to $2 billion in a very competitive market, with online search usage up 15% and Emerging Business revenue up 34%.

We grew our residential PSTN customers by 1.1% or 54,000 during the financial year. Our traditional PSTN revenue decline slowed further in the second half, declining 2.5% and for the full year revenue declined 4.1% compared to 6.7% in the prior corresponding period.

Our revenue growth was strong; hence our operating expenses increased 4.4%. Expense increases were driven by higher marketing costs associated with the launch of the Next G™ and Next IP™ networks and higher customer acquisition and recontracting costs – which started to decline in the second half, as expected. This year was the peak spend year for the transformation, and we have laid the foundation to improve future earnings.

Following a review of our Trading Post classified business, we have written-down its carrying value by $110 million, due to increasing competition in the traditional print classifieds markets.

I refer you to the attached shareholder newsletter for a more detailed analysis of the full year financial results.

Dividend

Telstra’s Board of Directors declared a final ordinary dividend of 14 cents per share, fully franked and payable on 21st September 2007. This brings the total ordinary dividend declared and paid for the year to 28 cents per share, or $3.5 billion.

Outlook

My commitment to you is clear: We will continue to build on the momentum achieved in the past financial year. As we have passed the peak spend year for capital expenditure, the earnings benefits should flow in the coming financial year. As a result, in the financial year ending 30 June 2008, you should expect to see:

• Revenue growth in the range of 2.0% to 3.0%;

• Earnings before interest tax amortisation and depreciation (EBITDA) growth in the range of 2.0% to 3.0%;

• EBIT growth in the range of 3.0% to 5.0%;

• Capital expenditure of between $4.6 billion and $4.9 billion (on an accrual basis);

• Dividends – the level of future dividends is a decision for the Board to make twice a year in its normal cycle having regard to earnings and cash flows as well as future regulatory impacts and other factors that affect operations.

We have made good progress in transforming our networks, systems, and corporate culture. However, this coming year will be equally challenging as we deploy the first phase of our IT systems transformation – scheduled for later this calendar year. We will continue to leverage the growth opportunities from our integrated portfolio of media communications assets – including BigPond, Sensis and Foxtel. We will continue to innovate, and lead from the front.

We have the right strategy along with a talented management team and dedicated, capable employees right across the business focused on achieving our strategic objectives – to improve the customer experience through innovation and service and to create long-term shareholder value.

Regulation and Government policy

The regulatory environment and Government policy continue to impede Telstra’s ability to invest your dollars confidently in new technology and to deploy advanced services to all Australians. During the year,

• the regulator – Australian Competition and Consumer Commission (ACCC) – announced dramatic reductions in the prices we can charge competitors for access to Telstra’s copper network – what is called the Unbundled Local Loop (ULL – down 30%) and Line Sharing Service (LSS – down 70%) These decisions were made despite the rising cost of copper, fuel, vehicles, and labour over recent years. They enable competitors to access our copper network below cost and discourage future investment – both by Telstra and by our competitors. We have a case pending in the High Court over the validity of this decision.

• the Government announced a decision to hand over nearly $1 billion of taxpayers’ money to SingTel-OPEL to overbuild and compete with the Next G™ broadband network paid for by Telstra shareholders. I am confident we will meet and beat SingTel-OPEL in the marketplace where consumers, not governments, make the decisions. The Government also announced a process to evaluate Next G™ performance prior to the closure of the CDMA network in early 2008 and suggested it may regulate to require Ministerial approval of that closure.

High-speed broadband update

As you know, Telstra is the only company with a fully-developed plan to build a Fibre-to-the Node (FTTN) network to deliver high-speed broadband in Australia. However, we have been stopped by regulatory settings that would subject your investment to unreasonable regulatory risk. When the Government announced the appointment of Expert Taskforce to consider proposals to build FTTN – including changes in the regulatory settings – we were encouraged. But this week we learned that the process is going to be stretched out well into 2008 – more delays.

