TELSTRA GROUP LIMITED — Annual Report 2008

Aug 12, 2008

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13 August 2008

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

Full Year 2008 Financial Results – CEO/CFO Analyst briefing presentation

In accordance with the listing rules, I enclose a presentation for release to the market.

Yours sincerely

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Carmel Mulhern Company Secretary

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

FY 2008 Financial Results

Sol Trujillo, CEO 13 August 2008

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Disclaimer

• These presentations include certain forward-looking statements that are based on information and assumptions known to date and are subject to various risks and uncertainties. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, these forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Telstra, which may cause actual results to differ materially from those expressed in the statements contained in these presentations. For example, the factors that are likely to affect the results of Telstra include general economic conditions in Australia and other countries in which we operate; exchange rates; the scale and complexity of our transformation; competition in the markets in which Telstra will operate; the inherent regulatory risks in the businesses of Telstra; the substantial technological changes taking place in the telecommunications industry; and the continuing growth in the data, internet, mobile and other telecommunications markets where Telstra will operate. A number of these factors are described in Telstra’s 2007 Debt Issuance Program Prospectus lodged with the ASX.

• All forward-looking figures in this presentation are unaudited and based on A-IFRS. Certain figures may be subject to rounding differences. All market share information in this presentation is based on management estimates based on internally available information unless otherwise indicated.

• All amounts are in Australian Dollars unless otherwise stated.

• Foxtel HD+ is a registered trademark of Twentieth Century Fox Corporation.

• SouFun revenues and expenses are unaudited management accounts converted from local currency to $US based on US GAAP and then translated to A-IFRS. Reported SouFun expenses include certain expenses incurred by Sensis to manage the investment in SouFun together with other expenses recognised on consolidation.

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PAT +13.5%
EBIT growth 9.1%
Retail growth +5.9%
FCF +33% to $3.9bn
On guidance basis, adjusted for CSLNW accelerated depreciation of $77 million
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FY08 $ billions (reported) Financial Results – strong retail performance Segments - FY08 Absolute Sales Revenue Growth	FY08 $ billions (reported) Financial Results – strong retail performance Segments - FY08 Absolute Sales Revenue Growth	FY08 $ billions (reported) Financial Results – strong retail performance Segments - FY08 Absolute Sales Revenue Growth	FY08 $ billions (reported) Financial Results – strong retail performance Segments - FY08 Absolute Sales Revenue Growth	FY08 $ billions (reported) Financial Results – strong retail performance Segments - FY08 Absolute Sales Revenue Growth	FY08 $ billions (reported) Financial Results – strong retail performance Segments - FY08 Absolute Sales Revenue Growth		Growth %
TC&C	+6.1%		Sales Revenue		24.7		4.2%
			Total Revenue		24.8		4.7%
TB	+8.6%		EBITDA		10.4		5.6%
TE&G	+3.6%		EBITDA Margin (%)		42.2%		+0.5pp
Total Retail (excl Sensis)	+5.9%		EBIT		6.2		7.7%
			PAT(post minorities)		3.7		13.5%
Sensis	+8.1%		Accrued Capex		4.9		-16.7%
Wholesale -4.5%			Free Cash Flow		3.9		33%
	$m 1,000 500 250 -100		Ordinary DPS (cents)		28		-

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Outperforming our global peer group
World Class Domestic Revenue Growth FY08 Mobile Services Revenue Growth
12.3%
Telstra 4.8%
7.2%
Telefonica 2.7%
3.0%
France Telecom 2.4% 2.9%
2.1%
BT 1.2%
-1.7% Telecom New Zealand -0.2%
-1.1%
-3.3%
-2.7% Telenor
-4.5%
-5.8% Deutsche Telekom
-6.5% Telecom Italia
Source: Company reports
Source: Company reports
Vodafone Europe: June Quarter
5
Telstra Vodafone Australia Orange France Optus Telefonica Spain Vodafone Europe KPN T-Mobile Germany Telecom Italia
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Guidance summary*

