TELSTRA GROUP LIMITED — Call Transcript 2006

May 3, 2006

4 May 2006

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

Transcript of presentation by John Stanhope, Chief Financial Officer Telstra, at the Macquarie Investor Conference

In accordance with the listing rules, I attach a transcript of a presentation by John Stanhope, Chief Financial Officer Telstra at the Macquarie Investor Conference, for release to the market.

Yours sincerely

$h$ ead

Fiona Mead Acting Company Secretary On behalf of Douglas Gration Company Secretary

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

TELSTRA - JOHN STANHOPE 3rd MAY 2006

TIM SMART: Good morning, ladies and gentlemen, we might just make a start, if that's okay. My name is Tim Smart, I'm head of the Australian Telecoms Team here at Macquarie. It's with great pleasure that we've got Telstra here,
and specifically John Stanhope, the Chief Financial Officer and Group
Managing Director for Finance Administration, to present to us here today. certainly a very interesting and defining period in Telstra's history at the moment.

In terms of John, as I mentioned, he's the Chief Financial Officer, he's responsible for finance, treasury, risk management, and assurance,
productivity, corporate services and billing. He's been in that role since 1
October 2003 and, of course, has had a long and distinguished career at
Telstr reduction programs, gross strategies, debt raisings, capital management initiatives and organisational restructures.

So, we are very pleased to have John here to speak today, so please welcome John Stanhope.

JOHN STANHOPE: Thanks very much, Tim, and it is a pleasure to be here today and, you know, it's always an interesting situation where you speak at various investor conferences and you think about, "Well, what is there new that
I can say?" It's not easy to come up with something other than to say, of
course, that the activities around Telstra at the moment are at a fe The activities with the regulator is at fever pitch, and that's an exciting time, I guess. Hopefully, shortly, to reach the crescendo and some reasonable decisions.

So thanks again, and good morning to you all. I refer to the usual disclaimer that is compulsory, of course.

Today I'm going to focus on our strategy and the direction of the business, but I am going to cover some of the common themes that I get regularly asked about as I go around and talk to the investors on a one-on-one basis and, of course, questions from Tim Smart and others.

I'm going to talk about the national 853G network, because there's a few questions around that. I'm going to talk about our IT transformation and cost take out because recently I made some comments about that, and I want to sort of reaffirm some things I said, and talk about it.

We get questions around how we are going to build the economies of the business, given what's happening today - so how are we going to change the economics of the business; the culture at Telstra - one of the questions oft asked is, "Well, you have a fairly major transformation program that you are undertaking. It's faster than anybody else has ever done, so what about the culture at Telstra, how is that changing?"; and I'll touch a little bit on the regulatory environment. There's not much I can say, but at least I'll talk a little bit about it. So, I'll address each of those issues in turn.

As you know, we are building a single national 3G network on the 850 spectrum. Currently in the world only Telstra and Singular in the United States are using the 850 spectrum for 3G. Singular is lunching in June this vear.

Carriers around the world are migrating from CDMA to GSM, and we know many carriers are considering migrating from CDMA to 3GSM. So why 850? The lower the spectrum, of course, the greater the area that can be covered. That means in both terms of area coverage, but also in building coverage.

So, for a landscape like Australia, we need a network that is going to cover a large distance, without increasing the cost associated with roll out and maintenance. With the coverage of 850, we have been able to utilise existing base stations so, as you would understand, we have CDMA base stations th throughout the country.

To service at least the same population - there's been a bit of noise lately about, you know, making sure Telstra does it, and so on, and we are trying to get across the point to people that this is a superior network that we will finish up with. So by building the 850 network, we will have Australia's only true national 3G mobile network, and this will mean all Australians in coverage areas will have access to our superior coverage, and content, and what I mean by that is after the launch of this network - shortly after the launch - there'll be high speed data availability and, therefore, access to more content than is available today.

850 also provides superior in-building coverage, which, of course, is critical to customers. Many of us get annoyed when we go into certain buildings, we don't have, or it drops out, and we don't have the coverage.

With a truly national network, we can rationalise our platforms to bring greater economies of scale and reduce costs over time. So it's not only about providing better facility to customers, it's also about reducing our cost base by also reducing one of the platforms, CDMA platform, which will reduce costs over time.

We are currently in the progress of acquiring a range of handsets and PC cards from vendors. We are often questioned about the availability of handsets, but I guess I've seen at least, personally seen, touched, held, used, at least six different 850 handsets.