Telstra Corporation Limited ABN 33 051 775 556

Still, we will make good on our commitment to you to make sound and timely investments – as we continue to explore all the options we have to wisely invest your capital, better serve our customers, and advance the national interest in bringing high-speed broadband to everyone. I want to encourage you to keep up to date on progress with our high-speed broadband plan and other important matters affecting your company by visiting our consumer advocacy website, www.nowwearetalking.com.au.

Broadband Services in the Bush

As you know, we are committed to switching off the CDMA network, which is rapidly becoming obsolete, on 28 January 2008. We have also announced that our Next G™ mobile broadband network will provide the same or better coverage than CDMA in October 2007 – two months ahead of schedule. At the end of July, we had already migrated around 600,000 customers from our CDMA network and have a detailed plan to migrate all the remaining customers by January 2008. We have also launched several new Next G™ handsets specifically suited for regional and rural customers, including the Samsung 411 and LG TU550.

The Board and I remain committed to keeping you informed with regular updates about Telstra’s transformation and performance. We also want to encourage you to become an electronic shareholder and help the environment. For more information visit our new look investor relations website at www.telstra.com.au/abouttelstra/investor

I also encourage you to go to Telstra’s Next G™ and 3G mobile networks to watch a short video message on BigPondTV that I have recorded for you on the annual results, and which you can watch free of charge. Watching this video will enable you to experience first hand the power of the world’s largest, fastest and most advanced mobile broadband network. We intend as part of our transformation journey to continue to deliver these kinds of innovative services to the market. Still, there is much yet to be done as we complete our 5-year transformation journey.

In the meantime, this has been a good year – for Telstra shareholders, such as you, and Telstra customers. I hope you are pleased.

Please contact us with any questions or comments at investor.relations@team.telstra.com.

Yours sincerely

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Sol Trujillo Chief Executive Officer

Full year newsletter

2007 CONTENTS | pg1. Year in review | pg2. Financial review | pg4. Transformation update | pg4. Regulation

Delivering on our promise The world is changing, our customers lives are changing and Telstra is changing. Our customers want more than plain old telephone services (POTS), they want real-time access to information on the move, in the format they choose and where they choose.

To meet these changing needs, Telstra is transforming into a world class media communications company. Telstra is transforming its networks and systems to meet our customer needs. We have a plan and our transformation is in full swing.

During the financial year we built on our track record of delivering on our promises. We:

• Launched the national Next G™ mobile broadband network, no other mobile network in the world is faster, larger or more advanced;

• Launched the Next IP™ network which, together with the Next G™ network, is the world’s largest fully integrated wireline and wireless national Internet Protocol (IP) network;

• Became Australia’s 3G market leader;

• Trained 12,000 people at the Telstra Learning Academy in its first 11 months;

• Improved workforce culture, with record numbers of employees responding to the 2007 Employee Engagement Survey and employees rating Telstra more favourably than last year.

But this is only the start, we still have a lot to do. We are bringing world class capabilities to Australia, and we are leading the world.

Our broadband business, BigPond®, extended its market leadership through the launch of innovative applications and content for the new media world. During the year we launched or enhanced our interactive offerings including our Second Life presence, expanded the membership of our games arena with members up 40% yearon-year and our BigBlog™ site experienced more than 7,000 unique visitors per week.

BigPond® recently launched mobile BigPond TV and has embraced the web 2.0 world and our new home page personalisation tool I-Pond™ is spearheading our charge to the user-generated internet experience of the future.

In mobiles, we launched the Next G™ network in October, allowing our customers to change the game. Our customers have embraced the speed and simplicity of the Next G™ network and in the second half over 1 million video calls were made and Sensis search visitors were up 39%.

Our Sensis business is a cornerstone of our integrated media communications strategy and the emerging business asset portfolio grew strongly. This included our banner advertising business, Sensis MediaSmart®, and our mapping business, Whereis®. Our directories business continued to manage the migration from print to online while maintaining some of the best directory revenue growth rates and margins in the world.