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Accrued capex EBIT growth EBITDA growth Total revenue growth Measure	Free cash flow Capex/sales EBITDA margin Revenue growth Measure $4.3-$4.6b 6-8% 6-7% 3-4% 2009 guidance	$6-$7b Around 14% 46-48% 3-4% CAGR from FY05 UPDATED FY10 Long-term Management Objectives

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* Off reported numbers, excludes any potential NBN investments
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6

IT Transformation: going well

	Migration Update		11 August
	Customers migrated		3.3 million
	Services migrated		4.3 million

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• Reduced 74 billing, product and ordering systems to three

• More than 15 million lines of code

• Including 5 million in mediation software

• To date: 1016 OSS and BSS systems decommissioned

• 365 IT systems

• 187 platforms capped or exited

• 464 product and pricing plan exits

• No increase in complaint volume

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IT transformation – Reducing complexity

			LEGACY		NEW
	Number of products		2,200		830
	Product codes		236,000 PCMS codes		97,000 components
	Pricing/charge codes		421,000		171,000
	Discount plans		10,000		2,000

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Possible permutations: More than one quadrillion!

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Transformation: 5 year end-to-end strategy
Transformation decisions… …delivering results
• Australia 1 [st] , 2 [nd] and 3 [rd] priority • Next G™ network: 99% population coverage and > 2m sq km
• Market-based management • Next IP™ network: 600% bigger than nearest competitor
• New customer experience • 47% 3G mobile penetration
• Next generation networks & IT • IP data access revenue exceeds legacy data
• One factory model • Retail sales revenue grew +5.9%
• Integrated company • 3G postpaid ARPU grew +5.3%
• Integrated services • Consumer PSTN churn halved, revenue growing
• Broadband focused • Mobile services revenue growth almost tripled from Dec 05
• Low cost model • 588k WBB subscribers generating around $90 ARPU
• Serving interests of all • Non-SMS data more than 50% of mobile data
• New economic model • Adding PSTN retail lines
• Differentiation is the key • Handset data revenues up 57% in 2H
• Value based v price based • Retail PSTN ARPU maintained
• ROIC will drive resource allocation • Field workforce productivity up 41%
• Simplicity of use (1-click, 1-touch, 1-button, any screen) • SARCs down 19%
• Fewer partners • Retail broadband market share & ARPU up
• Expand in core competency areas • More than 3m customers migrated to new billing system
• Comms, Info, transactions, entertainment = media-comms • T[life]™ - revitalising retail experience for customers
9
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Redefining the business…service experience
Field Workforce Productivity Network Trouble reports per 100 SIOs
6 (Activity Task per day) 6
5 -35%
4 5
3
2 4
1
0 3
2005 2006 2007 2008 2005 2006 2007 2008
ADSL Held Orders Wideband Customer Delivery Date (CDD)
100%
95%
5,000
90%
85%
80%
75%
0 70%
2006 2007 2008 2005 2006 2007 2008
10
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Redefining the business…service experience

