TELSTRA GROUP LIMITED — Call Transcript 2006

Feb 8, 2006

9 February 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 from Telstra's Media briefing - Half year results

Attached is a copy of the transcript from today's Telstra Media briefing on the half year results, for release to the market.

Yours sincerely

North brake

Douglas Gration Company Secretary

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

TELSTRA MEDIA BRIEFING THURSDAY, 9 FEBRUARY 2006

ANDREW MAIDEN: Good morning. My name is Andrew Maiden. Welcome to our audience at the Sofitel Hotel in Melbourne and welcome to those of you who are watching this via webcast. In a moment, I'll ask Sol Trujillo to open with some remarks about today's results.

I'm then going to invite questions from our Sydney audience and then after that from our Melbourne audience too. If you have a question please queue at one of the microphones in the two venues and begin by stating your name and organisation. When you are queuing, if you could please avoid interrupting the line of sight from TV cameras that are on the riser at the back of the room in Sydney. So I'd like to introduce Sol Trujillo now.

SOL TRUJILLO: Thank you, Andrew. Let me go ahead and get started. Let me welcome all of you for spending the time and the interest to understand more about Telstra and the results that we have announced today. I'm going to summarise real quickly and then we will turn it to questions and answers.

I guess the core message that I want to deliver and have delivered so far inside the company, now outside the company, is that we are in fact continuing and implementing the transition that we talked about, the transformation of Telstra which is going to be a multi-year task. In order to do that, we are taking some $\cdot$ what I call tough medicine to create the long-term value and to change the economic model, to change the way that we do business, to change the trends that have been in place for the last few years within the business here at Telstra.

What we announced today is that we are on track with the

guidance that we have given, and the guidance that we gave and the results that we have here says that our top line growth was 1.9 per cent which is basically on track with guidance. Our cost growth of negative 6.3 per cent is on track and our PSTN decline of negative 7.6 per cent is actually slightly faster than what we had guided everyone in terms of our anticipated plans going forward, and our mobiles growth was what I called or termed as just okay; not great and not bad, it's just okay.

At the same time, in terms of our results, our broadband SIOs were up 300,000 and our revenue was up 63 per cent. Now, those of you that might have been attending the November 15th strategy presentation, you heard me say that broadband is at the centre of our strategy and at the centre of our future, whether it be in terms of our fixed line business or our wireless business.

We talked about Sensis in terms of part of the growth platform that we have in the business going forward and we guided in terms of 6 to 7 per cent revenue growth and they have come in at that level, and then in terms of our meeting this morning with the analysts, we talked about our transformation. I outlined several things that we have underway in terms of the business and basically that is on track.

Now, in terms of the reporting period, we are talking about a month and a half of implementation from November 15th to the end of the year. But again, I'm encouraged by all that we have underway in the business.

So in terms of transformation just a few examples; one is that we said that over the three year time period would reduce our full time equivalents in the business in the range of 6,000 to 8,000. We are now down about 1,000 from the June reporting period. We have already identified about \$300 million in CAPEX savings that we are redirecting. So, again, this is not about trying to just cut costs. It's about finding ways to fund the core investments that we think we need to make in terms of the business.

We have also stopped about 400 plus projects that we have determined as of low value. I think those of you that know Telstra, you see Telstra's name on a lot of buildings and we have presence in a lot of places. We are also rationalising the amount of real estate that we have here and we have exited 15 office building leases.

In terms of service, you know, one of the core issues for us and one of the historical issues that I have heard, you know, since the day I got here was the stories about Telstra's service and the question is how do we improve it? Well, clearly Telstra does provide good service. It does do a good job serving the mass volumes both within cities as well as all the way out into bush but we are looking to improve the service experience even more.

In this case relative to broadband, whether you look at the broadband growth from Telstra or you look at the broadband growth from any other player in the marketplace, we have reduced the amount of unsatisfied DSL orders by 48 per cent since August. We have halved the number of unsatisfied demand orders. Big volume, big work, big improvement. In terms of our market based management, clearly that is a core part of our platform in terms of how we go to business going forward, how do we go to market, how do we compete and how do we provide a better and enhanced customer experience going forward?