Our network transformation is making integration a reality and we are building capability to deliver competitive advantage, leverage scale and reduce costs. We are creating a world class set of assets unmatched by our competition.

Our key productivity metrics continued to improve as we remove complexity and inefficiency. Technician productivity is up 17%, customer revisits are down 36% and we are equipping our staff with the skills required in the new Telstra.

We built top line momentum with a strong second half underlying sales performance. As we foreshadowed, transformation spend peaked this year as we invested in future revenue growth, simpler systems and world class networks to provide customers with compelling content, applications and integrated services. The benefits are already starting to emerge as customers vote with their wallets and we win where it matters – in the market.

Our strong performance was achieved despite the regulator helping our competitors. Not withstanding the unlevel playing field, we will continue to compete hard and win in the market. We will continue to develop our long-term strategy to maximise the value of integrated assets as we become a true media communications player.

The new Telstra is about adding value to our customer’s lives.

KEY AchIEVEMENTS:

launched world leading Next G™ mobile broadband network in October 2006

launched Next IP™ network in April 2007 3G market leader, 4 months ahead of schedule 2 million 3G and over 1 million Next G™ customers

KEY FINANcIALS:		2007 $m	change %
Sales revenue	23,673		4.2
EBITDA		9,861	3.0
EBIT Free cash fow		5,779 2,899	5.1 (36.7)
Ordinary dividends (cents per share)		28	–

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7.1%
EBIT
(excludes Trading Post write-down)
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We are changing the way we communicate with shareholders - for more information see the enclosed flyer

9 August 2007

Earnings momentum gathers pace...

The results for the financial year ended 30 June 2007 signal the beginning of the financial turnaround as the transformation starts to drive real benefits across the business. Our profit for the year grew 2.9% to $3.3 billion.

The first half momentum gathered pace in the second half, and for the full year our underlying earnings before interest and tax (EBIT) grew 7.1% (excluding the $110 million Trading Post write-down) as we restored positive earnings growth.

Sales revenue increased 4.2% to $23.7 billion. We continued to win in the key markets of mobiles, broadband and Sensis and further slowed the decline in fixed line revenue through our market-based management initiatives.

Profitability was up, driven by strong revenue growth and a decline in the labour expense, partially offset by an increase in operating expenses (before depreciation and amortisation). costs associated with driving mobile and broadband growth, Trading Post write-down and additional expenses relating to various acquisitions not included in the prior year expenses increased operating expenses by 4.4% to $14.1 billion.

Our balance sheet remains strong with net assets of $12.6 billion as we maintain flexibility to react to market conditions.

The financial year was our peak capital expenditure year as we invested in transforming the business, including the launch of the world class Next G™ and Next IP™ networks. As a result free cash flow declined $1.7 billion to $2.9 billion.

We declared a final fully franked ordinary dividend of 14 cents per share, bringing total ordinary dividends declared for the financial year to 28 cents per share.

Mobiles

We have added over one million Next G™ customers since its launch in October. The simplicity and compelling integrated content, applications and services offered on the Next G™ network combined with the strong 3G customer growth increased data revenue by 50% to $1.1 billion. Data now accounts for around 20% of total mobile revenue driven by:

• Number of SMS messages sent increasing by 62% to just under 5 billion;

• Non SMS data revenue up 92% driven by increased data usage following the launch of the Next G™ network, in particular increased use of laptop data cards.

Aside from data cards, non SMS revenue was driven by our active data customers increasing 28% since the launch of Next G™, Foxtel mobile streamed minutes tripled in the second half and video call minutes of use increased 40% to 580,000 minutes.