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Redefining the business…mobile
Browsing Usage per UU
Mobile Data Revenue
(Mb/mth)
$830m 2.0
$716m
$582m $367m 0.8
$343m
$490m
$311m 2007 2008
$286m $142m $179m
MMS Volumes (m)
$112m
$128m $230m $284m 64
$158m
$76m
37
1H07 2H07 1H08 2H08
SMS Handset WBB [2]
data [1]
1. Includes MMS, browsing, content and email
2. WBB revenue for laptop cards and datapacks ≥$29 2007 2008
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Redefining the business…IP and fixed
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IP & Data Access Revenue
$m
IP ARPU Escalator
1,000
900
Hosting
800
700 IP
Telephony
600
IP
500 Security
400 Managed
WAN
300
IP
200 Network
100
0
1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08
Legacy Data Products IP & Data Access Total Time
IP Data Products
12
Customer Value
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Redefining the business…broadband
and media-comms
Broadband Revenue growth
offsetting PSTN decline
Domestic
content $500m business in five
growth years
+$285m
+$159m +$64m
-$159m -$221m FOXTEL revenue • EBITDA +48% to $351m
-$318m +17% to $1.7b • ARPU up to $85 / month
FY05 FY08
FOXTEL HD+ Almost 40,000
launched in subscribers since
Fixed Retail Broadband (ex-WBB) June 2008 launch
PSTN
Net total
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BigPond Music
Find Download Listen
Market-leading search Simple purchase flow. Load your music.
and catalogues.
BigPond Music’s simple BigPond have chosen the
BigPond Music’s already three-step purchasing MP3 format for the
established cataloguing process is the product of reason that it is the most
and search indexing years of listening to supported audio format.
ensures the content customer feedback and
people want is at their responding to requests.
fingertips.
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Sensis: sales revenue +8.1%
Sensis Revenue
Revenue
$2.5b 25% World class • Total directories +7.2%
directories • Print directories +5.4%
$2.0b $1.83b $1.97b $2.13b 20% growth • Online directories +20%
$1.71b
$1.5b 15%
Digital media • MediaSmart +41%
$1.0b 10% momentumcontinues •• Whereis +52%Total Digital media +32%
$0.5b 5%
$0 FY05 FY06 FY07 FY08 0% Transformationinvestments •• Yellow network usage +4.3%+30% improvement in Yellow
delivering print turnaround time
Yellow Print White Print Digital Media Other benefits
Digital media as % total revenue
15
Total digital media = all online, mobile and satellite navigation revenues including online directories and China.
Digital Media as a % of Total Sensis Revenue
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China: investing in online growth
US$ Sales Revenue - China
Reported US$ China Double digit • Revenue growth +67%
sales revenue todouble revenue andEBITDA growth • EBITDA growth +99%
US$108m (incl
acquisitions)
• City expansion: On target
Growth for 100 cities by Dec 2008
US$79m potential •• Double digit market growth>2 billion page views/month
US$47m
FY07 FY08 FY09E Leverage •• Display advertisingMobile ad capability
potential • Traffic generation technology
New businesses acquired on 27 June 2008,
to be consolidated in FY09
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China: investing in online growth
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Redefining business 14 cps final dividend FCF $6 - $7bn in FY10 Shareholder value creation 17 Appendix

Redefining the business…mobiles

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3G as % of subs base Mobile EBITDA Margin Movement (pp)
60-70%
50% by 2010 2.3
45%
40% 0.7
35%
30%
25% -1.2 -1.1
20%
-2.1 -2.0
15%
10%
-3.4
5% -3.8
0%
H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008
Telstra Telefonica Moviles Vod Eu Av TIM AT&T
Source: Company reports
EBITDA margin change for last reported fiscal year
19
Optus T-Mobile Germany Vodafone UK Vodafone Italy Vodafone Germany Telefonica Spain Orange France Telstra
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Redefining the business…PSTN

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Mobiles & PSTN revenues at cross-over Bucking the global trend and growing retail PSTN
$m Telstra Retail
100 Lines +87K
4,000
95 Total LinesTelstra
3,500
90
3,000
85
2,500
80
2,000
75
2H05 1H06 2H06 1H07 2H07 1H08 2H08 2H05 1H06 2H06 1H07 2H07 1H08 2H08
Telstra European US Total Telstra Retail
PSTN Mobiles Total Lines Total Lines Lines
European Lines: DT, FT, TEF, TI US Lines: AT&T, VZ
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20

FY 2008 Financial Results

John Stanhope, CFO 13 August 2008

Disclaimer

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• These presentations include certain forward-looking statements that are based on information and assumptions known to date and are subject to various risks and uncertainties. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, these forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Telstra, which may cause actual results to differ materially from those expressed in the statements contained in these presentations. For example, the factors that are likely to affect the results of Telstra include general economic conditions in Australia and other countries in which we operate; exchange rates; the scale and complexity of our transformation; competition in the markets in which Telstra will operate; the inherent regulatory risks in the businesses of Telstra; the substantial technological changes taking place in the telecommunications industry; and the continuing growth in the data, internet, mobile and other telecommunications markets where Telstra will operate. A number of these factors are described in Telstra’s 2007 Debt Issuance Program Prospectus lodged with the ASX.

