12/02/2004

Office of the Company Secretary

The Manager Company Announcements Office Australian Stock Exchange 10th Floor, 20 Bond Street SYDNEY NSW 2000

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

Telephone 03 9634 6400 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Re: Telstra Corporation Limited Financial Results for the Half Year ended 31 December 2003

In accordance with Listing Rules, I enclose the following for immediate release:

1. Appendix 4D half yearly report;
1. Half year results and operations review financial highlights and normalisation schedule;
1. Media release;
1. Half year financial report for the half year ended 31 Dec 2003; and
1. Directors' report.

This Announcement has been released simultaneously to the New Zealand Stock Exchange.

Yours sincerely

Pont Grati

Douglas Gration Company Secretary

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

Telstra Corporation Limited and controlled entities

Appendix 4D Half-year report for the half-year ended 31 December 2003

Appendix 4D Half-year report

Telstra Corporation Limited ABN 33 051 775 556

Financial half-year ended

31 December 2003

Results for announcement to the market

	Telstra Group
	Half-year ended 31 December
	2003	2002	Movement
	sm.	\$m.	\$m.	₩
Extract from the Statement of Financial Performance Revenue from ordinary activities Net profit available to Telstra Entity shareholders	10,853 2,293	11,406 1,184	(553) 1.109	(4.8%) 93.7%

For the half-year ended 31 December 2003 and 31 December 2002, all items included in our statement of financial performance are considered to be from ordinary activities. As a result, our profit from ordinary activities after tax available to Telstra Entity shareholders is the same as our net profit available to Telstra Entity shareholders.

During the half-year ended 31 December 2003, the following significant item impacted on the results recorded in our statement of financial performance:

On 28 August 2003, we sold our 22.6% shareholding in our associated entity IBM Global Services Australia Limited (IBMGSA) with a book value of \$5 million. Proceeds from the sale of this investment amounted to \$154 million, resulting in a profit before income tax expense of \$149 million. As part of the disposal we negotiated changes to a 10 year contract with IBMGSA to provide information technology services. This modification to our service contract with IBMGSA resulted in an expense of \$130 million being recognised and the removal of \$1,596 million of expenditure commitments disclosed as at 30 June 2003. The net impact on our profit before income tax expense of this transaction was a profit of \$19 million (\$58 million after an income tax benefit).

.
During the half-year ended 31 December 2002, the following significant items impacted on the results recorded in our statement of financial performance:

Our share of net losses of associates and joint venture entities included a \$965 million write down of the carrying amount of our 50% owned joint venture, Reach Ltd. The decision to write down our investment was due to the depressed conditions in the global market for international data and internet capacity, resulting in high levels of excess capacity, intense price competition and lower than expected revenues.

Our revenue from ordinary activities included \$570 million from the sale of a portfolio of seven office properties. The carrying value of these properties was \$439 million at the time of sale, resulting in an increase to profit before income tax of \$131 million (\$90 million after income tax expense).

	Telstra Group
	Half-year ended 31
	December
	2003	2002
	đ.
Dividends per share (cents)
Interim dividends
- ordinarų dividend	13.0	12.0
- special dividend		3.0
Total interim dividends	13.0	15.0

Final ordinary dividend for the financial year ended 30 June provided for and paid during the interim period	12.0	11.0

Our interim ordinary dividend for the half-year ended 31 December 2003 and our interim dividend incorporating the special ordinary dividend for the half-year ended 31 December 2002 are fully franked at a tax rate of 30%. The interim ordinary dividend for the half-year ended 31 December 2003 will have a record date of 26 March 2004 with payment to be made on 30 April 2004.

Our final ordinary dividend for 30 June 2003 provided for and paid during the interim period was fully franked at a tax rate of 30%. The final ordinary dividend had a record date of 26 September 2003 and payment was made on 31 October 2003.

Contents and reference page

Appendix 4D requirements	Reference
1. Reporting period and the previous corresponding period.	Refer to the 31 December 2003 half-year financial report lodged with this document.
2. Results for announcement to the market.	Refer page 1 for "results for announcement to the market".
3. Net tangible assets per security.	Refer item 1 on page 3 of this report.
$\left $ 4. Details of entities over which control has been gained or lost $\left $ during the period.	Refer item 2 on page 3 of this report.
5. Details of individual and total dividends or distributions and dividend or distribution payments.	Refer to the "results for announcement to the market" on page 1 of this report. Also refer to note 4: Dividends and note 9: Events after balance date in the 31 December 2003 half-year financial report lodged with this document for additional information.
6. Details of dividend or distribution reinvestment plans in operation. Refer item 3 on page 3 of this report.
7. Details of associates and joint venture entities.	Refer item 4 on pages 3 to 4 of this document for details on our associates and joint venture entities. Also refer note 6: share of net loss from associates and joint venture entities in the 31 December 2003 half- year financial report lodged with this document for details of contributions to net profit for each of these entities.
8. Accounting standards used in compiling reports by foreign entities Not applicable. (e.g. International Accounting Standards).
$ $ 9. If the accounts are subject to audit dispute or qualification, a description of the dispute or qualification,	Refer item 5 on page 4 of this report.

$\mathbf{1}$ .

Net tangible assets per security	Telstra Group
	Half-year ended 31
	December
	2003 2002
Net tangible assets per security	110.8 108.8 .

Details of entities which control has been gained or lost having a material affect $\overline{2}$ .

We have not gained or lost control of any significant entities during the half year ended 31 December 2003 or the half-year ended 31 December 2002 that will materially affect users' understanding of the financial report as at 31 December 2003.

Details of dividend or distribution reinvestment plans in operation 3.

During the half-years ended 31 December 2003 and 31 December 2002, we had no dividend or distribution reinvestment plans in operation.

Details of associates and joint venture entities 4.