That part has been under construction as well actually starting in the July timeframe when I hired Bill Stewart to come in and head up our strategic marketing organisation. We are now at the point during the next 6 month period where we are going to be implementing part of what we have identified in terms of our segmentation.

In terms of the big change in our wireless platform, the decision that we made and that we communicated relative to the 850 3G HSDPA network, we made a decision at our board meeting on 14 November. We disclosed on 15 November and literally within a week or two, we were placing orders with the suppliers so that by now, by this month, we literally not only have engineered sites but we are going to be installing many of the sites as we think about the plan that we communicated that said we would have that turned up either late this year or early next year which would be at record speeds in terms of deployment from a perspective of anywhere in the world.

Our IP core which is kind of the backbone network that allows everybody's traffic to travel through successfully, we have launched the work on that and we have signed the contract with Cisco and have that underway and then finally, in terms of organisation, I announced this morning that as part of our 'brain gain' so to speak, we have hired another key executive into the business and her name is Fiona Balfour. Some of you have known her as the CIO formerly from Qantas; great experience, great technical knowledge and a person that drives for results and that's part of the culture that we want here at Telstra.

So with that, I will open it up for questions.

• TONY BOYD: (Financial Review) Sol, just looking at the Sensis which I believe has to double revenue by 2010, it's only growing at 6 per cent, is it true that to achieve that target, you'll have to increase revenue by close on \$200 million a year for the next four years which would come out at about 20 per cent compound? How are you going to do that?
• SOL TRUJILLO: Well, Tony, the math is pretty close to what you said in terms of what is needed in terms of organic growth as well as how we talked back

in November that there will be some strategic M&A activity in terms of some acquisitions that would help us achieve those targets. The key for the Sensis strategy as Bruce Akhurst outlined it back in November, is that we have a core Yellow Page business that's still growing. It's one of the few around the world. So if you did a search, you would find that it's one of the strongest growing Yellow Page businesses around the world. But I believe that we can make it even stronger in terms of growth.

Then you also have the White Pages which also is growing strongly, and again Bruce and his team have I think some very interesting strategies around how to sustain the growth that we are getting there. And then beyond that, we have our online services relative to our Yellow Pages and White Pages. That is growing strongly as well. We have one of the strongest growth rates of anywhere if you benchmark again around the world relative to that. So that's the first wave.

On top of that then, Bruce Akhurst talked in November about our search and since then our transaction services business. So if you think about all the searches that people in Australia do trying to find businesses, trying to find products, trying to find whatever, we are at the centre point, and as data at that point in time showed that we actually do more searches in Australia than anybody including Google and our growth rate in terms of searches was faster than anybody's including Google.

But beyond that then, since then we have turned up a transaction platform which to me is part of our core strategy going forward, so that actually you know with our Trading Post business, when you see something and you find it and you like it, you don't have to just pick up the phone to call, you can actually complete a transaction given the investments that we have made there. So there's going to be a whole continuum there as part of our strategy.

Some of that will get supplemented, some of that will be organic growth that will have higher growth rates than the old traditional part of the business. So we do have plans. We are aggressive. We have been bold in terms of what we think of that part of the business going forward.

• TONY BOYD: Just a quick follow up, Sol. I think in the past Sensis looked at merging with the company that owns my paper, Fairfax. I mean, you could v what potentially there's acquisitions of companies with hundreds of millions of dollars of revenue or ...
• SOL TRUJILLO: Well, in terms of what I would call traditional media, I'm not personally looking at those kinds of businesses as the way to grow because our consumer behaviour is changing. In the past we used to look at classifieds, in the past in terms of hard physical product solutions, people are going very much online and with what you are going to see from Telstra going forward through Sensis, through BigPond, through our mobiles business, you are going to see a very integrated look where it's going to be very simple, very easy to get access to whatever information you want or for whatever purchase or transactions you want to make. That's part of our core strategy and it's going to be different than in the past.

TONY BOYD: Okay, thank you.

SOL TRUJILLO: Thank you.

