TELSTRA GROUP LIMITED — Call Transcript 2007

Nov 29, 2007

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30 November 2007

The Manager

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ELECTRONIC LODGEMENT

Dear Sir or Madam

Transcript of Telstra Chief Executive Officer’s interview for Telstra Corporate Employee Communications

Attached for release to the market is a transcript of an interview for Telstra Corporate Employee Communication with Telstra CEO Sol Trujillo speaking to Telstra Director Executive Services Michael Grealy.

Yours sincerely

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Claire Elliott Acting Company Secretary

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

TELSTRA CEO SOL TRUJILLO

Interview for Telstra Corporate Employee Communications Speaking with Telstra Director Executive Services Michael Grealy

30 NOV 2007

Michael Grealy: Good morning Sol. Australia has a new Federal Labor Government under Prime Minister Kevin Rudd. What's your reaction to the result?

Sol Trujillo: Well I think Kevin Rudd has laid out a pretty bold vision for the nation and it is always about a forward looking view, which is about education, it's about health care, it's about the economy.

Now the real question is now that he's been elected and he's had that vision, it's turning it into reality; making it, you know, come to life. And the good news is, I think he understands the critical link between the kind of infrastructure we provide at Telstra - broadband and all the other services that we deliver every day, how critical it is to the nation's economy; which means productivity, which means economic improvement, which means a lot of things in terms of the overall competitiveness of this nation as it competes against other nations in the world. And the companies within the country competing around the world.

It also means that there has to be a change in regulatory policy. You know the policies that have been in place in the past have resulted in lack of investment or under investment in this country.

The only company that's been investing has been Telstra and we do that because that is our core business but there could be more and we've talked about fibre-to-the-node, we've talked about a lot of other things that could be critical to this nation's economy and now we're looking for that link, hopefully, to get things done on behalf of the nation; all the businesses, all the individuals and ultimately it could benefit Telstra as well.

Michael Grealy: Sol, how will Telstra engage with the new Rudd government?

Sol Trujillo: Well first of all we want to engage quickly, and secondly, we want to engage very constructively. You know, Telstra has been, ever since I've arrived here, all about constructive dialogue, but it's about results orientation. It's about outcomes, not processes. And what we've been bogged down, as my observation over the last ten years or so here in Australia has been, it's always about process. We have a process to establish a process to have a process to get to a meeting to do something and ultimately nothing ever happens. Well now it's about action.

This country needs this infrastructure. This country needs this investment. The businesses here, the young children of this nation need it, everybody

needs it so it is about action orientation. But we want to be focused on what's doable, what's doable in a broader context of serving as many Australians as possible. The second element of it though is that as we have said before we have shareholders. We have a duty to our shareholders to give them competitive returns. We have a duty to our shareholders not to dilute their investments. And finally we have a duty to our customers to do it right and to do it in the right way and that's really what our plan for Australia has been about since, you know, we've been engaged in a dialogue - a public dialogue - over the last two years. And at the end of the day my dream, my desire for both Telstra and Australia has been that Australia becomes the country around the world that everybody looks to and says: ‘Wow. This is the place that gets it. This is the place that everything is available to the consumer and to the business and this is the place where competitiveness drives everything’.

Michael Grealy: Given that answer Sol, what can you say about Fibre-to-thenode now?

Sol Trujillo: You know, the good news about Telstra is that we're always clear and we're always consistent and we always believe in a core principle of open access and truly competitive market place. In the case of our position is we've already said we're willing to do the five major cities of Australia, including the Gold Coast, which covers a high percentage of the population.

We will do that with our own shareholder money. Not government money, not subsidies flowing from somewhere else, our own capital that we will risk. We're willing to do that under an environment where our shareholders, because they've risked the capital, can get a competitive return. It's that simple.

The second part of it is we've even gone as far as saying we will open up that network and allow our competitors to get access to it. We've said that all along.

Now surprisingly there's media types and others that say we don't. They mustn't read what we say or care about what we say, but we've said it. The only thing is that we're going to do it at prices that enable us to earn competitive returns. Same principle, we've said that all along. That's what any business would do in any industry anywhere in the world. So those principles haven't changed.

The other thing is, is that in terms of fibre-to-the-node it is a very complex build. It's a multi-year build and it's a multibillion dollar investment.

So what we want to do is sit down with the new leadership, the new government and basically say: ‘OK let's build a plan. Let's build it for multiple years. Let's understand how we get our needs met and while you get your needs met, ultimately the consuming public gets what they need’. And that's the way we measure it. We don't measure it by processes, we measure it by

outcomes. Is there broadband made available in the next four years to the vast majority of Australians, for the benefit - whether it be for education, healthcare, whatever it might be - business competitiveness. That's what we want and we're going to work openly and constructively but we're going to be very clear. We're a business and we're in business to make money.

Michael Grealy: Sol, the Prime Minister has announced that Senator Conroy will be the Minister for Broadband, Communications and the Digital Economy. What was your reaction when you heard about that ministerial portfolio?

Sol Trujillo: Well you know when I first heard it I just got a smile. I had a smile because it is a recognition that we are now in a different era and we are in a digital economy and to acknowledge that, to state it, to say it's important but understand the reality of it is extremely critical. So I'd say that as my first reaction.

The second piece of it then is, is that it also intends a direction and the direction says that it's a break from the past. Old ways of thinking, old paradigms, old regulations, old, you know, processes - they don't fit with the digital economy and that's where we need new regulations. That's where we need new thinking. That's where we need to think about going forward competitiveness, going forward infrastructure, going forward processes, going forward relationships. To me that's what that announcement said and I was pleased to see it because it says, you know the Prime Minister gets where the future is and I think all of you inside the company have heard me say, I'm a believer in what I call the Wayne Gretzky theory of management; one of the most famous ice hockey players ever who won championships as a team, won most valuable player awards as an individual and when they asked him what was the key to his success he always used to say: "I like going to where the puck is going to be". And I think that's what the Prime Minister is saying here: Australia needs to be where the future is going to be.

Michael Grealy: Finally Sol, does the change in government mean that there will be any fundamental shift in the core strategy of Telstra and the priorities of the company under your leadership?

Sol Trujillo: The answer's simple Michael: no. Absolutely not.

We set out on a strategy back in November 2005, that the Board and the management decided upon. We communicated it to the financial markets, we've been executing on it now for two plus years and it's working. And the strategy is all about our customers. We put the customers at the centre of our business. We've organised ourselves so that we could focus on the customer. We've operationalised ourselves to focus on the customer.

We're building IT infrastructure, we're building networks, we're building a goto-market system that we call Market-Based Management that's all centred around the customer. We have new innovative processes where we can

bring new products, new services, new capabilities that are focused on the customer. Not about deploying technology but about delivering services to the customer. That's our core strategy.

It doesn't matter what the government is, what party it is, what colour they are or how tall they might be. It doesn't matter. What does matter though is how we go about executing it and going forward. It would be great to have an acceleration of bringing the thoughts, the ideas, the strategies that we have to all Australians faster.

The government can help them or as we saw for the last two years we can get all tangled up in process and debates and all that sort of thing. I always come back, Michael, at the end of the day, for us as a business we have to deliver results. Our customers expect us to deliver results, our shareholders expect us to deliver results, and now I think the Australian public, through this election has also said to the government: ‘We also want results, too’.

ENDS