Our investments in associated entities are listed below:

Name of associated entity	Principal activities Ownership Interest				i elstra Group's recorded amount of investment
		As at 31 December		As at 31 December
		2003	2002	2003	2002
		%.	%	5 _π	\$m.
IBM Global Services Australia Limited (a)
(1)	Information technology services		22.6		5
Australian-Japan Cable Holdings
Limited (incorporated in Bermuda) (a)	Network cable provider	39.9	39.9		37
Solution 6 Holdings Limited (2)	Business software system provider		13.2		q
Ecard Pty Ltd	Smart card transaction processing	50.0	50.0		9
PT Mitra Global Telekomunikasi
Indonesia (incorporated in Indonesia) (a) Telecommunications services		20.4	20.4	28	26
Telstra Super Pty Ltd	Superannuation trustee	100.0	100.0
muinternet Limited (4)	Educational portal		21.1
Keycorp Limited	Electronic transactions solutions	47.9	47.9
Telstra Foundation Limited	Charitable trustee organization	100.0	100.0
CityLink Limited (incorporated In New	Provider of wholesale fibre
$Zealand$ $(b)$ $(3)$	bandwidth		27.1
				28.	86

(a) Balance date is 31 December

(b) Balance date is 31 March

Unless noted above, all investments have a balance date of 30 June and are incorporated in Australia.

(1) On 28 August 2003, we sold our 22.6% shareholding in our associated entity IBM Global Services Australia Limited for \$154 million. Refer page 1"results for announcement to the market" for further details.

(2) On 8 May 2003, we sold 1 million of our shares in Solution 6 Holdings Limited reducing our ownership interest from 13:2% to 12:7%. On 19 June 2003, we sold our remaining 32 million shares for \$17 million.

(3) On 1 October 2003, we sold our 27.1% shareholding in our associated entity CityLink Limited for \$0.7 million.

(4) On 19 December 2003, we participated in a share buy-back undertaken by myinternet Limited that resulted in us disposing of our entire ownership interest in this entity.

(5) On 20 January 2004, we completed the sale of our 20.4% shareholding in our associated entity PT Mitra Giobal Telekomunikasi indonesia for \$50 million. Refer note 9 to the 31 December 2003 half-year report lodged with this document for further details.

Details of associates and joint venture entities (continued) 4,

Our investments in joint venture entities are listed below:

Name of joint venture entity	Principal activities		Ownership Interest	Telstra Group's recorded amount of investment
		As at 31 December		As at 31 December
		2003	2002	2003	2002
		%	%	$5m$	\$m
Foxtel Partnerships (#)	Pay television	50.0	50.0	14.7	33
Customer Services Pty Ltd	Customer service	50.0	50.0
Foxtel Management Pty Ltd	Management services	50.0	50.0
Foxtel Cable Television Ptu Ltd	Pay television	80.0	80.0
	International connectivity services
Reach Ltd (incorporated in Bermuda) (a)	to wholesale customers	50.0	50.0
Stellar Call Centres Pty Ltd	Call centre services and solutions	50.0	50.0	353	10
Xantic B.V. (incorporated in
Netherlands) (a)	Global satellite communications	35.0	35.0	60.	111
	Olumpic business and investment
Investment 2000 Ptu Ltd (1)	opportunities		25.0
TNAS Limited (incorporated in New	Toll free number portability in New
$Zealand$ $(b)$ $(2)$	Zealand	33.3	50.0
				85	154

(a) Balance date is 31 December

(b) Balance date is 31 March
Unless noted above, all investments have a balance date of 30 June and are incorporated in Australia.

(#) This includes both the Foxtel Partnership and the Foxtel Television Partnership

(1) Investment 2000 Pty Ltd was liquidated on 28 April 2003.

(2) Our shareholding in TNAS Limited was diluted due to a cancellation of issued capital in this entity during the financial year ended 30 June 2003.

5, Statement about the audit status

Our half-year report is based on the Telstra Corporation Limited and controlled entities half-year financial report for the half-year ended 31 December 2003, which has been reviewed by the Australian National Audit Office (ANAO). Our half-year financial report is not subject to audit dispute or qualification. Refer to the 31 December 2003 half-year financial report for the independent reviewreport to the members of Telstra Corporation Limited.

Telstra Corporation Limited Half year end results and operations review Half year ended 31 December 2003

Good profit growth with strong cash management

Financial highlights

Reported earnings before interest and tax (EBIT) increased by \$972 million or 38.1% to \$3.5 billion, comprising a decline in reported revenues of 4.8% to \$10.8 billion, and a reported expense decline of 17.2% to \$7.3 billion. Reported net profit after tax and outside equity interests (NPAT) increased by \$1.1 billion or 93.7% to \$2.3 billion. The increase in reported EBIT and NPAT is largely attributable to the non cash write down of the investment in Reach Ltd, of \$965 million, in the half year ended 31 December 2002.
Underlying¹ sales revenue decreased 0.1% to \$10.5 billion. Growth occurred across mobiles, internet and IP solutions, PSTN products, and Sensis (advertising and directories), partly offset by a decline in revenues from controlled entities, particularly the foreign exchange impact on Hong Kong CSL's result, other sales and service and ISDN. Underlying¹ domestic sales revenue increased \$87 million or 0.9% to \$9.7 billion. Excluding revenue from NDC construction activity and cable recovery and recycling project, underlying domestic sales revenue increased \$175 million or 1.8% to \$9.7 billion. Underlying¹ total revenue (excluding interest) declined \$29 million or 0.3% to \$10.6 billion.
Underlying¹ operating expenses (before depreciation, amortisation & interest) declined \$228 million or 4.1% to \$5.3 billion, driven by a decline in goods and services purchased. Underlying¹ total expenses (including depreciation and amortisation but before interest and tax) declined by \$129 million or 1.8% to \$7.1 billion with underlying depreciation and amortisation growth of 5.8%.
Underlying¹ earnings before interest and tax increased \$100 million or 3.0% to \$3.5 billion, from reduced expenses, particularly network payments and cost reduction programs. Underlying EBIT margin has increased by 1.0% to 33.1% with underlying EBITDA margin increasing 2.0% to 50.4%.
Underlying¹ profit after tax and outside equity interests increased \$115 million or 5.7% to \$2.1 ٠ billion, with earnings per share increasing 6.3% to 16.7 cents.
Operating capital expenditure declined by 10.7% to \$1.4 billion and represents 13.5% of sales revenue. Domestic core operating capital expenditure² declined by \$157 million or 10.8% to \$1.3 billion.
Free cash flow³ declined 13.7% to \$1.8 billion, driven by a reduction in proceeds from asset and investment sales and increased tax paid. Excluding prior year asset sales of \$570 million relating to the seven commercial properties, free cash flow grew \$281 million or 18.2%
A fully franked interim ordinary dividend of 13c per share has been declared and is payable on 30 April 2004. This represents an increase of 8% on the interim ordinary dividend declared in the corresponding period in the prior year.
Customer Service performance continued to lift as will be seen in the soon to be released December quarter ACA report, with work continuing in the company to drive further improvements to meet customers' expectations.
A strong Statement of financial position (Balance Sheet) with strong capital settings was ۰ maintained.

