TELSTRA GROUP LIMITED — Interim / Quarterly Report 2004

Mar 11, 2004

12 March 2004

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

TelstraClear Information Pack

This is provided for information only and does not contain price sensitive information not previously released to the market.

Yours sincerely

Pont braking

Douglas Gration Company Secretary

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

The Marie Charles Indian 12 March 2014 TEKNOCEN fogstoar Abattarway.

DISCLAIMER

These slides are provided to analysts and investors as support material for the discussions with TelstraClear management. The information in these slides has not been subjected to an independent audit and should not be relied upon by investors in making investment decisions.

They are not intended to be a summary of, or substitute for, information provided by Telstra to the market in its financial statements and annual report.

In this material estimates have been developed by TelstraClear based on information and assumptions known to date.

They are subject to considerable uncertainties at this stage.

Actual results could vary materially from these estimates.

They are not a forecast or representation by Telstra or any other person as to what will happen in the future.

Highlights

• Challenger for Choice ٩
• Continued Sales Growth ٩
• Margin Expansion Continues ٩

• Cost of Sales improvement

• Leadership in delivery of simple and compelling offers

• Retail revenue growth of 6.2% over pcp
• 1HFY04 EBITDA margin of $23.2\%$ (up from $17.5\%$ pcp)
• Reduction of costs from renegotiated bilateral agreements & migration of data circuits

1HFY04 Financial Summary

Profit & Loss

	Half Year ended 31 December
	2003 NZSm	2002 NZ\$m	% change
Total Revenue	336	325	$+3.4%$
Operating Expenses	258	268	-3 7%
Depreciation & Amorisation	83.	84	$-1.2\%$
EBITDA	78	57	$+37%$
EBIT	(5)	(27)
Capital Expenditure	59	55
EBITDA margin	23.2%	17.5%

Revenue growth and margin expansion driving profitability improvement

Reconciliation to Telstra's Half-Year disclosure

Inter-company figures eliminated in Telstra's Half-Year disclosure
Half Year ended 31 December 2003 NZSm
Total Revenue	15
Total Opex	2
ebitda	13
EBIT	12

Includes inter-company revenues and expenses

TelstraClear Slide 4

TelstraClear Financials

Includes inter-company revenues

equivalent reduction in outpayment costs

Entering EBIT positive territory, ahead of previous forecast

TelstraClear Slide 5

TelstraClear 1HFY04 Revenue Split

. . . . . . . . . . . . . . . . . . . .

Balanced portfolio of products

Customer metrics

Market Share by Revenue 12% Total customers / accounts 410,000

Market
106,000	- 39%
53,000	34%
287,000 57,000		Business Business
4,700		Internet s
		Addressable Penetration %

Access Lines 75,000 Resold Lines 10,000 ubscribers 280,000

Figures as at 31 December 2003

Customer number growth across all segments

Residential and Small Business

• → Success in calling products through differentiated value offerings
• "Big NZ" launched February 2004
  • Calls to Australia, USA and Canada or the UK and Ireland for the same rates as making a New Zealand national toll call
• ⇒ New suite of on-net residential broadband packages launched 2 March 2004, current penetration close to 9%

• Focus on bundled offerings that promote two or more products
• 95% of on-net residential customers have 2 or more products
• 50% of off-net residential customers have 2 or more products $\overline{\phantom{a}}$
• SKY resale to be bundled with TelstraClear services in off-net areas
• Opportunities to grow consumer revenues through residential and € JetStream resale

Addressable market in residential segment will expand with resale

Commercial & Corporate Business Markets

• Success in winning major corporate and government contracts including IAG, Cadbury Schweppes, Coca Cola, BP Oil & Department of Corrections
• ↓ Continued leadership in advanced technologies and new service models – winner of Cisco's "Asia Pacific IP Communications Partner of the Year", February 2004
• $\Rightarrow$ Growth in small & medium size business revenues with resale of Telecom business lines
• S Leverage Trans-Tasman capability

Continued success with corporates and trans-Tasman businesses

Product & Technology Update

• Deployment of business Wireless Local Loop (Auckland, Rotorua, Napier & Dunedin) using Alvarion over 3.5GHz spectrum
• New next generation IN platform eServe Global deployed
• Trans-Tasman's first Internet Protocol Virtual Private Network service $\Rightarrow$ (IP VPN), launched by Telstra and TelstraClear, September 2003
• NZ's first free Spam protection deployed on ISPs, September 2003
• On-line pre-paid phone card service launched, $\clubsuit$ October 2003
• Broadsoft soft-switch implementation with launch $\clubsuit$ of Private Voice (IP Telephony) services in 4QFY04
• HFC network digitised $\clubsuit$
• DSL equipment deployed in all cabinets

Leaders and innovators in IP solutions

Regulatory Events

Significant upcoming issues:

Minister's decision on Commerce Commission's Dec'03 recommendations not to regulate ULL & business grade wholesale DSL

• ⇒ Residential Resale workshop
• ⇒ Business Resale reconsideration application

• $\Rightarrow$ TSO judicial review by Vodafone

• ⇒ Decision on ULL and wholesale DSL by Minister

• Regulation of internet grade DSL

• ≎ Unbundled Partial $Circuit - ensure$ Telecom delivers on its promise or seek regulation

• ≎ Likely mobile interconnection investigation launched

• ⊅ Residential Resale determination
• Cong Term Number Portability determination on cost allocation (local & mobile number portability)
• ⊅ PSTN interconnection TSLRIC price review

Fixed Access Update

• Business access options include: $\ddot{\bullet}$
• Extension of network to new commercial & industrial developments
• Extending wireless local loop services to additional cities
• Leasing wholesale access from utility infrastructure suppliers
• Resale of Telecom business lines, access to wholesale DSL (JetStream & Layer2DSL) & wholesale access to Telecom unbundled partial circuits
• Access to Telecom's unconditioned local loop*
• Residential access options include: $\clubsuit$
• Extension of wireline infrastructure to multiple dwelling units and new ----subdivisions
• Leasing wholesale access from utility infrastructure suppliers
• Review feasibility of residential wireless technologies
• Resale of Telecom residential lines & access to wholesale DSL (JetStream & Layer2DSL)
• Access to Telecom's unconditioned local loop*

* Access yet to be determined

Mobility Update

• Promoting efficient trans-Tasman industry structure
• Short-listed vendors developing efficient design
• Regulatory clarity €
• Discussions ongoing with all parties €
• Vodafone Agency agreement continues indefinitely
• Continue to win SME & Corporate mobile accounts

TelstraClear Senior Leadership Team

Experienced executive team in place

TelstraClear Shareholding and Board

Strong support from Teistra and Board members

Outlook

• Focus on profitable revenue growth $\Rightarrow$
• Capital expenditure FY04 forecast remains NZ\$160m
• Continued focus on opex management
• Continued regulatory activity in support of economic $\clubsuit$ customer access to key bottleneck facilities