JOANNE COLLINS: (Reuters) I'm just wondering if you could give an indication of where you see mobile revenue growth in the second half relative to the first, and also, on broadband revenue growth which was obviously quite strong in the first half, do you think that you will be able to sustain that level or exceed it in the second half?

SOL TRUJILLO: Okay. In terms of mobiles, obviously we are not going to give

predictions in terms of growth rates per se. What I said this morning in terms of the analysts community when asked is I said we would improve our relative market share position in the second half. So depending upon your assumptions of the industry growth, you can do whatever math you choose, but we will be aggressive but we are going to be very focussed, consistent with the strategy that I outlined which says segment by segment by segment we know what we are going to do and we have got certain initiatives that will help us grow that part of our business better.

In terms of broadband, obviously our BigPond business I think John Stanhope said this morning, and that was if you compare us to the next largest competitor which happens to be Optus, we outgrew them by a factor of four to one in terms of broadband. So you can see we have had a very aggressive growth rate. My expectations are that that will continue. Thank you.

• JENNIFER HEWITT: (The Financial Review). Obviously the relations with the Government over the last six months have been fairly tumultuous. Do you think looking back on that period and actually looking ahead that how you have handled has been effective? Are you confident of a better outcome, and secondly, obviously the government feels a lot of pressure because of the timetable to privatisation; could you just explain how that pressure affects you if at all in the way you do business?
• SOL TRUJILLO: Okay. In terms of outcomes, obviously I'm not in the business of predicting because I don't know and I won't try to predict what the government will choose to do or not. So have we been successful, have we not been successful? I think it's too early to tell. The important I think part of the answer to that is given what I saw happening the minute that I walked in the door here at Telstra, it was not good outcome in terms of what I saw as the ACCC recommendation in terms of averaging and

unbundled local loops, what I saw as the operational separation plans because what we are looking for at Telstra is more freedom to be able to compete, not less. And from a shareholders' standpoint, let me be real clear, the shareholders are the ones that finance this business. They want us to be free to compete. They obviously want returns on their investment and it's our job to advocate on their behalf in terms of all of those kinds of issues.

At the same time, the good news is that customers also want a lot of new services, new capabilities and they want it simpler and they want it better. With what we have been advocating, it is all about customers as well. So there's a nice correlation between customers and shareholders here and has that created some conflict or reconsideration and rethinking in terms of the general trends in regulatory management, regulatory outcomes in Australia, the answer is yes, but I think it's important and I think it's necessary.

• JOHN ROLFE: (The Daily Telegraph). I just want to ask you about two subjects. On PSTN, on my rough calculations of the numbers that you provided this morning, every Australian spent about 15 minutes less on their home phone as compared to a year ago and that's before you factor in the fact that they made 25 fewer local calls. So the local $\cdot$ or the home phone as we know it, is it dead?
• SOL TRUJILLO: Well, John, I'm intrigued by your math here because I haven't looked at it that way so it's an interesting way to think about it. I think if we, Telstra, were the only ones providing that call, now, we carry the call. but if you think about the local calling, what is happening is that there are other players out there that are encouraging customers and customers are actually moving over to lower priced plans let's call it, and

the call volume still exists. It doesn't show up in our revenues, it shows up with somebody else somewhere but it shows up as less revenue but it's still a minute of traffic.

So back in November, and I haven't looked at $\cdot$ I'll admit to you $\cdot$ I haven't looked at the charts in an updated way, but back in November if you saw Greg Winn's presentation in terms of traffic volume on the network it's growing. Now, a lot of that is tied to broadband, broadband from Telstra, broadband from our wholesale customers as well, but a lot of it is continued to increase, so demand on the network isn't falling off at all. Voice calling per se maybe shifting, some on the physical fixed line network over to the mobile networks. Some of that is occurring, and also then if you email maybe you don't need to make the call and also then to a lesser extent there is the voice over IP which is almost a complete bypass in using the internet in order to make a call.