All results stated in \$A unless otherwise indicated.

Footnotes:

N/M refers to not meaningful. All statistical data represents management's best estimates and excludes all Telstra internal usage statistics.

Undertying results are produced to allow like for like comparison by removing those items which are either not of a comparable nature owing to structural changes to the ı, business e.g. acquisitions/consolidations, significant and non recurring or not part of the core operations of the business.
The half years ended 31 December 2003 and 2002 underlying results EXCLUDE:

Proceeds from asset/investment sales and book value of asset/investment sales, the diminution in value of investments, the non cash write down of the investment in Reach and Reach contract exit transactions, and the tax benefit from the accounting impact of tax consolidation.
Domestic core operating capital expenditure is operating capital expenditure excluding HKCSL & TelstraClear o

Free cash flow = operating cash flow less cash used in Investing activities.

Statement of financial performance
Cash flow summary
Statement of financial position summary
Statistical data summary
Summary of operating results
Results of operations
Operating revenues
PSTN Products
Basic access
Local calls ……………………………………………………………………………………………
PSTN value added services
National long distance calls
Fixed to mobile calls
International direct
Mobiles
Data
ISDN
Internet and IP solutions
Sensis (advertising and directories)
Intercarrier services Inbound calling products
Solutions management
Other controlled entities
Customer premises equipment
Payphones
Other sales and services
Other Revenue
Operating expenses
Labour expense
Goods and services purchased
Other expenses
Share of net loss from associates and joint venture entities
Depreciation and Amortisation
International	33
Hong Kong CSL Financial Summary
Reach Financial Summary
TelstraClear Financial Summary
Net borrowing costs
Income Tax Expense
Cash flow
Corporate Governance and Board Practices
Application of critical accounting policies
Normalisation Schedule
Normalisation Schedule (cont'd)
Quarterly Data
Product Reconciliation
Statement of Financial Position - detail

Statement of financial performance for the half year ended 31 December 2003

	Half Year Ended 31 December
	2003		2002		Reported	Underlying ²	Reported	Underlying'
	Reported Underlying		Reported	Underlying	Change	Change	Change	Change
		(in \$ million)			\$m	\$m	96	96
PSTN products
Basic access	1,610	1,610	1,556	1,556	54	54	3.5	3.5
Local calls	778	778	796	796	(18)	(18)	(2.3)	(2.3)
PSTN value added services	134	134	141	141	(7)	(7)	(5.0)	(5.0)
National long distance	578	578	582	582	(4)	(4)	(0.7)	(0.7)
Fixed to mobile	808	808	753	753	55	55	7.3	7.3
International direct	139	139	161	151	(22)	(22)	(13.7)	(13.7)
Total PSTN products	4,047	4,047	3,989	3,989	58	58	1.5	1.5
Mobiles
Mobile services	1,733	1,733	1,632	1,632	101	101	6.2	6.2
Mobile handsets Total Mobiles	186 1,919	186 1,919	172 1,804	172 1,864	14 115	34 115	8.1 6.4	8.1 6.4
Data and Internet
Data	509	509	526	526	(17)	(17)	(3.2)	(3.2)
ISDN (Access and Calis)	471	471	496	496	(25)	(25)	(5.0)	(5.0)
Internet and IP solutions	463	463	391	391	72	72	18.4	18.4
Total Data and Internet	1,443	1,443	1,413	1,413	30	30	2.1	2.1
Sensis (advertising and directories)	769	769	731	731	38	38	5.2	5.2
Intercarrier services	583	583	591	591	(8)	(8)	(1.4)	(1.4)
Inbound calling products	235	238	250	250	(12)	(12)	(4.8)	(A.8)
Solutions management	233	233	239	239	(6)	(6)	(2.5)	(2.5)
Other Controlled Entities (excl HK CSL & TelstraClear)	79	79	117	117	(38)	(38)	${32.5}$	${32.5}$
Hong Kong CSL TelstraClear	377 282	377 282	484	484	(107)	(107)	${22.1}$	${22.1}$
Costomer premises equipment	92	92	273 100	273 100	5	$\mathfrak{D}$	3.3 (8.0)	3.3 (8.0)
Payphones	72	72	75	75	(8) (3)	(8) (3)	(4.0)	(4.0)
Other sales & service	322	322	402	402	(80)	(80)	${19.9}$	(19.9)
Sales revenue	10,456	10,456	10,468	10,468	(12)	(12)	(0.1)	(0.1)
Other revenue	370	94	899	111	(529)	(17)	${58.8}$	(15.3)
Total revenue	10,826	10,550	11,367	10,579	${541}$	(29)	(4.8)	(0.3)
Expenses:
Labour	1,635	1,635	1,624	1,624	$11\,$	11	0.7	0.7
Goods and services purchased	1,690	1,690	2,011	1,946	(323)	(256)	(16.0)	(13.2)
Other expenses	2,148	1,930	2,510	1,914	(362)	36	${14.4}$	0.8
Expenses before equity acc/depn/amort/interest	5,473	5,255	5,145	5,484	(672)	(229)	${10.9}$	(4.2)
Share of net loss from associates and joint venture entities	29	29	969	28	(940)	$\mathbf 1$	${97.0}$	$3.5 -$