So let me continue on with 3G. We are seeing that good range of handsets already being developed by vendors. The hand sets we'll be able to offer will cover a range of bands, both for use in Australia and for roaming overseas. Initially we will be launching handsets that cover 3G 850 and a range of 250 bands, which allow global roaming based on 2G.

We are also acquiring handsets and devices which have tri-band 3G, which will be able to be used almost anywhere in the world. Just to be clear, even though a handset may only have dual band 3G capability, it will still be able to roam back to 2G if 3G coverage is not available.

So while a customer may not be able to use all the data functionality of video calling, they can still use the 2G network for voice and some data. We are really at 2.5G, I guess. 3G - it's not just about handsets, it's also about mobile broadband via either the PC cards or PCs having their 3G antennas, the likes of which Dell and Lenovo are producing overseas.

So we'll have a number of cards as well as the handsets available at launch. So that's hopefully dispelling some of the myths about 3G 850 roll out and handsets availability. The transformation, and IT in particular - I did say a little while back that the transformation in terms of the network roll out is relatively easy compared to this tough bit, which is the IT transformation.

So, it is a major component of our transformation. It is about simplification. It's the IT or system's simplification. Our IT infrastructure is currently extraordinarily complex. There's no doubt about that. That complexity causes extra work at the front of house, back of house, right throughout the company.

So we are focussing on implementation of fundamentally new capabilities in both the business support system and operational support system areas, which are needed to help us manage the next generation network - that is the OSS - to help us manage the next generation network. Dramatic simplifications of platform, so OSS platforms and products and price plans and so on, pave the way for the implementation of these new capabilities.

Make no mistake, we realise - and I'm sure you do - that it is a huge task that confronts us, but wholesale change is needed. You know, we are a company that's been around for a long time, and the complexity has built up over a long
time. So towards the end of this year there will be a moratorium. So we are doing about it differently. That is, no work on old systems will occur after November, and we haven't quite picked the date in November yet, but we will shortly, and we'll start to build the new systems, and we'll take seven or eight months where that will be the focus of the company, and the old systems we won't play around with.

Now, probably, there'll perhaps be one exception. You don't want to be vulnerable in the market if somebody comes forward with some pretty
innovative pricing, so we would respond to any possibility of being at a market disadvantage, but that would be the only exception, and we would expect those to be few.

So what we've tried to do is build new systems and within the organisation while making changes to the old systems in the past, we are not going to do that because that's resulted in a distraction from the main game and, in fact, we've had a couple of cracks at this and we've failed because we haven't stopped work on the old systems. So that's our intention. Of course, it's not without risks, but the different way we go about it gives us a far higher probability of success.

You can see from that slide, the dramatic change that we are going to make. We are going to deliver this next transformation over the next three to five years. Our key business support systems, CRM billing and customer care, will transform over the next three years. Our operating support systems will
follow, our network transformation, as we deploy over the same three to five year time frame, the next generation network.

The earlier focus is on improving the quality of our customer information. You know, we have far too many handoffs at the front of house because we don't know about the customer in terms of a CRM, so that is essential to be able to deliver better service to the customer. So it's about focussing on quality of the customer information through our CRM capabilities. It's about the system support for market-based management and, of course, it's very much about front of house simplification.

I think if you recall our November 'Strategy Day', the 6,000-8,000 over three years, and 10,000 to 12,000 staff reduction over five years, is very much dependent on simplifying on the front of house. Today our billing and customer care is very much product focused. Tomorrow it will be about our customers, customers segmentation.

We have an aggressive timetable, no doubt about that. So how we are going to do it. Well, one, we are going to have a few world-class partners, and we have; and, two, we are aiming to avoid custom-builds, so we are going through this process now of what we call fit-gap, which is about, you know, we buy this thing off the shelf, other people have done the sort of things that we want to do around the world before, so let's just plug it in and - so we are having this - here's what it does, is there a gap to what we do today, and does it matter if there's something that we've got today that we don't get out of just putting it in an unchanged way, so no customisation, or as little as possible.

By the way, that's the way I put SAP into the company. That's the only way to get these sort of things done. So we have a defined plan, which will radically simplify the system's environment. We are going to remove some 80 per cent, as you can see there, of our systems, most of them over the next three years. And there will be multiple benefits. We'll have less complexity, of course, less outages, of course, a lower cost and simplified processes for the front of house employees. And, for example, we'll move from six tickets of work or work ticket systems for our few of force, down to one.