• JOHN ROLF: Hence my question about as we know it that it's completely changed as we know it, what people have traditionally used their home line for?
• SOL TRUJILLO: Well, a lot of people are still using their home phone and the challenge for us as marketers is to how do we reinvigorate the needs and the ways to do that. I think you will see some interesting approaches here in the coming six to 12 months from Telstra that will help that. But the trends are what they are and we are not going to buck the big trend. But can we make it more interesting and can we stimulate growth? I believe we can.
• JOHN ROLF: My second question is about job numbers. As you said here, about $1,000$ gone since June 30. I think it's a few more, about $1,080$ or so, and John to the analysts talked about how it made sense to bring forward as many of the future job cuts as possible. What should we expect in 2006 or if you want to nominate in this particular half, should we expect 2,000 to

$3,000$ job cuts?

SOL TRUJILLO: Well, again, I'm not going to give a specific number because we did not provide that in terms of our guidance and we are still working through some of the designation of layer by layer by layer within the business, but trust me that it will be a much more aggressive number in the second half than what you saw in the first half and it will be consistent with all the strategies that we have outlined.

JOHN ROLF: Thank you.

SOL TRUJILLO: Thank vou.

• MICHAEL SAINSBURY: (The Australian) Just a question about the massive broadband take up which is pretty impressive I think on Telstra's behalf particularly compared to Optus. With all those broadband customers, where does Telstra go with the next level of that strategy providing content services on broadband? Where are you with you know, looking at IPTV? How does that fit in with Foxtel and maybe just give us a bit of a colour on where you see Telstra fit into this whole digital home thing that we are seeing coming out of the States particularly?
• SOL TRUJILLO: Okay. That again is an important question in terms of how we think strategically about the business. As you probably remember, I hope you remember Justin's presentation back in November, Justin Milne, who runs our BigPond business. We talked about market share growth because that is core to our strategy and going beyond the high 30s, low 40s that we were at at that point in time on up higher and we will be aggressive about that because we think we have the best value proposition for consumers here in Australia; consumers in their home, consumers in their small business and consumers at the enterprise level. Not only on fixed line but also on wireless and wireless is the other element that's emerging in terms of growth.

But beyond that, to your question, Michael, on content and services, I think you have seen a recent announcement in terms of our BigPond where we are doing some aggressive downloads of services. whether it be in terms of music, whether it be in terms of movies and other things, and again, some of the attendant features as you see it evolve. So you are going to see a platform here at BigPond that will become much more interesting and will become a monetisable set of circumstances on top of the physical element.

In terms of IPTV, specifically, that's going to get related to a bigger NGN kind of conversation as we work through fibre to the node versus not fibre to the node and as we think about other options.

• MICHAEL SAINSBURY: Do you see Telstra doing a lot of the $\cdot$ at the moment you are doing a lot of your content sort of in-house, some of the sports rights and stuff, I think, a lot of that gets developed either in house or through your in house people. Do you see that sort of capability increasing inside Telstra or do you see yourself partnering with some of the other bigger content providers, and also just in terms of companies like Sony and Microsoft that have got an eye on providing this sort of digital home gateway, would you be looking at bundling your services with services from companies like those?
• SOL TRUJILLO: The simple answer is yes to all the above. Some of it "I'm not trying to be cute with your question. Some of it is that we do have some unique capabilities within our BigPond business in terms of managing content, re-architecting content and to some extent developing some content and re-purposing. We have some capabilities there. But do we need partnerships and do we need relationships? The answer to that is yes also. Will we have some? The answer is yes, and I can tell you I have

been working at some of those issues over the last few months. And then finally, in terms of, you know, what can we home grow beyond what we do today. I think there's more and I think. Michael, as you point out, you know, sports has been kind of an early focus. But beyond sports, you will see other capabilities and other focus areas just simply because that's what market based management is about. It's about the diversity of segments, the diversity of needs and also the willingness to pay by customers for some of the services that we can deliver. Okay. Sorry Melbourne, we'll take you now.