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632
419 2,003
13.9%
467 Mobile revenue increased
1,024 13.9% driven by speed,
313 coverage and content
317 advantage in 3G, with
20 1.7 million customers taking
1H06 2H06 1H07 2H07 up 3G services in the year.
3G customers
Data Revenue ($m)
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Broadband

FINANCIAl hIGhlIGhTS

FINANCIAl hIGhlIGhTS
Year ended 30 June	2007 $m	2006 $m	change $m	change %
Sales revenue EBITDA(1) EBIT(1) Free cash fow Ordinary dividends (cents per share)(2)	23,673 9,861 5,779 2,899 28	22,712 9,575 5,497 4,579 28	961 286 282 (1,680) –	4.2 3.0 5.1 (36.7) –

(1) includes transformation related costs.

(2) 2006 includes a 6 cent per share special dividend paid with the interim dividend.

Revenue

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4.2%

Sales revenue grew 4.2%, ahead of our full year guidance of 2.5% to 3.0%. Our Australian operations were strong, with underlying sales revenue up 3.5% for the year.

During the financial year we added a further 900,000 customers to Australia’s leading internet service provider, BigPond®, an increase of 60%. At the end of the financial year, we had 2.4 million customers.

BigPond® services continued to innovate. We recently entered the web 2.0 world with the launch of I-Pond™, created the largest virtual universe amongst real world brands via our Second Life presence and recently launched on-demand mobile TV with BigPond® TV.

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47%
2,406
44%
66%
1,506 Retail broadband revenue
41%
grew 66% to $1.2 billion
861 with market share
growing 3 percentage
points to 47%.
05 06 07
Subscribers (000’s)
Market Share
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Sensis

Sensis had another strong year of revenue growth. The directories business grew 4% to $1.5 billion. Yellow Pages® directory revenue increased 2.6% to $1.2 billion and White Pages® directory revenue increased 9.6% to $331 million.

Our emerging businesses delivered another strong result, and accounted for 40% of the total Sensis growth. Whereis® location and navigation revenues grew by 75% and Sensis MediaSmart® display advertising revenues grew by 93%.

The classifieds business revenue declined 12%, with print revenue down and online revenue up – which is consistent across the industry.

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1,974
1,827
8%
1,708
05 06 07
Revenue ($m)
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Sensis total revenue increased 8.0%, driven by our directories, emerging businesses and $49 million contribution from SouFun.

9 August 2007

2 www.nowwearetalking.com.au

PSTN

PSTN revenue declined 4.1% to $7.2 billion, and slowed to a decline of 2.5% in the second half. This represents the third consecutive half the PSTN revenue decline has slowed – a 5 percentage point improvement over the past 18 months.

Our PSTN line loss trends are truly world class. We added 54,000 residential customers during the year, losing 1,000 customers in the first half and grew customers by 55,000 in the second half. Our market based management led initiatives such as subscription based pricing and value based segmented offers is helping deliver a more tailored customer experience which is flowing through to the financials.

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-0.3%
-2.0%
-2.5%
-4.9%
-5.6%
-6.0%
-7.6%
2H041H05 2H05 1H06 2H06 1H07 2H07
Growth
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4.1% PSTN revenue decline slowed to 4.1% and we added residential customers for the year, a world class performance.

Expenses

Selected items from theINCOME STATEMENT
Year ended 30 June	2007	2006	change
Labour Goods and services purchased Other expenses	$m 4,017 5,151 4,924	$m 4,364 4,701 4,427	% (8.0) 9.6 11.2
Total operating expenses	14,092	13,492	4.4
Depreciation and amortisation	4,082	4,078	0.1
Total expenses	18,174	17,570	3.4

Labour costs decreased 8% to $4 billion as the workforce reduction initiatives start to flow into the financials. The overall workforce declined a further 1,887 during the year and has fallen 5,746 since June 2005 (excluding any impact from any acquisition and divestment activity over the past 2 years).

Salary and associated costs were flat and redundancy costs decreased 72% as the majority of the $186 million provision raised at the end of last financial year was used to fund the redundancies in the current year.