Total operating expenses & share of net loss from associates &
joint venture entities before depn/amort/interest	5,502	5,284	7,134	5,512	(1,612)	(228)	(22.7)	(4.1)
EBITDA	5,324	5,266	4,253	5,067	1,071	199	25.2	3.9
EBITDA excl share of net loss from associates & joint venture
entities	5,353	5,295	5,222	5,095	131	200	2.5	3.9
Depreciation	1,412	1,412	1,346	1,346	66	56	4.9	4.9
Amortisation (excl goodwill)	330	330	300	300	30	30	10.0	10.0
Goodwill amortisation	60	60	57	57	Э	3	5.3	5.3
Total depreciation/amortisation	1,802	1,802	1,703	1,703	99	99	5.8	5.8
Total operating expenses & shore of net loss from associates &
joint venture entities before interest.	7,304	7,086	8,817	7,215	(1, 513)	(129)	${17.2}$	(1.8)
EBIT	3,522	3,464	2,550	3,364	972	100	38.1	3.0

EBIT exclishare of net loss from associates & joint venture entities.	3,551	3,493	3,519	3,392	32	101	0.9	3.0
Net borrowing costs	355	355	432	432	(77)	(77)	${17.8}$	${17.8}$
Profit before income tax	3,167	3,109	2,138	2,932	1,049	177	49.5	6.0
Tax ⁽ⁱ⁾	874	971	968	943	(94)	28	(9.7)	3,0
Profit after tax (bef. Outside equity interests)	2,293	2,138	1,150	1,989	1,143	149	99.4	7.5
Outside equity interests	٥	$\ddot{\mathbf{0}}$	(34)	(34)	34	34	N/M	N/M
Profit after tax	2,293	2,138	1,184	2,023	1,109	115	93.7	5.7
Effective tax rate ⁽ⁱⁱ⁾	27.6%	31.2%	45.7%	32.2%			(18.1)	(1.8)
EBITDA margin on sales revenue ⁽ⁱⁱ⁾	50.9%	50.4%	40.6%	48.4%			10.3	2.0
EBIT margin on sales revenue (ii)	33.7%	33.1%	24.4%	32.1%			9.3	1.0
Earninas per share (cents) ⁽ⁱⁱⁱ⁾	17.9	16.7	9.2	15.7			94.6	6.3

(i) Underlying tax calculations represent management's best estimates

(ii) The reported and underlying percentage growth represents the percentage movement from the prior corresponding period

Product definitions have been reviewed and where necessary in the Half Year Ended 31 December 2002, comparative figures have been adjusted to align with changes in presentation in the Half Year Ended 31 December 2003. (Refer reconciliation on page 53).

(iii) 2002 EPS is based on 12,866 million shares, 2003 EPS uses the weighted average of 12,817 million shares as a result of the share buyback.

Cash flow summary

For the half year ended 31 December 2003

Cashflow Summary

		Half Year Ended 31 December
	2003	2002	Change	Change
		(in \$ millions)		%
Receipts from Customers	11,370	11,356	14	0.1
Payments to Suppliers/Employees	(6,466)	(6, 513)	47	(0.7)
Net Interest and Finance Charges	(396)	(502)	106	(21.1)
Income Tax Paid	(1,086)	(839)	(247)	29.4
Dividends Received	1	1	0	0.0
GST Remitted to the ATO	(498)	(552)	54	(9.8)
Operating Cash Flow	2,925	2,951	(26)	(0.9)
Operating Capital Expenditure	(1,411)	(1,580)	169	(10.7)
Less Capitalised Interest	37	52	(15)	(28.6)
Operating Capital Expenditure	(1, 374)	(1,528)	154	(10.1)
Investment Expenditure	1	(16)	17	(106.3)
Patents, Trademarks and Licences (including 3G spectrum)	(2)	(2)	0	0.0
Capital Expenditure - excluding Capitalised Interest	(1, 375)	(1, 546)	171	(11.1)
Receipts from Asset Sales/Other Proceeds	277	711	(434)	(61.0)
Cash flow used in Investing Activities	(1,098)	(835)	(263)	31.5
Free Cash Flow (Operating Cash Flow less Cash Flow used in Investing
Activities)	1,827	2,116	(289)	(13.7)
Movements in Borrowings/Finance Leases	(23)	(422)	399	(94.5)
Employee Share Loans (Net)	14	19	(5)	(26.3)
Dividends Paid	(1, 544)	(1,415)	(129)	9.1
Share Buy Back	(1,009)	0	(1,009)	N/M
Net Financing Activities	(2, 562)	(1, 818)	(744)	40.9
Net Cash Flow	(735)	298	(1,033)	(346.6)

Statement of financial position summary

As at 31 December 2003

Statement of Financial Position

	Half Year Ended 31 December
	2002 2003		Change	Change
	(in \$ millions)
Current Assets	5,128	6,045	(917)	(15.2)
Intangibles	3,008	3,304	(296)	(9.0)
Property, Plant and Equipment	22,666	23,068	(402)	(1.7)
Total Non-Current Assets	28,905	30,768	(1, 863)	(6.1)
Net Debt	11,055	10,848	207	1.9
Total Liabilities	18,923	21,578	(2,655)	(12.3)
Gross Debt	12,196	12,958	(762)	(5.9)
Net Assets/Shareholders' Equity	15,110	15,235	(125)	(0.8)