• All forward-looking figures in this presentation are unaudited and based on A-IFRS. Certain figures may be subject to rounding differences. All market share information in this presentation is based on management estimates based on internally available information unless otherwise indicated.

• All amounts are in Australian Dollars unless otherwise stated.

• SouFun revenues and expenses are unaudited management accounts converted from local currency to $US based on US GAAP and then translated to A-IFRS. Reported SouFun expenses include certain expenses incurred by Sensis to manage the investment in SouFun together with other expenses recognised on consolidation.

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Financial Results

Reported	1H08 pcp	2H08 pcp	FY08 ($’b)	4.7% FY08 pcp 4.2% 5.6% +0.5pp 7.7% 13.5% -17% 33% - Profit after Tax +13.5% EBIT +9.1%*
Sales Revenue	5.3%	3.0%	24.7
Total Revenue	6.2%	3.2%	24.8
EBITDA	5.2%	6.0%	10.4
EBITDA Margin (%)	-0.1pp	+1.2pp	42.2%
EBIT	6.2%	9.3%	6.2
PAT (post minorities)	13.0%	14.0%	3.7
Accrued Capex	18%	-34%	4.9
Free Cash Flow	54%	24%	3.9
Ordinary DPS (cents)	-	-	28c

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*** On guidance basis, adjusted for CSLNW accelerated depreciation of $77m**

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Guidance*

Measure	2009 guidance	UPDATED FY10 Long-term Management Objectives	PREVIOUS FY10 Long-term Management Objectives
Total revenue growth	3-4%	3-4% CAGR from FY05	2.5-3% CAGR from FY05
Operating expense growth	-	4-5% CAGR from FY05	2-3% CAGR from FY05
EBITDA growth	6-7%	3-3.5% CAGR from FY05	2.5-3% CAGR from FY05
EBITDA margin	-	46-48% in FY10	46-48% in FY10
EBIT growth	6-8%	-	-
Depreciation & Amortisation	Around $4.5b	-	-
Capex/sales	-	Around 14% in FY10	10-12% in FY10
Workforce		Down 10,000-12,000 by FY10	Down 12,000 by FY10
Accrued capex	$4.3-4.6b	-	-
FCF	-	$6-7b in FY10	$6-7b in FY10

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*** Off reported numbers, excludes any potential NBN investments**

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Towards $6bn-$7bn of FCF
$1.0b -$0.5b +$0.2b
+$0.3b
$6-7b
$3.9b
$2.9b
FY07 Revenue Opex Capex Other FY08 FY10
Objective
5
+$956m
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Changing product mix since Transformation
$24.7b
$22.2b
+$1.5b -$1.1b
+$0.4b -$0.2b
+$0.2b
+$1.7b
Mobile Internet Fixed IP & data Advertising Other
access and
+5pp to +6pp to -9pp to Directories
26% 10% 36%
Percent of Sales Revenues
FY05 FY08
Sales Revenue
6
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Changing product mix since Transformation
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FY08 Product Growth led by Mobiles & Broadband
Mobile Services +12.3% Mobile Services (ex Wireless Broadband) +7%
Retail Broadband +30%
Retail Broadband +49.2% (ex Wireless Broadband)
$m ULL Shortfall – band 2
150
PSTN -3.2%
Revenue
Cost
Cumulative
Sensis +8.1% 0
-100 1H06 2H06 1H07 2H07 1H08 2H08
IP and Data Access +7.1%
7
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Strong Mobile Growth
500
400
15%
300
10%
200
100 5%
0 0%
1H06 2H06 1H07 2H07 1H08 2H08
-100
-200
Postpaid mobile Prepaid mobile Mobile Services revenue growth
8
Revenue Growth
SIO net adds (000’s)
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il Performance
		1H08		2H08		FY08
Sales Revenue growth		7.6%		4.3%		5.9%
- Mobile Services		13.0%		10.0%		11.5%
- Fixed		-0.3%		-1.5%		-0.9%
- Internet		47.2%		35.3%		40.7%
- Data and IP		8.2%		8.8%		8.5%
Operating contribution growth		8.5%		7.5%		8.0%
Operating contribution margin		64.0%		65.2%		64.6%
- change (yoy)		0.5pp		1.9pp		1.2pp
SIO net adds (‘000)
- PSTN		48		39		87
- Postpaid mobile		315		257		572
							9