• JOHN DURIE (Financial Review). Hi there, Sol. I've got a few questions. Firstly, on margins I see you are still promising to increase you're EBITDA margins back over 50 per cent by the year 2010. I'm just wondering how realistic that was, what that tells us about what you think of the industry going forward and also the regulatory framework going forward?
• SOL TRUJILLO: Okay. John, I would say first of all, I think the premise for your assumption may be different than mine. What we are going to see going forward is a re-architecting of how we deliver products and services. It has nothing to do with competitors and how much you pay for, you know, a loop or not, whether it's, you know, X dollar or Y dollar. It's about a fundamental re-architecting under an IP kind of network platform because all the services you deliver, John, going forward are software defined as opposed to physically having to roll trucks, physically having to, you know, move wires, physically having to have hardware associated with every service that you provide and physically then having to have handsets and equipment that's unique to that service.

All of that is going to change in terms of the core model of this industry going forward. Part of the strategy that we have here, John, going forward, is about getting ahead of that curve because we have such a problematic trend with PSTN and some of the trends that have existed here at Telstra over the last two or three or five years, and getting to that point sooner. When we get to that point, you will find that margins absolutely will be better. We have already seen it in the various iterations of this industry and it's coming again.

• JOHN DRURY: Okay, thank you. Just in general terms, on a blended nature I know we have got some areas growing faster than others, but how do you see the telephony or the telecommunications market right now, the immediate outlook as a blended option? Is it growing at 2 per cent, 5 per cent falling or ...
• SOL TRUJILLO: Well, you know, it is growing and we have kind of conflicting trends. I look at, you know, the kind of the big growth engine going forward is obviously broadband. Right, most of us, you know, broadband will become in the next five years, like mobiles were to us eight or ten years ago. It becomes more and more part of our life and not only part of our life in terms of daily life but it becomes a tool for many things that we do and it becomes a tool in many different kinds of ways segment by segment by segment.

So that's going to be a growth engine. As we have seen now with mobiles, mobile growth will continue, right, and we have seen this around the world. I saw this in Europe, you know, three, four years ago where you reached 100 per cent penetration and then all of a sudden you start seeing people now with two mobiles or two SIM cards. And my usage and my ARPU continues to grow even though price points initially start going down.

So we are mirroring, John, I guess some of the trends that have * some of the steps that have occurred in other parts of the world where

now we are seeing bucket plans that have driven some of the average pricing down, but beyond that, then we are going to move into a stage of value add services, whether they be things that encourage you to call more or to use more air time or things that you might want to subscribe to in terms of the devices.

So broadband drives revenue growth. Mobiles will drive revenue growth, clearly not at the same pace and then you have kind of the price pressures on the old PSTN that will continue to be negative because there are substitutes that are more attractive to certain segments of the consumer space today.

• JOHN DURIE: Great. Sorry, lastly, a two part personal question I guess. When you first arrived here I think you had four board seats in the US and you said you were going to get that down to one. To my knowledge, you have still got two, Gilette and Target. I was just wondering what is going to happen there?
• SOL TRUJILLO: Well, you are correct in your facts. When I came I had four, now I'm down to two. Will I live up to the contractual obligation that I made to the board of going to one? The answer is yes. Beyond that I won't comment any further.

JOHN DRURY: You couldn't give us any timeline?

SOL TRUJILLO: No.

• JOHN DURIE: Okay. Traditionally Telstra goes on $\cdot$ the different parts of Telstra senior management do a roadshow after half yearly results, the CFO and the CEO etc. I'm just wondering what the company's plans were this time?
• SOL TRUJILLO: Well, we will have selective meetings in terms of follow up with investor groups and we will continue those over the coming months.

JOHN DURIE: Will they be both domestic and offshore?

SOL TRUJILLO: Yes.

JOHN DRURY: And you'll take part in them?

SOL TRUJILLO: John and I will be hand in hand as we go to those meetings.

JOHN DRURY: Okay, thank you.

• PAUL CADDOCK: (Channel 7) Sol, tomorrow a class action of shareholders begins against the corporation alleging that information should have been given to the market when it was given to the government in August last year. There is talk of claims of \$300 million and upwards. How concerned are you at the impact of this action, what the impact could be and did Telstra do anything wrong?
• SOL TRUJILLO: The answer to the last part of your question is absolutely not. As a matter of fact, Telstra, at least since I have been here because I can only speak for the time that I've been here, has been as fully disclosing as possible, probably to the point of irritating some. But our posture, our beliefs and the value system of the CEO as well as the board is we are going to disclose whatever is appropriate to the market and we will do that.

