TELSTRA GROUP LIMITED — Capital/Financing Update 2003

Apr 13, 2003

14 April 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 Corporation Limited Analyst briefing - REACH Loan Rearrangement

In accordance with the listing rules, I attach an announcement for release to the market.

Yours sincerely

Pont brak

Douglas Gration Company Secretary

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

Rabiko

A Telsing Corporation Bimited REAGE Loan Roanangement

Ziggy Switkowski - CEO David Moffatt - CFO

April 2008

Background

• REACH has agreed in principle with its banking syndicate to rearrange its US\$1.5bn non-recourse loan.

• Over the past few years the international wholesale telecommunications market and particularly the sub-sea cable sector has been experiencing extremely volatile market conditions.

• the industry paradigm has dramatically and permanently changed.

• Rearrangement of the loan was necessary to:

• give REACH greater financial flexibility than was permitted by its previous financial arrangements; and
• position REACH to take greater advantage of industry consolidation and continue its leadership in this sector.

Key Features of Loan Rearrangement

• Cash flow neutral to Telstra.
• Telstra and PCCW remain 50/50 shareholders in REACH.
• Improved schedule of loan repayment.
• Decrease in Ioan balance outstanding by US\$300m to US\$1.2bn.
• Removal of financial covenants.
• Loan remains non-recourse to shareholders.
• Telstra and PCCW make equal capacity pre-payments at benchmarked market prices.
• Telstra & PCCW to acquire 90% of capacity requirements from REACH at benchmarked arm's length prices.

Capacity Prepayment Utilisation

REISTRA Slide 5

Status of REACH: Post Loan Rearrangement

• Telstra and PCCW continue to be 50/50 shareholders in REACH. $\bullet$
• Syndicated Ioan facility continues to be non-recourse. $\bullet$
• Telstra and PCCW make equal capacity pre-payments to REACH to enable $\bullet$ REACH to reduce its debt to banking syndicates to US\$1.2bn.
• Interest rate for syndicated loan at market rates. $\bullet$
• Telstra and PCCW have made long term commitments to purchase 90% of their $\bullet$ international service requirements from REACH.
• Purchases will be made at market prices determined through annual $\bullet$ benchmarking.
• Bullet payment in 2010. $\bullet$
• Banks have security over REACH assets. ٠

Appropriate capital structure to service its customers

Appendix: Financial Impact on Telstra Corporation

• Pre-payment of future capacity of US\$143m which will be $\bullet$ benchmarked against market prices at least annually.
• Cash flow neutral: Capacity pre-payment is funded by partial redemption of US\$190m converting note.
• The capacity pre-payment will be recorded as a non-current $\bullet$ receivable at fair value and maintained in real present value terms.
• The utilisation of pre-paid capacity will depend on the surplus cash $\bullet$ . generated by REACH.