Retail Performance

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Telstra Consumer and Channels +6.1%
Sales Revenue Market Based Management delivering:
$5.03b $4.95b
Broadband ADSL ARPU
$4.63b $4.77b +46% 32% ARPU growth up 6.9%
+9% +5%
PSTN Churn Net subscriber
down growth of 56k
+0.5% -1.8%
1H07 2H07 1H08 2H08 Mobile FY08 average SARC
SARC down down 24%
Fixed Mobile Services
Internet Other
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Telstra Consumer and Channels +6.1%

10

Telstra Business +8.6%

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Sales Revenue
$1.81b $1.83b Slowing PSTN Added 30k SIOs
Revenue decline for the year
+46% +41%
$1.70b
$1.65b
+22% +17%
Strong growth in 3G now 65%
mobile voice and of mobile
data revenues postpaid base
+1% +1%
Strong
Broadband
broadband
1H07 2H07 1H08 2H08 revenue
revenue +51%
and SIOs
Fixed Mobile Services
Internet Other
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Telstra Enterprise & Government +3.6%
Sales Revenue
$2.33b
$2.29b
Strong
Revenue Revenues +3.6%
$2.27b -4% Growth
+5%
$2.19b
+19% +24%
Costs remain
+6% +6% under control Expenses -2.8%
-4% -4%
Mobile Mobile Revenues
1H07 2H07 1H08 2H08 momentum +26%
Fixed IP & Data Mobile Services
Business Services and Other
Applications
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Telstra Enterprise & Government +3.6%

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Total Expenses +3.3%
3.3%
+$0.1b
3.5% $4.2b
+$0.3b
+$0.03b
+$0.1b
$4.2b
$4.0b
$18.8b
$5.2b
$5.2b
$5.2b
$4.9b
FY07 Labour Goods & Services Other FY08 Depreciation & FY08
Opex Purchased Opex Amortisation Total
Expenses
13
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FTE reductions on track

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Target Headcount Reductions Labour Expense: +3.5%
12,000 8,784 $4,300m
$0.1b $-0.1b
6,107 $4,200m
8,000 $0.2b $4.16b
3,859 On track
$4,100m
For 10,000 -12,000
4,000 FTE Reductionby FY10 $4.02b $-0.1b
$4,000m
0
FY06 FY07 FY08 $3,900m
FY07 Volume Price Redundancy Other FY08
Pre-acquisitions & divestments
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Directly Variable Cost growth slowed…