Statistical data summary

For the half year ended 31 December 2003

Statistical Summary

		Half Year Ended 31 December
	2003	2002	Change	Change %
Billable traffic data (in millions)
Local calls (number of calls)	4,831	5,019	(188)	(3.7)
National long distance minutes ¹⁰	4,343	4,656	(313)	(6.7)
Fixed-to-mobile minutes	2,099	1,955	144	7.4
International direct minutes	338	387	(49)	(12.7)
Mobile voice telephone minutes ⁽ⁱⁱ⁾	3,011	2,594	417	16.1
Inbound Calling Products - B Party Minutes	1,351	1,343	8	0.6
Network and operations data
Basic access lines in service (00)
Residential	6.07	6.27	(0.2)	(3.2)
Business	2.51	2.66	(0.1)	(5.6)
Total retail customers	8.58	8.93	(0.3)	(3.9)
Domestic wholesale	1.68	1.41	0.3	19.1
Total basic access lines in services (in millions)	10.26	10.34	(0.1)	(0.8)
ISDN access (basic lines equivalents) (in thousands) ^(iv)	1,224	1,190	34	2.8
Mobile services in operation (SIO) (in thousands) $^{(v)}$
GSM	6,139	5,421	718	13.2
CDMA	846	677	169	25.0
Mobile services in operations	6,985	6,098	887	14.5
CDMA Wholesale SIO (in thousands)	53	42	11	26
Number of SMS sent (in millions)	910	632	278	44
Online subscribers (in thousands)
Narrowband subscribers	1,178	1,103	75	6.8
Broadband subscribers ^(vi)	507	244	262	107.8
Total online subscribers	1,685	1,347	338	25.1
FOXTEL subscribers (in thousands)
FOXTEL cable subscribers	474	480	(6)	(1.3)
FOXTEL direct to home satellite subscribers	388	329	59	17.9
Total FOXTEL subscribers	862	809	53	6.6
Value-added services (in thousands)
Mobile messagebank customers	4,907	5,218	(311)	(6.0)
Easycall® call waiting customers	5,605	5,605	0	0.0
Fixed line Messagebank* customers	1,398	1,434	(36)	(2.5)
Calling number display customers	1,077	925	152	16.4
Employee data
Domestic full-time staff ^(vii)	35,324	38,291	(2, 967)	(7.7)
Full-time staff and equivalents (viii)	40,080	43,038	(2,958)	(6.9)

⁶¹ Includes national long distance minutes from our public switched telephone network (PSTN) and independently operated payphones to
Australian fixed telephones. Excludes minutes related to calls from non-PSTN networks, FaxStream* services.

$^{66}$ Includes all calls made from mobile telephones including long distance, international and data calls. Excludes Hong Kong CSL.

$^{(60)}$ Excludes advanced access services, such as ISDN services

${}^{(iv)}$ Expressed in equivalent number of clear voice channels.

(*) Excludes Hong Kong CSL SiOs.

^(vü Within Broadband, Broadband subscribers include DSL Layer 2 and 35 subscribers; retail products include cable, satellite, ISP, HyperConnect and ADSL, while wholesale products include Flexstream, DSL layer 2 and DSL layer 3S

$^{\rm (vii)}$ Excludes offshore, casual and part time employees

${}^{\rm (viii)}$ includes all domestic and offshore employees, including controlled entities.

Summary of operating results

For the half year ended 31 December 2003

Telstra Corporation Limited reported a profit after tax and outside equity interests (PAT) of \$2,293 million for the half year ended 31 December 2003, an increase of \$1,109 million on the prior year. The increase of 93.7% was primarily due to the non cash write down of the investment in Reach Ltd of \$965 million in the previous corresponding half year.

After adjusting to allow like for like comparisons with the half year ended 31 December 2002, as detailed on the normalisation schedule, underlying¹ PAT increased \$115 million or 5.7% to \$2,138 million, with earnings per share increasing 6.3% to 16.7 cents . Underlying $^{\rm 1}$ EBIT increased by \$100 million or 3.0% to \$3,464 million, and underlying¹EBITDA increased by \$199 million or 3.9% to \$5,266 million.

Revenue

Reported total revenue declined by \$541 million or 4.8% driven by the inclusion of revenue from the sale of seven commercial properties of \$570 million in the half year ended 31 December 2002.

Underlying¹ total revenue declined \$29 million or 0.3%.

Sales revenue decreased \$12 million or 0.1%, benefiting from growth in mobiles, the continuing impact of rebalancing initiatives and increases in mobile services in operation. Growth in internet and IP products and Sensis (advertising and directories) revenues, was offset by a decline in revenues from controlled entities, including Hong Kong CSL, other sales and service and ISDN.

Domestic sales revenue increased by \$87 million or 0.9% to \$9,739 million. Excluding NDC construction and cable recovery and recycling revenues, domestic sales revenue increased by 1.8% to \$9,703 million.

Expenses

The decrease in reported total expenses of \$1.5 billion or 17.2% includes the non cash write down of the investment in Reach Ltd and the cost of asset and investments sold in the half year ended 31 December 2002.

Underlying¹ operating expenses (before depreciation/amortisation) declined by \$228 million or 4.1% largely due to a \$256 million or 13.2% decline in underlying $^1$ goods and services purchased, comprising reduced network payments for services provided by Reach and cost reduction programs. Underlying¹ operating expenses (including depreciation and amortisation but before interest and tax) declined \$129 million or 1.8%, and includes depreciation and amortisation growth of 5.8%.

Net borrowing costs declined by \$77 million or 17.8% due to reduction of long term debt and costs incurred in the prior year following closure of various interest rate swaps.

Reported tax expense declined by \$94 million or 9.7% primarily due to a \$58 million benefit, which related to the consolidation of Multimedia subsidiary into the Telstra Tax Group as a result of the adoption of tax consolidation from July 2002. Underlying $1$ tax expense has increased by 3.0%.