Goods and services purchased increased 9.6% as we invested in the mobile market. The main drivers of this increase were:

• increased marketing campaign around the launch of the Next G™ mobile broadband network in October;

• costs of acquiring and retaining customers through the subsidisation of higher value 3G mobile handsets;

• higher volumes associated with the strong growth in both 3G and broadband customers.

9.6% Goods and services purchased up 9.6% to support the increased volumes which have driven revenue growth, in particular 3G and broadband.

This was partially offset by a fall in the costs we pay other telecommunication providers to finish (terminate) a call on their network. The biggest driver of this fall was when the Accc dropped the mobile terminating rate from 18 cents per minute to 15 cents per minute.

Other expenses increased 11.2% to $4.9 billion. The main drivers of this include:

• service contracts and agreements increased 18.6% driven by IT costs related to the transformation and extra call centre staff to respond to the increased volumes flowing from the rise in 3G and broadband customers including activation of services and billing enquiries;

• promotions and advertising costs increased 18.5% relating to BigPond® and Sensis campaigns and launch of the Next IP™ network;

• general and administrative costs increased 19.8% as we invested in training and equipping our staff with the right skills to serve our customers including the opening of the Telstra Learning Academy, transformation costs and accommodation costs such as power and maintenance costs associated with operating multiple mobile telephone networks;

• write-down of the Trading Post mastheads.

Depreciation and amortisation (D&A) was relatively flat, but if transformation related accelerated D&A is excluded then D&A grew 3.5%. This increase was expected following the launch of the $1.1 billion Next G™ mobile network in October and launch of the $1.5 billion Next IP™ core network in April this year, with more enhancements to come.

Balance sheet

	Selected items from theBAlANCE ShEET
	As at 30 June current assets Property, plant & equipment	2007 $m 5,353 24,607	2006 $m 4,899 23,592	change $m 454 1,015
	Total non-current assets	32,522	31,325	1,197
	Total assets	37,875	36,224	1,651
	Total liabilities	25,295	23,390	1,905
	Net assets/equity	12,580	12,834	(254)

Total assets increased $1,651 million due to the net impact of:

• a $1,015 million increase in property, plant and equipment as we invested in new networks including the Next G™ and Next IP™ networks as part of the transformation;

• a $449 million increase in other intangibles mainly due the development and acquisition of software assets as part of the IT transformation;

• The increase in total liabilities of $1,905 million was due to the net impact of:

• a $938 million increase in total borrowings to help fund our capital expenditure requirements in this, our peak transformation capital investment year and to pay dividends;

• a $774 million increase in other current liabilities, including accruals and payables due to higher levels of construction activity as part of our network and IT system transformation.

cash flow

	Selected items from theCASh FlOW STATEMENT
	Year ended 30 June Net cash provided by operating activities capital expenditure Free cash fow	2007 $m 8,520 (5,982) 2,899	2006 $m 8,553 (4,303) 4,579	change $m (33) (1,679) (1,680)

Free cash flow declined $1,680 million to $2,899 million mainly due to:

• a $1,397 million increase in capital expenditure as we invested in the transforming our business to provide our customers with better applications and services including the construction of the Next G™ and Next IP™ networks and upgrading our IT systems;

• a $282 million increase in investing cash flows as we acquired 55% (on an undiluted basis) of the issued capital in SouFun, a leading real estate web site in china;

We used our free cash flow to:

• pay dividends to our shareholders totalling $3,479 million, representing 28 cents per share;

• pay finance costs of $1,056 million to our debt holders.

Outlook

At the end of the financial year, we were only 19 months into our 5 year transformation strategy announced back in November 2005. Fiscal 2007 was the peak transformation spend year as we invested in building next generation platforms to reduce complexity and improve our customer experience.