In terms of the claim itself, I think we have already stated publicly, we don't think it has any valid basis to it and we will deal with it through the processes that it goes through.

SAMANTHA BRENNAN: (CNN intern). Hi Sol, I was just wondering if Telstra is concerned with rolling out high speed broadband, why is it that you cannot get an ADSL2 connection in Pitt Street in the heart of the Sydney CBD?

SOL TRUJILLO: I don't know.

SAMANTHA BRENNAN: Okay. Thank you.

SOL TRUJILLO: But I would love for you to give me specific address location and then we will see what I can do about it.

SAMANTHA BRENNAN: It's 107 Pitt Street in Sydney.

SOL TRUJILLO: 107 Pitt Street. I apologise if you can't get it but we will figure out why we can't and then see what we can do about it, okay. [Telstra does not offer ADSL $2+$ at present]

SAMANTHA BRENNAN: Thank you.

• KAREN TSO: (Channel 9). Hi Sol. How concerned are you about mobile phone capped plans eroding growth in the mobile phone business?
• SOL TRUJILLO: Well, obviously it would be not wise for me to say I'm not concerned because I am concerned. I have lived through some of this trend in other markets whether they be in the US or in Europe, and what happens when they are first introduced you see a lot of erosion in terms of price points, therefore erosion then that you see in margins. The real response is not to say you shouldn't do it or, you know, to go out and introduce the lowest priced capped plan that you can possibly find. The answer is to go as we are going to do into the market segment by segment and give the best value proposition to customers that they are looking for because not every customer is focussed on the same reasons for purchasing.

I think you will see some of that happen from Telstra. I know you will see it happen from Telstra here in the coming months, and I think also some of the competitors at some point of time, they can only afford to do so much.

STEWART CORNER: (Exchange Newsletter and ITWire) Sol, you have said a lot

about how broadband is going to be the driver of the business and the services you are going to be able to get over broadband, what is going to drive your revenue down in the future, you also said that you won't put in fibre to the node unless you get regulatory relief. So how much will it impact your plans if you decide not to go ahead with that network and you're constrained to the current deployment and the limitations of ADSL technology with DSLAMS in the exchanges which limits the bandwidth you can get and the distances from the exchange you can serve those bandwidths?

SOL TRUJILLO: Well, I think that the notion of bandwidth and penetration of bandwidth, first stages are like mobile phones. People only use mobile for voice calling. In the case of bandwidth initially most people are using · surveys still show today mostly for doing email and some browsing and some other kind of other basic functions.

As I think about this whole notion of broadband going forward and this decision to put on hold $\cdot$ notice I say put on hold $\cdot$ the deployment of fibre to the node, it not only affects Telstra, it affects everybody that's a player in the marketplace across Australia. $S_{0}$ there's no player that's going to "get ahead of us" because of the unique regulatory structure that exists in Australia where one company builds a network and then everybody rides on it. So we will have probably some mitigation in growth in terms of as we think about the long-term and I think that's a real issue.

That's an issue that we put on the table. We made proposals. I have personally made proposals to actually connect all of Australia with high speed broadband. Now, for whatever reasons, those have not been supported and, you know, people make their choices and we live with it. But at the same time, we also have to make choices on behalf of our

shareholders and others will have to live with whatever our shareholders' wishes are which is to create value not to destroy value.

• MICHAEL SAINSBURY: Sol, just a follow up question on that, that really $\cdot$ in the analysts' briefing before you talked about around the fact that there were some decisions coming from the Government and you have $\cdot$ just then you have sort of said, please note that this is on hold rather than put off, is there a number for an averaged ULL price that Telstra would be happy with that would then enable you to go ahead and build the fibre network that you are looking at?
• SOL TRUJILLO: The number is \$30. John Stanhope has said it several times, we all have said it several times because that's our cost, our averaged cost. And what we have to do on behalf our shareholders is if we are going to provide a service, that we can support, it's got to cover our costs.
• MICHAEL SAINSBURY: So that's a non-negotiatable number? I mean, if the ACCC came in at \$26 or \$27, would you come at it or come at some of it?
• SOL TRUJILLO: Michael, I'm not going to speculate on what they might do because there's just too broad a range and I don't think it would be appropriate for me to even comment on speculation.

