TELSTRA GROUP LIMITED — Capital/Financing Update 2006

Jun 7, 2006

\$100 million agreement with Telstra Wholesale to drive profit growth for People Telecom

Sydney, Australia. 8 June 2006. Continued customer growth at People Telecom Limited (ASX / NZX: PEO) has prompted the group to sign a new \$100 million agreement with Telstra Wholesale for the provision of fixed wire and broadband services until the end of 2007.

The agreement signals People Telecom's continuing success in growing the business, with the group's critical mass of customers delivering even greater purchasing power and confirming the group's position as a top tier carriage service provider.

Ryan O'Hare, CEO of People Telecom said "The business is now achieving economies of scale and along with this new agreement we expect the bottom line to be boosted between \$1 million and \$2 million per annum.

"The benefits are expected to impact positively on the bottom line from 1^st July this year so the arrangement will deliver real benefit to shareholders in the short term."

This agreement shows the group is pursuing the right model of service and growth, coupled with strong partner relationships - "we are set for strong, profitable growth," Mr O'Hare said.

Group Managing Director of Telstra Wholesale, Kate McKenzie, said "Telstra Wholesale's core strength of delivering high quality, reliable service has made us supplier of choice to many wholesale customers. We are delighted to extend our relationship with People Telecom through this comprehensive supply agreement."

The agreement demonstrates the success of People Telecom's model in building quality partner relationships and customer scale rather than being solely focused on network build.

The arrangement is also signifies Telstra's long term commitment to aligned wholesale partners.

For further information, please visit http://www.peopletelecom.com.au or contact:

Rvan M. O'Hare Chief Executive Officer People Telecom Ltd (02) 9458 5821 0415 888 500 ryan.ohare@peopletelecom.com.au

Kazim Reza Chief Operating Officer People Telecom Ltd (02) 0458 5803

kazim.reza@peopletelecom.com.au

Kyahn Timms Media and Investor Relations consultant to People Telecom Buchan Consulting (03) 9866 4722 040 101 8828 ktimms@bcg.com.au

About People Telecom:

As one of Australia's largest telecommunications groups, People Telecom offers a comprehensive range of telecommunications products and services for businesses.

The group is a leader in service within the telecommunications landscape, offering high customer service levels accompanied by a full suite of standard and cutting edge telecommunications products such as Voice-Over Internet Protocol (VoIP).

Over the five year period the group has grown significantly. In the 2004 financial year pro-forma revenues reached \$73m and in the 2005 financial year the revenue achieved was \$100 million.