Okay, so the new economic Telstra's competitive advantage, so what do we mean when we talk about that stuff? We are going to deliver a valuer proposition, we believe, to customers, based on the competitive advantage that we have as a full service operator, and we believe Australia's leading
telecommunications company. Market based management really is the starting point of that value proposition.

Just to remind us, or remind you all, the goal of market based management is to know the customers like never before, and deliver integrated services tailored for their needs, so not looking at it sort of like product by product, like wireless and fixed and data, and so on, but looking at it from a segmented slice.

Our strategic marketing initiatives are the key plank in changing Telstra. We are already - it's very early days, but we are already seeing the impact of just understanding the segment better than we have before. And a segmentation we've done. I mean, it's not sort of some marketer dreaming up the segmentation, it is informed by market research, and market research, I guess, can go back a fair way in the company. We used to have a good market research group and over time it's sort of dissipated, but now we have a very strong market research activity back in the company.

So they are the key planks, or it is the key plank to a truly customer-driven organisation; so we are putting the customer at the centre of everything we do, and this will be reflected through what we believe will be impro shares in the various segments.

You know, we found out very specifically, like west of Brisbane metropolitan area, what our market share is per segment. We didn't know that before, so we can be very, very targeted. And why is it so, which is pretty important. I mean, not just finding out the data, but why is it so. So we think we can improve our overall market share by being very targeted in areas where our market share is low in the various segments.

We think market base management and value pricing will also result in higher uppers and reduce our opportunity. There will be an emphasis on, and you would expect a CFO to say this, profit and loss measurement at the customer We've restructured the consumer division around those segment level. segments, seven segments, and have almost completed the task of appointing all the segments leads, some of which have been recruited from outside the

company because we didn't believe we had the skills inside the company, and they will be directly accountable for profit and loss - segment profit and loss performance.

The next plank of our value proposition will be our differentiated content. We are leveraging the exclusive content of BigPond, Australia's leading ISP, and Sensis, or information services search and transaction business, to provide a richer customer experience, so far as content is concerned. And, of course, as
bandwidth increases, both in terms of fixed broadband and wireless
broadband, that content will increase.

So not only do we have the differentiation of content, but we can provide that content over multiple devices to actually deliver that truly integrated customer experience, and I was asked earlier this morning, "Obviously that leads to integrated pricing packages" and so on. I guess that isn't something
particularly new. There are some integrated services out there today at sites here and now, but there'll be more in the future.

I mean, they are available to our BigPond broadband customers now, and within our metro 3G coverage area. When, of course, we have the completion of our national high speed 3G mobile network, those services will be available nationally.

We have already successfully moved Sensis from being a pure print business 10 years ago, to being a market leader in online local search. We are taking that integration one step further. It's about not only enabling you to find what business you'd like to buy from, or in the case of Trading Post', enabling you to find a product that you might be looking for, but we are taking it one step further, which is enabling you to actually do the transaction. We have already started this in our 'Trading Post' business, as we have reacted to some competition with the print media with respect to their classified advertising strategies.

The value propositions are attractive to customers, because it delivers to them what they want, when they want it and, above all, does it in a simple way, and this simplicity, always simplicity for customers, is critical, but this simplicity continues to be a critical element because you shouldn't have to be a technology expert to be able to do these things, and customers simply won't use it if it's going take them 20 minutes to figure out how, or 15 clicks and so on.

So our vision is 'One click, one button, one touch, one screen, one-step simplicity' is where we are driving to, and that's behind everything we are doing in terms of building the systems, building the platforms, building the integrated products and services.

This simplicity, matched with our ability to integrate, differentiate, and know our customer better than anyone else, we believe will allow us to provide real value to the customers, and value they are willing to pay for. We are trying to lead the industry out of discounting and actually move towards value pricing.

The result will be a change in the current pricing dynamics. We believe from the commoditisation of access to a model of value-based pricing. Now, I am not suggesting that, you know, voice, for example, is going to all of a sudden be value price, but it's the value on top of voice that I'm talking about.

You may have already seen that we have launched, on a low scale, some subscription-based pricing plans aimed at our higher-value customers. In the coming months - and the take-up is quite strong - you'll see further evidence of how we are changing the economic dynamics of this market and the industry, and repositioning the value proposition to customers.