Free cash flow³ declined 13.7% to \$1.8 billion, driven by a reduction in proceeds from asset and investment sales and increased tax paid. After removing the impact of the sale of seven commercial properties in the prior year, free cash increased by \$281 million or 18.2%.

Treasury operations

Telstra financial position remains strong with current credit ratings of AA-, Aa3 and AA- from S&P, Moody's and Fitch respectively.

Dividend

A fully-franked interim ordinary dividend of 13c per share has been declared and is payable on 30 April 2004. This represents an increase of 8% on the interim ordinary dividend declared in the corresponding period in the prior year.

$\boldsymbol{7}$

For enquiries on these results contact:

John Stanhope Chief Financial Officer Telstra Corporation Limited Wayne Treeby General Manager, Investor Relations Telstra Corporation Limited Phone: 61 3 9634 8014 Email: [email protected]

Operating and Financial Review

Results of operations

The following table illustrates reported and underlying¹ results for the half years ended 31 December 2003 and 2002.

Table 1 - Results of operations

	Half Year Ended 31 December
		2003		2002		Underlying ¹
	Reported	Underlying*	Reported	Underlying ¹	Change %	Change %
			(in \$ million)
Sales revenue	10,456	10,456	10,468	10,468	(0.1)	(0.1)
Other revenue	370	94	899	111	(58.8)	(15.3)
Total revenue	10,826	10,550	11,367	10,579	(4.8)	(0.3)
Expenses before equity acc/depn/amort/interest	5,473	5,255	6,145	5,484	(10.9)	(4.2)
Share of net loss from associates and joint ventures	29	29	969	28	(97.0)	3.6
Total expenses before depn/amort/interest	5,502	5,284	7,114	5,512	(22.7)	(4.1)
Depreciation & amortisation	1,832	1,802	1,703	1,703	5.8	5.8
Total expenses	7,304	7,686	8,817	7,215	(17.2)	(1.8)
Earnings before interest & tax (EBIT)	3,522	3,464	2,550	3,364	38.1	3.0

Reported earnings before interest and tax (EBIT) grew 38.1%, driven by a number of items that occurred in the half years ended 31 December 2003 and 2002 making like for like comparisons difficult. After adjusting for these items, underlying¹ EBIT increased by 3.0%.

The items that required adjustment for this comparison are reflected on the normalisation schedule on page 50, and consist of:

The write down in investments of \$968 million, largely comprising the non cash write down of $\bullet$ the investment in Reach Ltd of \$965 million in the prior year;
Reach contract exit expenses of \$41 million in the prior year; and $\bullet$

Asset and investment sales generated EBIT of \$58 million in the current year and \$195 million in $\bullet$ the prior year.

Operating revenues

The following table includes reported and underlying¹ operating revenues for the half years ended 31 December 2003 and 2002.

Table 2 - Operating revenue by major product and service category

	Half Year Ended 31 December
		2003		2002	Reported	Underluing ¹
	Reported	Underlying ^*	Reported	Underlying ^t	Change %	Change %
			(in \$ million)
PSTN products
Basic access	1,610	1,610	1,556	1,556	3.5	3.5
Local calls	778	778	796	796	(2.3)	(2.3)
PSTN value added services	134	134	141	141	(5.0)	(5.0)
National long distance	578	578	582	582	(0.7)	(0.7)
Fixed to mobile	808	868	753	753	7.3	7.3
International direct	139	139	161	161	(13.7)	(13.7)
Total PSTN products	4,047	4,047	3,989	3,989	1.5	1.5
Mobiles
Mobile services	1,733	1,733	1,632	1,632	6.2	6.2
Mobile handsets	186	186	172	172	8.1	8.1
Total Mobiles	1,919	1,919	1,804	1,804	6.4	6.4
Data and Internet
Data	509	509	526	526	(3.2)	(3.2)
ISDN (Access and Calls)	471	471	496	496	(5.0)	(5.0)
Internet and IP solutions	463	463	391	391	18.4	18.4
Total Data and Internet	1,443	1,443	1,413	1.413	2.1	2.1
Sensis (advertising and directories)	769	769	731	731	5.2	5.2
Intercarrier services	583	583	591	591	(1.4)	(1.4)
Inbound calling products	238	238	250	250	(4.8)	(4.8)
Solutions management	233	233	239	239	(2.5)	(2.5)
Other Controlled Entities (excl HK CSL and
TelstraClear)	79	79	117	117	(32.5)	(32.5)
Hong Kong CSL	377	377	484	484	(22.1)	(22.1)
Telstra Clear	282	282	273	273	3.3	3.3 ₁
Customer premises equipment	92	92	100	100	(8.0)	(0.8)
Pauphones	72	72	75	75	(4.0)	(4.0)
Other sales & service	322	322	402	402	(19.9)	(19.9)
Sales revenue	10,456	10,456	10,468	10,468	(6.1)	(0.1)
Other revenue	370	94	899	111	(58.8)	(15.3)
Total revenue	10,826	10,550	11,367	10,579	(4.8)	(0.3)
Domestic sales revenue		9,739		9,652		0.9
Domestic sales revenue (excl NDC & cable recovery)		9,763		9,528		1.8

Reported revenue decreased by 4.8% and was attributable to the asset and investment sales in the current year of \$276 million, as opposed to \$788 million in the prior year. The sale of seven commercial properties in the prior year for \$570 million is the main driver of the year on year decrease.

After excluding these items, underlying¹ total revenue decreased by 0.3%.

The continuing impact of rebalancing initiatives has resulted in an increase in basic access revenue, partly offset by reductions in fixed line call revenue. Growth in internet and IP products, fixed to mobile, mobiles, advertising and directories was offset by declines in ISDN, intercarrier revenues, inbound calling products and revenues from controlled entities, including Hong Kong CSL and other sales and services primarily NDC construction revenues.

PSTN Products

Explanations for the increase of 1.5% in total PSTN products are reflected in the following tables.