We have laid a solid foundation since we started the transformation, but the company is experiencing a combination of regulator driven wholesale price reductions and Government subsidisation of competitors, and as a result, we have set prudent guidance and in fiscal 2008 we expect: revenue growth of between 2.0% to 3.0%, EBITDA growth of between 2.0% to 3.0% and EBIT growth between 3.0% to 5.0%.

9 August 2007

www.telstra.com 3

Transformation: Building world class capability

Mini glossary

• STATUS PROGRESS • launched in October 2006 • over 1 million customers on the Next G™ network

• • upgrade speeds for data cards to 7.2Mbps by end of calendar year 2007

• �������� • launched core network in April 2007 • capped or exited a further 124 network platforms

• • 80%+ of Telstra’s corporate and enterprise IP WAN networks now supported by Telstra’s

• �������� Next IP™ network • exited a further 132 IT systems • on track to achieve 80% target reduction by end of fiscal 2010

• • deployed integrated desktop providing a single log in to our front of house systems,

• �������� reducing log in time by 60% • subscription pricing plans for consumer and business customers launched

• • outbound strike rates have doubled with the use of segmented based offers and words that work

• ������� • rolled out 65 new branded retail locations, including the first dedicated Telstra Business centre

• • trained over 12,000 staff at the Telstra Learning Academy in first 11 months

• • technician productivity up 17% • customer revisits down 36%

• ��������

Next G™ network

completed construction of the World’s largest and fastest national mobile broadband network.

Next Generation Network completed construction of the world class Next IP™ core network which is secure, scalable to improve network reliability and increase the services offered to customers.

Simpler systems Reducing and simplifying systems will deliver improved customer experience and lead to cost savings and efficiencies.

Market Based Management MBM puts the customer at the centre of everything we do and helps Telstra tailor products and services to the customer needs.

• outbound strike rates have doubled with the use of segmented based offers and words that work

Workforce excellence Investing in our people to better serve our customers’ needs.

Update on Telstra’s high-speed broadband plan

Telstra remains firmly committed to investing in new infrastructure to provide Australians with world class telecommunications services. highspeed broadband is critical to Australia’s future economic prosperity and social wellbeing.

and the increasing numbers of consumers who are demanding broadband.

We owe it to our shareholders to make sound and timely investments. In the meantime, we will continue to explore all the options we have to better serve our customers, wisely invest our shareholders savings, and serve the national interest.

Over the past two years, Telstra has put forward three separate, detailed high-speed broadband plans for Australia. The first plan was rejected by the Government; the second was not supported by the Accc; and the third was rejected by the Government, after being blocked by the Accc. Despite these setbacks, Telstra and its many supporters remain undaunted.

help us protect your investment

We welcome shareholder’s support and help to make Telstra’s high-speed broadband plan a reality. Shareholders are especially invited to join our Telstra Active Supporters group where people who share Telstra’s interests come together to voice their concerns and take positive action.

The Government has now established an Expert Taskforce to consider proposals to build a Fibreto-the Node (FTTN) network to deliver high-speed broadband. As the only company with a fullydeveloped FTTN plan, Telstra will participate in the review if it is conducted in a rigorous and objective way. however we will not get bogged down in a process that is not going to deliver a timely outcome.

For more information, to register as a Telstra Active Supporter and to keep up to date with events as they happen, please visit our website: www.nowwearetalking.com.au

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Australia already lags behind other leading countries in the developed world in broadband penetration and speeds. With new fibre networks already planned for many other countries, Telstra feels a sense of urgency to deliver high-speed broadband to Australia. This sense of urgency is shared by our business customers,

ACCC Australian competition and consumer commission.

ADSl Asymmetric Digital Subscriber Line – is a broadband technology that provides access to the Internet at fast speeds.

FTTN Fibre to the node – infrastructure that delivers fibre close to the customer premises. FTTN can deliver broadband data and potentially television services to customer premises.

IP Internet Protocol – is a standard set of rules for the carriage of digital information such as voice, video, data and images, across a global network.