Customer value, of course, is why we are doing this, in turn drives shareholder value, which is all about improving our bottom line. So let me talk a little bit about the new economic model. This is the first time, I guess, we have shown this slide, so I just want to give you some insight into our thinking about the economics going forward

So this is about the new economic dynamics. It's a question I often get asked, "How are you going to achieve the aggressive financial targets that we set ourselves?^" I understand there's a degree of scepticism on what can actually be achieved, but we have done a lot of work on this new economic framework and believe we can succeed at delivering it.

I won't go into too much detail here, but let me just give you a brief outline of the concept we are working to, and this is a concept slide here. We are developing quite significant models below this.

The evolution of processes, networks and systems is driving the need for a new analytical framework. The matrix here shows you the split between traditional and next generation products and networks. For the past 30 years, probably longer than that, the telecom industry has focused on developing products over traditional networks.

Innovations over the years have been driven by exploiting the capabilities of the existing traditional networks. Now a new-type of platform-based innovation is taking place. New platforms enable us to re-engineer the existing product set and enable a new sometimes - well, even yet to be invented product set. Our strategy is precisely about exploiting the capabilities offered by the new network platforms, and about how we move from traditional networks and products to next generation networks and products.

So the transition, if you like, in terms of that slide towards the right-hand side of that matrix. The model illustrates how profit drivers are likely to shift over time. Changing revenue mix will reduce margins in the short term, and we are seeing that. And all you guys that analyse Telstra know that. So there is a changing revenue mix happening in the short term, as our traditional high-market products are in decline, while currently lower margin products gr marketing 101, I guess.

However, sufficiency gains from the transformation program also go to improved margins, particularly on a fast-growing new network portfolio. The cost of delivering products over on this right-hand side is far less than they are today on the traditional side. So I just wanted to get across in a little more, not a lot of detail, but a little more conceptional detail for you why we have confidence in our financials going forward, that we talked about on 15 November, 'Strategy Day'.

Look, the changing product set and evolving network and systems will affect the cost of business processes. Detailed driver analysis, which we are doing, will enable us to reduce the end-to-end product costs, and this is part of the economic model again, with increased sufficiencies in processes, systems and networks. We will manage down-costs in each part of the delivery product cycle.

So we've got our product group close to our network group, and there is a lot of work going into the cost reduction in the product delivery cycle. So we are going to reduce the total operating expenses and improve the margins by changing the cost structure by product by product of the total business, in the delivery of new products and services.

So let me move on to operating free cash flow growth. Through this transformation, our expectation is that operating free cash flow can return to growth, and over, you would understand, this fiscal, and the next fiscal, there is high use of cash in terms of capital expenditure to do this transformation. CAP EX will be reduced after that initial spike. That's occurring during the transformation program.

As we previously flagged, we aim to have CAP EX at around 12 per cent of sales by 2010. That's when we'll be mostly done with this major transformation. Then, of course, the CAP EX requirements ought to be quite low.

As you can see from the slide, it's only - and it is only an illustrative slide - so don't get your calculators out here, but with our traditional products over traditional networks alone, we could witness a decline in free cash flow position, so through the transformation, the combination of cost reduction that I just talked about, and incremental revenue from new products over the next generation networks, we can return to free cash flow growth.

Let me just touch on the culture, because it is a question that I get asked a lot. So as you can see, we are working on our network, we are working on our systems, we are working on our economic model. We are working on our systems, we are working on our economic model. We are working on the customer exp it's the people that bring it together and make it happen for the customer.

So this is why we need to change the culture in the organisation. Culture is a funny word. I guess it means many things to many people. I guess what I'm talking about here is behaviours. Behaviour of people when they talk to a customer. It is a very critical element. It's really important to look at our people and look at how we work together, so working together is also a behavioural thing that we need to occur, how we get things done together.

Andrea Grant, who is our newly appointed HR head, who came to us from General Motors, together with the senior leadership team, took a look at the kind of cultural or behavioural - I won't use the word "culture", I don't like
it - behavioural transformation that we need for the business going forward.
And, hey, we've got some work to do. So we are now going through t

Back in early March, 300 of the top managers in Telstra got together for two days to discuss the vision mission and strategic direction of the company. Our vision is to do for customers what no one else has done, create a world of one click, one button, one screen, one step solutions that are simple, easy, and valued by individuals, businesses and Government.

