TELSTRA GROUP LIMITED — Capital/Financing Update 2003

Dec 11, 2003

12 December 2003

The Manager

Company Announcements Office Australian Stock Exchange 10th Floor, 20 Bond 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

Telstra announces cable network upgrade for television

In accordance with the listing rules, I attach an announcement 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

Media Release

12 December 2003

388/2003

Telstra announces cable network upgrade for television

Telstra CEO, Dr Ziggy Switkowski today confirmed that its HFC cable network would be digitised to support the provision of digital television services.

The upgrading of the Telstra cable and a similar digital upgrade by FOXTEL will enable the television platform to carry in excess of 150 digital television channels and additional digital services.

The decision follows the ACCC approval of an order exempting the digital services from future regulatory intervention on the basis of a comprehensive set of access undertakings. These access undertakings mean the digital television platform can also be used by alternative providers to offer competing or complementary services. The ACCC exemption is expected to take effect next week (see note 1 below).

Dr Switkowski said the service upgrade would open the way to a new generation of FOXTEL services and create a digital TV platform that could be used by the whole industry.

"Digitisation will allow FOXTEL to offer many more channels, better picture and sound quality, a wider program variety and choice for subscribers," he said.

"FOXTEL is Australia's leading subscription television provider and digitisation will enhance consumer value and expand the market.

"The digitised Telstra HFC network will be designed as an 'open network', meaning that it can be used to distribute other subscription television services - competing with or complementary to FOXTEL.

The digital upgrading includes the Telstra Hybrid Fibre Coaxial (HFC) cable and the provision of new digital FOXTEL set top units (STU) and other infrastructure, which together make up the digital platform. The cost of digitising Telstra's HFC cable of approximately \$70 million has been included in previously announced capital expenditure targets. Other costs of digitisation including FOXTEL television systems and STU upgrading will be provided by FOXTEL, phased-in over two years and subject to subscriber demand.

"Growth in FOXTEL's subscriber numbers due to digitisation of Telstra's HFC network not only benefits Telstra as a shareholder of FOXTEL but also translates into increased payments by FOXTEL to Telstra for the use of the network," he said.

"The investment in this next generation digital television technology has been made possible by the ACCC's approval of a comprehensive set of undertakings that establish the price and non-price terms and conditions of access to the Telstra-FOXTEL subscription television infrastructure by other service providers," he said.

Following an extensive public review of the Telstra-FOXTEL undertakings, the ACCC granted exemptions from future regulatory intervention under Part XIC of the Trade Practices Act. This new regulatory procedure was made possible by amendments to the regulatory regime last year.

The new process allows the regulator to approve access terms and conditions before the infrastructure investment is made and to then exempt the owners from future access regulation. This process provides greater regulatory certainty for investors.

Details of the launch of the FOXTEL digital cable subscription television service will be announced by FOXTEL.

FOXTEL is jointly owned by Telstra (50 per cent), News Corporation (25 per cent) and PBL (25 per cent).

Background Notes:

1. The ACCC exemption approved today will only take effect when Telstra and FOXTEL finalise amendments to the undertakings. These amendments cover operating procedures, aspects of dispute resolution and other issues which are not financially material.)

Contact: Rod Bruem 0438 288 010

Telstra Media Releases are available at the Telstra Newsroom on http://www.telstra.com.au/newsroom