TELSTRA GROUP LIMITED — Capital/Financing Update 2006

Aug 20, 2006

21 August 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

Telstra issues revised guidance on financial outlook

In accordance with the listing rules, attached is a copy of an announcement for release to the market.

Yours sincerely

Pont braking

Douglas Gration Company Secretary

Media Release

21 August 2006

153/2006

Telstra issues revised guidance on financial outlook

Further to Telstra's announcements of 10 August 2006 regarding its financial results for fiscal 2006, which included guidance on its outlook for fiscal 2007, and 14 August 2006 regarding the ACCC's reduction to ULL access pricing, Telstra is now able to provide revised guidance on its financial and dividend outlook.

Dividends

The Telstra Board has considered the level of future dividends. In the interests of shareholders, and despite the earnings impacts noted below, it is the current intention of the Board to declare ordinary dividends of 28 cents per share for the fiscal 2007 year. This assumes the company continues to be successful in implementing its transformation strategy and there are no further material adverse regulatory outcomes during the course of fiscal 2007.

The Board is unable to give guidance on ordinary dividends for the fiscal 2008 year owing to the remaining uncertainty attached to regulatory outcomes and impacts. However, the Board recognises the importance of dividends to Telstra's shareholders, despite the ongoing value destruction caused by the telecommunications regulatory regime administered by the ACCC.

Of course, the final amount of dividends declared for any year is a decision for the Board to make twice a year in its normal cycle having regard to, among other factors, the company's earnings and cash flow as well as regulatory impacts.

Earnings

As foreshadowed in its 14 August 2006 announcement, following the adverse regulatory decision on ULL pricing, and by making reasonable assumptions as to the necessary elements, Telstra management and the Board have now assessed the likely impact of the lower ULL pricing. Telstra's revised fiscal 2007 outlook is as follows:

• $\bullet$ Revenue Growth of 1.5 to 2.0 per cent;
• EBIT growth of plus 2 to plus 4 per cent:
• Underlying EBIT (excluding transformation costs) to be minus 2 to minus 4 per cent;
• Operating cash capital expenditure of between \$5.4 and \$5.7 billion.

This guidance assumes no FTTN build, a Band 2 ULL price of \$17.70 applying for all wholesale customers for the remainder of fiscal 2007, no additional redundancy and restructuring provisioning and fiscal 2007 being the largest transformational spend year.

Telstra's national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at: www.telstra.com.au/abouttelstra/media

For news, views and discussion on telecommunications in Australia see www.nowwearetalking.com.au

As explained in the earlier announcements, Telstra's previous guidance on its fiscal 2007 outlook was based on a price of \$22 per month in Band 2 for ULL access. This was the most reasonable and reliable assumption at that time, particularly as it was the last price mandated by the ACCC prior to the issuing of the first Interim Determination on the evening of 11 August 2006, it was the lowest actual price being paid by customers at that time, and Telstra had been in discussions with the ACCC about ULL pricing at various levels above those that were contained in the Interim Determination.

Finally, as foreshadowed in the announcement on 14 August, Telstra notes that since Friday 11 August 2006, when the ACCC first issued an Interim Determination at \$17.70 per month in Band 2, the ACCC has issued several other Interim Determinations at the same level and Telstra expects the same outcome in the remaining Interim Determinations. As explained in our announcement of 14 August 2006, however, Final Determinations are yet to be made by the ACCC, and the actual pricing mandated by the ACCC in those Final Determinations and their timing is a matter for the ACCC. Telstra will continue to pursue all available avenues to achieve reasonable regulatory outcomes for the benefit of all shareholders.

Telstra Media Contact:

Andrew Maiden Tel: 02 9298 5259 Mbl: 0428 310 700

Telstra's national media inquiry line is 1300 769 780 and the Telstra Media Centre is located at: www.telstra.com.au/abouttelstra/media

For news, views and discussion on telecommunications in Australia see www.nowwearetalking.com.au