The continuing impact of rebalancing initiatives has resulted in an increase in basic access revenue, partly offset by reductions in local calls, international direct® and national long distance revenues. Fixed to mobile revenues continue strong growth as mobile services in operation continue to grow.

Basic access

Table 3 - Basic access

	Half Year Ended 31 December
	2003	Change 2002
	(in \$ millions except for statistical data) ℅
Basic access revenue
Retail	1,361	1,359	2	0.1
Domestic wholesale	249	197	52	26.4
Total basic access revenue	1,610	1,556	54	3.5
Basic access lines in service (in millions)
Residential	6.07	6.27	(0.2)	(3.2)
Business	2.51	2.66	(0.1)	(5.6)
Sub-total	8.58	8.93	(0.3)	(3.9)
Domestic wholesale	1.68	1.41	0.3	19.1
Total access lines in service (in millions)	10.26	10.34	(0.1)	(0.8)

Basic access revenue increased primarily due to rebalancing initiatives. As part of these initiatives, Telstra has introduced pricing packages where by customers are offered plans carrying higher basic access charges enabling them to take advantage of lower calling rates. Offsetting this growth is the slight decline in the number of basic access lines of 0.8% due to competition and migration to broadband.

Wholesale growth is driven mostly by an increase in the number of basic access lines.

Growth in basic access revenue is partly offset by the treatment of pensioner discounts, whereby the discount is now applied to basic access.

Local calls

Table 4 - Local calls

	Half Year Ended 31 December
	2003	Change 2002
	(in \$ millions except for statistical data) %
Local call revenue
Retail	662	689	(27)	(3.9)
Domestic wholesale	116	107	9	8.4
Total local call revenue	778	796	(18)	(2.3)
Number of local calls (in millions)	4,831	5,019	(188)	(3.7)

Local call revenue declined, due to the 3.7% reduction in the number of local calls from product substitution to mobiles, fixed to mobile, internet, ISDN and the impact of competition. The reduction in volumes is partially offset by an increase in yield due to the removal of the five Free Call rebate in the prior year and impact of pensioner discounts no longer being applied to local calls but to basic
access. Rebalancing initiatives have reduced the call rates for Homeline^TM customers from 22c to 20c.

Local call volume reductions have slowed since the launch of 1# Feature Assistant $^{\text{\tiny{\textsf{TM}}}}$ and Telstra Home Message 101^TM.

PSTN value added services

Table 5 - PSTN value added services

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)
PSTN value added services revenue
Retail	114	125	(11)	(8.8)
Domestic wholesale	20	16	4	25.0
Total PSTN value added services revenue	134	141		(5.0)

Reduction in revenue for PSTN value added services particularly fixed line Messagebank® and Call Return (*10#) is attributable to new free product offerings such as call 1# Feature Assistant $^{\text{\tiny{TM}}}$ and Telstra Home Message 101^™.

National long distance calls

Table 6 - National long distance calls

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)
National long distance revenue
Retail	573	579	(6)	(1.0)
Domestic wholesale	5	3		66.7
Total national long distance revenue	578	582	(4)	(0.7)
National long distance minutes (in millions)	4,343	4,656	(313)	(6.7)

The reduction in national long distance revenue was attributable to the 6.7% decline in call volumes, offset by withdrawal of 1c Saturday offered in the prior year and the impact of pensioner discounts no longer being applied to national long distance calls. This resulted in an average increase in revenue per minute of 6.6%.

Fixed to mobile calls

Table 7 - Fixed to mobile calls
	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)			%
Fixed to mobile revenue
Retail	799	746	53	7.1
Domestic wholesale	9		2	28.6
Total fixed to mobile revenue	808	753.	55	7.3
Fixed to mobile minutes (in millions)	2,099	1,955	144	7.4

Fixed to mobile revenue increased by 7.3% due to an increase in fixed to mobile minutes from continued strong growth in the number of mobile services in the Australian market.

Telstra Corporation Limited and controlled entities

International direct

Table 8 - International direct

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)			%
International direct revenue	139	161	(22)	(13.7)
International direct minutes (in millions)	338	387	(49)	(12.7)

International direct® revenue declined due to a reduction in minutes of 12.7%. This reduction is due to customers using other products such as e-mail or mobile and the impact of competitors offering aggressively priced prepaid calling cards.

This reduction was partly compensated by a flagfall increase from August 2002. In addition there has been increased use of offerings such as 0018 Free $\%$ hour and 10 minute capped calls under Homeline $^{TM}$ rebalancing initiatives.

Mobiles

Table 9 - Mobiles	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)			%
Mobiles revenue	1,919	1,804	115	6.4
Comprising:
Access fees and call charges	1,339	1,315	24	1.8
Value added services
International roaming	85	83	2	2.4
Mobile messagebank	90	82	8	9.8
Mobile data	219	152	67	44.1
Total value added services	394	317	77	24.3
Mobile services revenue	1,733	1,632	101	6.2
Mobile handset sales	186	172	14	8.1
Total mobiles goods and services revenue ⁽¹⁾	1,919	1,804	115	6.4
GSM mobile SIO (in thousands)	6,139	5,421	718	13.2
CDMA mobile SIO (in thousands)	846	677	169	25.0
Total mobile SIO (in thousands)	6,985	6,098	887	14.5
Prepaid mobile SIO (in thousands)	2,574	1,963	611	31.1
Postpaid mobile SIO (in thousands)	4,411	4,135	276	6.7
Total mobile SIO (in thousands)	6,985	6,098	887	14.5
Number of SMS sent (in millions)	910	632	278	44.0
Deactivation rate ⁽ⁱⁱ⁾	$9.6\%$	11.3%	(1.7)
Mobile voice telephone minutes (in millions)	3,011	2,594	417	16.1
	(in \$ per service in operation)
Average revenue per user per month (iii)	42.63	45.18	(2.55)	(5.6)
Average prepaid revenue per user per month (iii)	14.72	13.77	0.95	6.9
Average postpaid revenue per user per month (iii)	58.24	59.91	(1.67)	(2.8)
Mobile data revenue per SIO per month	5.39	4.18	1.21	28.9

⁽ⁱ⁾ Excludes revenue from:

call termination charges, including calls from our fixed network which we categorise as fixed to mobile;
resale of GSM and CDMA services to other carriers which is recognised as intercarrier services revenue; and
HK CSL which is recognised as various controlled entity revenue.