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DVC Growth: +0.6% DVC growth < Sales growth
$5,151m $5,181m 4.7x
$1,799m -0.1% $1,797m
3.4x
2.3x
$2,036m $2,004m
-1.6%
$1,316m $1,380m 0.1x
4.9%
FY07 FY08 FY05 FY06 FY07 FY08
Network Payments COGS Other
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… driven by SARCs
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Blended SARCs trend reversal Mobile EBITDA Margins (%)
$193
40%
$184
$175
$150
$148 $149
30%
1H07 2H07 FY07 1H08 2H08 FY08
2H06 1H07 2H07 1H08 2H08
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Key drivers in ‘Other Expenses’ increase
Other Expenses: +6.5%
+$5,246m
+$4,924m
Key Drivers Change:
FY08 vs FY07
$2,339m
7%
$2,177m SC&A IT Prof services +$147m
General Admin Debtor impairment +$58m
Impairment
Other ‘Other IT Costs +$38m
expenses’
$949m 8% $1,028m P&A +$35m
$361m
$389m -7%
$1,409m $1,518m
8%
FY07 FY08
17
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Capex passes peak
Capex: -17% Depreciation & Amortisation: +3%
$5.9b
Other $1.5b -17% $4.9b $4.1b $4.2b
$0.70b
Amortisation $0.74b -5%
$1.2b
Transmission $0.6b +2%
Wireless $0.8b $0.6b
-45%
$0.4b Depreciation +4% $3.49b
IT $1.3b $3.34b
-5% $1.3b
Fixed Access/
Network Core $1.7b $1.4b
-19%
FY07 FY08
FY07 FY08
18
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$6b-$7b Free Cash Flow FY10

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19
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Appendix 20

Telstra Consumer & Channels - Performance

	1H08	2H08	FY08
Sales Revenue growth	8.5%	3.8%	6.1%
- Mobile Services	9.0%	5.1%	7.0%
- Fixed	0.5%	-1.8%	-0.7%
- Internet	45.6%	31.8%	38.0%
- Data and IP	43.5%	22.3%	32.3%
Operating contribution growth	8.9%	6.4%	7.6%
Operating contribution margin	63.6%	65.3%	64.4%
- change (yoy)	0.3pp	1.7pp	0.9pp
SIO net adds (‘000)
- PSTN	32	24	56
- Postpaid mobile	132	76	208

Telstra Business - Performance

	1H08	2H08	FY08
Sales Revenue growth	9.3%	7.9%	8.6%
- Mobile Services	21.7%	17.4%	19.5%
- Fixed	0.8%	0.9%	0.9%
- Internet	46.0%	41.3%	43.5%
- Data and IP	21.5%	29.7%	25.8%
Operating contribution growth	7.2%	9.5%	8.4%
Operating contribution margin	71.7%	72.4%	72.1%
- change (yoy)	-1.4pp	1.0pp	-0.2pp
SIO net adds (‘000)
- PSTN	19	11	30
- Postpaid mobile	89	78	167

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Telstra Enterprise & Government	Telstra Enterprise & Government	Telstra Enterprise & Government	Telstra Enterprise & Government	Telstra Enterprise & Government	Telstra Enterprise & Government	- Performance	- Performance	- Performance
			1H08		2H08		FY08
	Sales Revenue growth		4.5%		2.7%		3.6%
	- Mobile Services		19.3%		23.7%		21.6%
	- Fixed		-4.3%		-4.1%		-4.2%
	- Internet		73.7%		68.2%		70.7%
	- Data and IP		6.3%		6.0%		6.2%
	Operating contribution growth		8.5%		8.3%		8.4%
	Operating contribution margin		59.1%		59.6%		59.3%
	- change (yoy)		2.2pp		3.1pp		2.6pp
	SIO net adds (‘000)
	- PSTN		(2)		4		2
	- Postpaid mobile		95		102		197

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Tax and Interest

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Net Finance Costs: -0.1% Income Tax: +0.8%
FY07 FY08 Change $1,417m [$1,429m] Lower Tax increase (vs Profit) due to:
$130m FY08 Foxtel
Borrowing Costs $1,053m $1,238m 18% distributions non-assessable
Other (incl IFRS adj) $34m -$152m -547% FY07 included non-deductible
Trading Post impairment
Net Finance Costs $1,087m $1,086m -0.1%
Tax amendments and other
These unrealised gains will progressively unwind FY07 FY08
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Debt markets remain open to Telstra
Long-term Debt Maturity Profile
FY08 Debt Completed
$bn LT debt average maturity: ~5 years
3.0 €500m Eurobond
benchmark
2.5
2.0 A$1bn Domestic
1.5 Syndicated Loan Facility
1.0
US$600m Asian
0.5 Syndicated Loan Facility
0.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
to
FY21
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