IP core The core element of a network which carries and logically splits voice, data and video using IP technology.

Next G™ network Telstra’s trade mark name for its 3GSM 850 mobile network.

PSTN Public Switched Telephone Network - standard home telephone service, delivered over underground copper wires.

Ull Unconditioned Local Loop – The Local Loop is the copper wire that connects the Telstra exchange in your area to your house. Telstra is required to provide access to this wire to other operators.

Contact details

Registered Office

Level 41, 242 Exhibition Street Melbourne Victoria 3000 Australia

Douglas Gration company Secretary email: companysecretary@team.telstra.com

General Enquiries – Registered Office

Australia: 1300 368 387 All Other: +61(8) 8308 1721

Shareholder Enquiries

Australia: 1300 88 66 77 All Other: +61(2) 8280 7756 Fax: +61(2) 9287 0303 email: telstra@linkmarketservices.com.au website: www.linkmarketservices.com.au

Telstra Corporation limited

Incorporated in the Australian capital Territory

Telstra is listed on Stock Exchanges in Australia and in New Zealand (Wellington)

Investor Relations

Level 36, 242 Exhibition Street Melbourne Victoria 3000 Australia Ph: +61(3) 9634 8014 email: investor.relations@team.telstra.com

The Telstra Share Registrar

Link Market Services Limited PO Box A942 Sydney South NSW 1234 Australia

Websites

Telstra’s investor relations home page: www.telstra.com.au/abouttelstra/investor

Telstra’s interactive advocacy website: www.nowwearetalking.com.au

Key upcoming dates for 2007

Ex-dividend share trading commences 20 Aug Record date for final dividend 24 Aug Final dividend paid 21 Sep Annual General Meeting 7 Nov Note – Timing of events may be subject to change. Any changes will be notified to the Australian Stock Exchange (ASX). © Telstra corporation Limited (ABN 33 051 775 556) 2007 ® Registered trade mark of Telstra corporation Limited ™ Trade mark of Telstra corporation Limited Trading Post is a registered trade mark of Research Resources Pty Ltd

9 August 2007

4 www.nowwearetalking.com.au

CHANGES TO THE WAY WE COMMUNICATE WITH OUR SHAREHOLDERS...

Recent amendments to the Corporations Act allow companies to provide their annual reports to shareholders on the Internet rather than by hard copy.Telstra will continue to make its Annual Report available to shareholders on the Internet at www.telstra.com.au/abouttelstra/ investor/annual_reports.cfm but commencing from the 2007 Annual Report we will no longer mail you a hard copy unless you specifically ask us to do so.

To receive a hard copy Annual Report (free of charge),visit our Share Registry’s website www.linkmarketservices.com.au/telstra ,choose the “Communication Options”menu and follow the prompts. Alternatively you can call our Share Registry on 1300 88 66 77 .

Telstra will use this opportunity to improve communications with shareholders, help the environment and save on printing and postage costs...

We will continue to provide you with regular Shareholder Updates around key events such as results announcements,as well as with other shareholder mailings throughout the year.Given this emphasis on timely communication and our separate update on results,the Annual Review previously issued almost two months after the results will be streamlined into a shorter Shareholder Update.

Why not consider the benefits of receiving all your shareholder communications electronically?

Electronic shareholders get their communications from Telstra quickly,conveniently and clutter-free.Telstra is proud to be a member of eTree and donates $2 to Landcare Australia for every shareholder who chooses to receive all their communications electronically (including dividend statements).We will also email you other relevant information as it arises.

To become an electronic shareholder visit our Share Registry’s website

www.linkmarketservices.com.au/telstra ,choose the “Become an e-shareholder”option and follow the prompts.Alternatively you can call our Share Registry on 1300 88 66 77 .

Minimising the number of lengthy statutory reports we print and mail has obvious environmental benefits and also saves significant expense for you,our shareholders.However, our commitment to updating you with timely information about your investment is stronger than ever.