Our mission is to know our customers and meet their needs better than anyone else. That vision, and that mission, is now being cascaded through the organisation via staff road shows throughout the whole country, so we are trying to get to the whole 50,000 staff and contractors. That's being done by the CEO and myself and other members of the senior leadership team.

So we are speaking to the staff, and we are answering all their questions. So it's about making sure that all staff are aligned with the new strategies,

because we are going to have that alignment so we can really deliver on the vision and really deliver what customers need.

You know, there's been a fantastic response to these road shows, with staff excited about the challenges, excited about the opportunities ahead, and excited about a new Telstra, if you like. We've also - but just putting up, you know, signs and senior leader management, senior team talking to people, just doesn't make it happen, so there's a lot of activities going on which will help imbed the right behaviours into the organisation.

So we've set six behavioural requirements that we are looking for. Everybody in the company should put the customer first. We are empowering our people in order for them to be able to do that. Winning in the market is a behaviour that - winning in the market is top of mind, is a behaviour that we want. There has been somewhat of an attitude in the organisation that, you know, "We are the big guy, we are the incumbent, we are supposed to lose market share."

Well, bugger that, we need to win. You don't go out on a football field to just play, you go out to win. So a behaviour and an attitude that we want in the company is that we are here to win. And, of course, a behavioural sense of delingthermore must prevail, and we want our people to believe that anything is possible and, lastly, that we get it together, it says there, but what that means is we succeed together, that we actually work together in achieving this.

So look, we are investing in our people. We announced November 15,
\$200 million injection into training, and in March we signed a contract with Accenture to introduce a new training program to our field staff - not for the whole 200 million, but for the field staff element of the program, and we are bringing training and development that has already been produced and developed for the field staff because, hey, guess what, IP networks and so on have been introduced elsewhere in the world. Again, we are not reinventing these things.

So understand that agreement, Telstra is using Accenture's global expertise, so our field staff are skilled in those new technologies, can deliver better service to our customers and, as a result of this agreement, our field service staff will have greater skills and understand the network and advanced IP technologies.

I mean, our field workforce, their actual job changes significantly. Importantly, as well, we've aligned the management incentive program to focus on the achievement of our strategic objectives, and we said a little bit about that on the strategies day.

So let me just finish off. I guess we'll nearly just finish off with a bit about regulatory. I just want to clarify the regulatory principles that we are seeking for existing and planned investments. We all understand that there is substitution from fixed line to wireless, from legacy services to IP-based services, from legacy services to next generation high-speed networks, both fixed and wireless, and we recognise that in instances where there are clear bottle-necks, particularly around legacy, that regulation is required to provide competitors access to those bottle-neck services.

However, the issue around that, of course, is that that access should allow us to recover costs. However, when it comes to undertaking investments in new networks that will provide high speed and improved services to customers at a fairly significant cost to the company, the company needs to be able to earn a return from undertaking this investment. That's our shareholder responsibility, our shareholders expect and are entitled to earn a return on significant investments where the capital, their capital is at risk.

And that's our argument for fibre to the node. We are not arguing for an access holiday. We will provide competitors access to whatever it is, on the right commercial terms.

On mobiles - the recent comments that the 3G network should be regulated or, should I say, reportedly said that it should be regulated - we believe that
that would be a backward step. There is no wireless regulation anywhere in the world, except perhaps in some underdeveloped countries.

Mobile has flourished due to the competitive nature of the industry, not through it being regulated. So we welcomed the Minister For Finance's comments over the weekend, and on Thursday or Friday, I think it was, that the Government wants to ensure regulatory certainty, and that it is quite confident that access to new mobile services will not be regulated.

And, lastly, in closing, just let me just reiterate our longer term financial outcomes that we expect from the transformation of Telstra. Of course, they remain subject to reasonable regulatory outcomes that we all hope will be very much on the horizon. We are committing to 2-2.5 per cent regulatory growth,
and 20-25 per cent of that regulatory growth will come from new services. It has to, if we are going to achieve that.

Our 2010 cost structure will be no higher than back in the fiscal '06, so we'll have a bit of a hump in the next two years, but then we are back to those sort of levels. And that for fiscal 2010, we expect either our margins would have
recovered from between 50-52, and I tried to explain how we think that's possible, with both low cost revenue producing products and services from fewer platforms.

