TELSTRA GROUP LIMITED — Capital/Financing Update 2007

Oct 31, 2007

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1 November 2007

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

Transformation drives upgraded earnings guidance, IT system upgraded ahead of schedule, icon store unveiled

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

Regards

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Claire Elliott Acting Company Secretary

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

1 November 2007

248/2007

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Transformation drives upgraded earnings guidance, IT system upgraded ahead of schedule, icon store unveiled

Telstra has upgraded its EBIT guidance for 2007/08 and its long-term objectives for both revenue and EBITDA growth as the company’s transformation strategy delivers sustained strong results.

Speaking at Telstra’s annual investor briefing in Sydney today, Chief Executive Officer, Mr Sol Trujillo, announced that –

• EBIT guidance for 2007/08 would increase by two percentage points from 3-5% to 5-7% which includes a $100 million distribution from FOXTEL; and

• the long-term objectives for both revenue and EBITDA growth to 2010 would increase by 0.5 percentage points from the range 2-2.5% per annum to the new range 2.5-3% per annum.

Mr Trujillo also announced that Telstra had beaten by two months its schedule to switch-on a transformed new IT system that will make it easier for customers to do business with the company. The company also last night launched an icon store that will revolutionize the way customers interact with the company.

“Telstra is winning on the front line. We are earning new revenues as NextG[TM] mobile broadband changes the way customers use their mobiles; we are winning market share and revenue-per-user in broadband; and we are bucking the worldwide decline in traditional products,” Mr Trujillo, said today.

“We have again beaten our own transformation timetable, switching on an improved IT system that makes life better for customers and launching a new icon store that changes the way customers experience Telstra.

“Two years into our transformation, consumers have restored Telstra’s position as market leader. Consumers are recognising we offer better products, innovation, service and value. Because of that complete experience, consumers are choosing Telstra over the competition, and they are doing it in growing numbers.

“Telstra is also achieving world-class marketing excellence, operational excellence and accelerating profitable growth. The best news is we are achieving these results by staying on course and executing the same integrated, forward-looking strategy we announced two years ago,” Mr Trujillo said.

Mr Trujillo updated some results, expanded on the day’s announcements and updated the market on the main elements of the company’s transformation strategy –

• The improved IT system was switched on last weekend. Called ‘IT release one’, the new system will eventually serve 5.3 million consumer and small business customers by giving call centre staff a single view of the customer, reducing repeat activities, increasing automation and enabling a single bill for most products. The second wave of IT improvement is on track for release at the end of 2008.

• The new Telstra icon store was launched last night at 400 George Street. Spread over two levels in Sydney’s shopping district, the T[life][TM] store will revolutionise the way customers interact with Telstra.

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

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

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Customers will test-drive live products, learn from interactive, hands-on technology demonstrations and receive expert advice from specially trained staff. It will be matched by an icon store in Melbourne.

• An advanced new Telstra Experience Centre will open tonight at 400 George Street . Visitors will interact with live products like Telstra’s NextIP[TM] Virtual Private Network and NextG[TM] network to appreciate how integrated solutions can improve their business productivity. Industry partners will also use the Centre to setup, test and present technology innovations to Telstra customers.

• Major network investments have provided faster broadband to more people . The company has built more than 6,000 NextG[TM] base stations (nearly twice the number of CDMA) providing a cell range as far as 200 kilometres and peak network speeds of 14.4 Mbps, sold nearly 400,000 mobile data cards that turbo-charge laptops, installed 2.2 million ADSL1 and 2.7 million ADSL2+ ports, upgraded to 30 Mbps the HFC network passing 940,000 homes in Melbourne and 925,000 homes in Sydney, and achieved 99.999% reliability on the NextIP[TM] network for business.

• Market-based management has given Telstra unprecedented and unmatched customer knowledge of customer preferences and needs, resulting in improved customer value and satisfaction scores across all businesses units, segments and products. Strike rates on customer contacts doubled from 8% in April-June 2006 to 16% one year later. Telstra has achieved measurable improvements in brand qualities including innovation, ease of use and trustworthiness. This has assisted Telstra to simultaneously command a price premium and increase market share.