MICHAEL SAINSBURY: You said \$30 is the number. I mean ...

SOL TRUJILLO: That is our number.

MICHAEL SAINSBURY: Are you prepared to talk about other numbers?

SOL TRUJILLO: Again, I won't comment on anything speculative other than we have shared our cost studies. We know what our costs are, we know what's in the best interests of our shareholders and it's \$30. Okay. Melbourne.

JOHN DURIE: John Durie again. You are moving on to the 850 megahertz

spectrum in mobiles. I'm not aware of too many sort of major telcos around the world who use this spectrum. I could be wrong, please correct me if I am. I was just wondering if you could be a little bit more specific on where you are at with that, when you plan to be finishing CDMA and how that process will go? And secondly, in terms of this fibre to the node discussion and you talk a lot about technology changing the industry, I just wondered if you could comment on the impact of wireless and maybe where the fibre to the nodes maybe a little bit elaborate we don't need it here anyway because there are other innovations that negate it?

SOL TRUJILLO: Okay. John, there's a lot in your series of questions there. In terms of the 850 spectrum space, there are not a lot of countries or companies around the world that are in that space yet. Now, if you did a survey of companies, what I would call a blind survey so that they are not quoted etc. etc. and you ask most companies would they love to be in that spectrum space, the answer is yes. The reason why is because you have a better spectrum where you can in fact penetrate buildings and walls - all those sorts of things. We all experience in the higher bands times where you are in elevators, you are in buildings, you get blockage, you get interference, you know, you get a lesser potential experience.

So in the case of name a big company somewhere in the world that's in that space now and moving aggressively in that space, if you go to the US and you look at Singular, they are now competing in that space and they are aggressively competing as I have seen in some ads towards the advantages of what they are going to do there. There are certain other countries around the world that are $\epsilon$ now companies are looking at it because the spectrum is available. Sometimes in certain countries that spectrum has only been made available to military and to some other And so every country goes through their processes of clearing uses.

spectrum, making certain spaces available and moving certain uses on to other bands.

I can only speak for us here in Australia. I want us to deliver the best customer experience possible and I can assure you that we will in a competitive sense have the best customer experience for our customers with that. In terms of timing, obviously we have communicated back in November that our plans are for turn up of this network in late '06, early '07 assuming we can meet all the aggressive timelines, we get the suppliers to deliver everything on time that we need and we, Telstra, get all the engineering done and deployments done that we are capable of doing.

If that happens, we will do that. In terms of your question about CDMA, I don't think you asked this but I will say it in case you didn't, we have provided notification under the rules and regs of requirements here in Australia, that in two years from next January essentially, we would be looking to shut down the CDMA network because at that point of time we feel that we will have provided, one, a better service and, two, we will have provided equal if not better coverage in the marketplace vistation for any current CDMA customer.

Obviously I personally am very sensitive to the needs of our CDMA customers. I am very interested in growing our relationship with those customers that are current CDMA customers and we will be very, very focussed on continuing to grow our relationships there.

• RENAI LEMAI: (ZDNet Australia) Sol, just a question about the new CIO. Traditionally, CIOs have reported directly to the CEO. In this case I think Fiona is reporting to the COO; why in this case is that happening?
• SOL TRUJILLO: Well, in this case, obviously, I don't know if you've had a chance to meet Greg Winn, but Greg Winn is a terrific, terrific operations person.

He knows all parts of the business. He has either done the work himself or supervised the work throughout his career. We are trying to make sure that we have full integration of all of the operating elements, the physical elements, whether it be IT elements, whether it be network elements, and the best way that I think we can make that happen in the current stage that we are in, kind of redoing the plumbing, is to have all those operating kinds of roles reporting to Greg. So he can be the chief integrator in addition to what I joke with him as the chief plumber as he redoes the plumbing in the business.

He is just very good at that and I know it will work well and I think Fiona believes in that as well. Okay. All right. Thank you.

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