We are going to spend \$2.5-\$3 billion capital above our original plan, so if you think about it, about \$4 billion a year, over five is 20, so that's $$22-\$25$ billion to transform the business. And after transforming the business, we expect the CAPEX sales to go back to about 12 per cent, and then I guess to grow in proportion to future revenue growth, and we expect to generate free cash flow in the order of \$6 to \$7 billion by 2010.

And, of course, the last one there – the controversial dividend, of course; but, look, our intention still is to pay 28 cents per share subject to board considerations and, you know, you wouldn't expect us to say anything regulatory outcome.

So I hope what I've said today helps you understand a little more of what we are doing with our transformation, and I've added today, I guess, what we are trying to do with the behaviour of our people, or the culture, if you like, of our people. So thank you very much for listening, and I will now take some questions.

TIM SMART: Thanks very much, John. We do have some time for a few questions. I think there's a couple of microphones around, so if you put your hand up if you'd like to ask a question.

Perhaps I will just kick off by asking one to you, John. You previously said you would not roll out fibre to the node without certainty, in terms of the commercials. Is it possible that you will get certainty on fibre to the node, sort of, by October/November this year, do you think?

JOHN STANHOPE: Well, I think we've said recently the discussions with the regulator are quite constructive. Obviously I am not going to go into the details of those discussions. The principle of a reasonable return on a new investment is certainly understood by the regulator. You know, these things will come down, at the end of the day, to what is the wholesale price, and what is it that is embedded in that price, in terms of the rate of return, so it doesn't take you long to agree to some principles, but like all those things, it comes down to the dollars, at the end of the day. But so far so good.

I think, you know, we are working to a timetable which, you know, you've seen in the press - the expectation of $\delta$ May, that the Cabinet will meet to talk about those things. There's a lot for them to think about on that day, so we shouldn't have too high an expectation of what might come out of that day, given it's a very complex issue.

SCOTT MADDOCK: John, the 3G roll out, you say that you are going to rationalise the systems, and thus save costs, yet you are going to have full roaming to 2G, so you are going to maintain at least one 2G network.

JOHN STANHOPE: Yes.

SCOTT MADDOCK: So where does the rationalisation come from?

JOHN STANHOPE: CDMA - we won't have a CDMA network.

SCOTT MADDOCK: So you'll still have two networks, as you do now.

JOHN STANHOPE: Yes, we will, certainly initially, and it will take some time before the whole 8.6 million customers move over to a 3G network, but eventually you get there, I guess, but certainly in the short term you get the CDMA-type rationalisation, and then everyone in the world will go from 2G to 3G. But that will take longer, Ray.

There's only 1.6 million customers on CDMA. 7 million of our customers, I'm talking about - there's 7 million on GSM. So that's a slower transition, and a slower reduction rationalisation, but certainly CDMA is the first one to go, and look, there's systems and marketing and there's collateral, and all those sort of things attached to CDMA.

SCOTT MADDOCK: But how long do you expect that you'll be running three networks?

JOHN STANHOPE: Do you mean CDMA as well?

SCOTT MADDOCK: : Yes.

JOHN STANHOPE: We announced that we expect to close CDMA '08, end of $08.$ Part of our logic behind that, of course, is that you don't want your migration across from CDMA to 3G to cost you a lot, so as people come off contracts - so we are trying to do this in an orderly way, and a least-cost way, because when a person comes off contract all of us in the industry come back and say, "Well, do I get a free mobile" and so on, so closure, we've said, would be the end of '08 calendar.

There's a bit of debate going on in the Government about that, but that's our position.

TIM SMART: John, I might just take the opportunity to ask one question as well. With regards to stakes in the ground. The first time you presented that was at your November strategy review and, you know, quite a lot of those stakes are caveated against reasonable regulatory outcomes.

Six months down the track, and given the discussions you have had with the regulator to date and, in fact, with the Government to date as well, how do you think you are placed with those targets that you have set out there.

JOHN STANHOPE: That's a loaded question. You know, the discussions are going well. If the discussions conclude as well as they are going, then the stakes in the grounds are in good shape.

TIM SMART: I might just ask one more, John, if that's all right. One more question, if that's okay. Optus reports tomorrow, and then you've got the March quarter data. Is there any challenge in sort of the broad trends in the business you've seen, in the fixed-line decline? Is there any change in the way you've seen the business purchasing over the first quarter?

JOHN STANHOPE: Absolutely no reason to change our current guidance. Tim.

TIM SMART: All right, with that, I might just say thank you very much to John Stanhope, and thank you very much for your interest in Telstra again.

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