• Telstra has bucked the worldwide trend of PSTN market share decline by adding 33,000 retail customers to the traditional copper telephone service in July-September 2007. This was assisted by the twelfth consecutive month of positive retail churn, leading to world-class trends in retail PSTN revenues.

• Superior NextG[TM] coverage, capabilities and content has continued to attract record new customers . By 30 September Telstra had 2.514 million 3G customers of whom 1.546 million are NextG[TM] customers. In another world-class performance for a 3GSM operator, Telstra has generated more mobile revenue from nonSMS data content than from SMS, showing Telstra customers are using their handsets differently to experience content and services unique to the NextG[TM] network.

• Customers can now choose from nearly 30 NextG[TM] handsets including six new devices unveiled today. The new devices include two from Nokia and others from ZTE, Samsung and Motorola, designed to appeal to specific customer segments like rural and youth. A new super receptive ZTE Country Phone[TM] , for instance, will enable bush customers to take even more advantage of the expansive Next G™ network coverage.

• Telstra also announced unique new online content and services including 33 channels of mobile FOXTEL and 33 shows on BigPond TV, a BigPond Office application that makes it easy for small businesses and families to share documents or budgets, a trial of exclusive discounts for NextG[TM] customers who use their handset to scan barcodes at shops and restaurants, the creation of a simulated city of Sydney on Second Life, and a new pocket-sized mobile credit card terminal for business customers.

• Productivity has increased dramatically . Since November 2005 unsatisfied ADSL orders have fallen 90%, activation costs are down 22%, field workforce productivity has improved 20% and reported problems per 100 services have declined by 40%. Despite reducing staff numbers by 5,746 to June 2007 the company has delivered the best customer service levels ever recorded.

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

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

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• The company’s procurement policies continue to save money . Telstra’s partnership with Brightstar for endto-end handset procurement has delivered savings of more than $300 million compared to old buying practices, including $246 million in 2006/07 alone. Telstra will also enter phase two of a contract with IBM to transform the supply-chain. The existing contract will contribute to savings of $159 million by the end of 2007/08. The phase two contract will produce savings beyond the $500 million already announced.

• Telstra has saved office space, water, electricity and paper. Since November 2005 the company has exited 66 property leases representing 107,020 square metres of office space. The company will this year save enough electricity to power some 2,225 suburban homes (17.9 million KWh) and enough water to fill about 2,000 backyard swimming pools (83 million litres). Consolidating multiple customer services onto single bills has saved 240 million sheets of paper annually.

• Staff are enthusiastic about the company’s future and proud of its new culture , with staff surveys showing the highest support in more than a decade for the company’s management, strategy, business direction and job satisfaction.

• A leadership development program is producing a broad and deep talent pool. Telstra has recruited international leaders from world-class companies in Australia, Europe, Asia and North America. Telstra has new programs to groom future leaders and boost staff diversity. The new Telstra Learning Academy has also transferred new skills to 16,000 field employees, with more to come.

“Key to Telstra’s future success will be wireless, where our NextG[TM] network now offers content, coverage and speed that is revolutionizing the way Australians use their handsets. At the same time we have a commanding position in broadband, where we are growing market share and revenue thanks to superior services and content from BigPond, Sensis and FOXTEL,” Mr Trujillo said.

“Telstra now has a low-cost operating model based on intelligent new networks that are accelerating revenue growth at lower unit cost, simplified processes, and a software-defined environment that allows us to roll-out new applications and services at low cost. It’s a different kind of business.

“We are also reducing the capital intensity of our business after transformation spending peaked in 2006/07. The major expenses of the transformation – including the NextG[TM ] and Next IP[TM] networks – are largely behind us, and our capex to sales ratio will decline to 10-12% by 2010.

“We are winning on the front line despite the world’s most punitive and intrusive regulatory environment which has produced the developed world’s lowest wholesale prices, highest input costs and declining investment from other companies. Despite the challenges we are winning because of operational superiority, differentiation from the competition and value-based thinking.

“I am proud of our results but recognize we still have plenty on our agenda. Our journey has only just begun and our progress is measured by results and the velocity of change. Customers are making choices for themselves, and by their choices they have restored Telstra’s position as the market leader,” Mr Trujillo said.

Telstra Media Contacts:

Andrew Maiden (0428 310 700) Jeremy Mitchell (0438 205 416)

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

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