TELSTRA GROUP LIMITED — Capital/Financing Update 2006

May 24, 2006

25 May 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

Cash Capital Expenditure Guidance

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

Yours sincerely

F. Mead

Fiona Mead Acting Company Secretary On behalf of Douglas Gration Company Secretary

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

Media Release

25 May 2006

103/2006

Cash Capital Expenditure Guidance

As part of Telstra's 05/06 interim results announcement made on 9 February 2006, the company advised that cash capital expenditure for the 2005/06 year was expected to be between \$4.8bn and \$5.1bn.

After a review of end of year expected expenditure levels, this guidance has now been revised to an expectation of between \$4.1bn and \$4.4bn. Of the \$700 million reduction to guidance approximately \$200m is deferred to the 2006/07 fiscal year. Management's focus has been on optimising project performance and contractual outcomes to deliver shareholder value during the transformation of the company.

There are a number of factors that have driven this revised guidance and these are:-

• lower costs for property, plant and equipment as an outcome of the company's tough procurement $\bullet$ contract negotiations and improved capital labour productivity across all projects;
• stopping additional discretionary projects that were not aligned to the transformation strategy;
• efficiencies obtained from merging some transformation projects; $\bullet$
• lower program of work in some areas; $\bullet$
• Transformation project deferrals representing: $\bullet$
• $\circ$ minor delays (8-10 weeks) in the Business Support Systems transformation due to some industry changes and some outstanding contract negotiations. This is expected to be recovered next fiscal year; and
• $\circ$ minor delays (4-5 weeks) in the wireline transformation due to delays in the completion of key network architecture design. This will also be recovered in the next fiscal year.

All other aspects of the transformation strategy remain on track.

Capital expenditure for Fibre to the Node was not part of the initial guidance and is not part of the revised guidance. The Fibre to the Node investment remains on hold.

All other elements of the guidance for 2005/06 given on 9 February remain unchanged.

John Stanhope Chief Financial Officer

Telstra Media Contact Andrew Maiden 02 9298 5259

Investors Contact David Anderson 03 9634 2410

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