⁽⁶⁾ Deactivations rate now excludes transfers of: account names, services between Telstra's GSM and CDMA networks, and services between prepaid and postpaid. The prior year comparative has been restated to exclude such transfers. This rate includes deactivations of inactive prepaid services, deactivated after the 6 month recharge period.

(iii) Average revenue per user per month is calculated using average SIOs.

The increase in mobile services revenue was largely driven by:

An increase in mobile data revenue of 44.1%. Driving this increase is Short Message Service (SMS) ۰ revenue growth of 43.3%, attributable to the increase in the number of messages sent which increased by 44.0% to 910 million;

Messagebank® revenue increase of 9.8% driven by the 9.6% increase in Messagebank® minutes and $\bullet$ a slight increase in yield. This increase is partly offset by the decline in the number and yield of memo messages of 9.0% and 3.2% respectively.
Mobile services revenue increase of 6.2% driven by strong growth in GSM and CDMA services in $\bullet$ operation of 14.5% and increases in voice telephone minutes of 16.1%. This growth is partially offset by loyalty bonuses. The loyalty bonus is a rebate against the access fee.

The loyalty bonus is used as a customer retention initiative in lieu of other similar cost based structures such as handset subsidies.

Mobile handset sales increased by 8.1% largely driven by the change in the mobiles business model whereby customers purchase phones outright or through the Mobile Repayment Option (MRO). The growth in volumes is offset by the reduction in the average price of CDMA and GSM handsets.

Data

Table 10 - Data

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)
Data revenue
Frame relay	184	170	14	8.2
ATM	29	37	(8)	(21.6)
Digital data services	130	148	(18)	(12.2)
Leased lines	133	141	(8)	(5.7)
International private lines	15	20	(5)	(25.0)
Other data	18	10	8	N/M
Total data revenue	509	526	(17)	(3.2)
Permanent Virtual Circuits (in thousands)
Frame	29	29	0	0.0
ATM (incl Wholesale)	12	11	1	9.1

Data revenue declined by 3.2% due to product substitution to technologically advanced IP and DSL based product options.

Frame relay revenue grew due to migration from digital data services, leased lines and international private lines.

ATM revenue declined due to the loss of a significant contract and migration to newer IP and DSL based options. Despite the decrease in revenue, ATM virtual circuits grew by 9.1% due to the wholesale ATM product where revenues are recorded against the Intercarrier services product.

Digital data services and leased lines including Transend revenue fell, as they are mature products. Bank and financial institution customers are migrating to newer technologies with greater bandwidth to meet application needs such as Frame relay and Argent.

International private line revenue decreased due to competition, excess capacity in the market and the migration to Frame Relay.

The increase in other data revenue is attributable to EFTPOS product migration to Argent Dial-up from the Transend platform.

ISDN

Table 11 - ISDN

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)			%
ISDN revenue
Access	198	198	0	0.0
Calls	273	298	(25)	(8.4)
Total ISDN revenue	471	496	(25)	(5.0)
ISDN access lines (basic access line equivalents) (in thousands)	1.224	1.190	34	2.8

ISDN access revenue was flat due to the penetration into the SME and consumer markets who are typically low yield. Consequently, the numbers of ISDN access lines have grown by 2.8%. Large enterprise customers have been migrating to highly advanced products such as Frame Relay.

ISDN call revenue decreased largely driven by a decline in data call revenue of 22.6%. ISDN data corporate customers are migrating to products such as Direct Internet Access Service, ADSL and Telstra Private Internet Provider Solutions. The overall decrease in ISDN call revenue was partly offset by an increase in voice call revenue of 7.0%. This increase was driven by the introduction of charging customers for thirty minute blocks of time, rather than a per minute basis. In addition, a greater proportion of customers are using ISDN for voice instead of data as this product moves into SME and consumer segments from the corporate segment.

Internet and IP solutions

Table 12 - Internet and IP solutions

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)			%
Internet & IP solutions revenue
Online broadband	179	118	61	51.7
Online narrowband	144	148	(4)	(2.7)
Internet direct	62	59	3	5.1
IP solutions	71	56	15	26.8
Other	7	10	(3)	(30.0)
Total Internet & IP solutions revenue	463	391	72	18.4
Broadband subscribers - Wholesale (in thousands)	220	57	163	286.0
Broadband subscribers - Retail (in thousands)	287	188	99	52.7
Total Broadband subscribers (in thousands)	507	244	262	107.8
Narowband subscribers - Retail (in thousands)	1,178	1,103	75	6.8
Total online subscribers (in thousands)	1,685	1,347	338	25.1

Internet and IP solutions revenue increased driven by:

Continued strong growth in BigPond™ broadband subscriber revenue driven by subscriber growth ٠ of 107.8% and growth across all products as customers migrate from data and ISDN products. This increase is offset by a decline in the average revenue per user due to 2 weeks of rebates to customers as a result of network outage in October and due to the introduction of the usage toolbar in May 2003 impacting excess usage billing;
Growth in BigPond^TM narrowband subscribers of 6.8% offset by average revenue per subscriber $\bullet$ declines due to BigPond rebates;
Growth in IP solutions of 26.8%. These products are in the growth phase of the product life cycle $\bullet$ with revenue increases for IP WAN and IP MAN/Ethernet. This growth is partially offset by decline in MegaPop® and IP Remote dial-up security software tools.

Sensis (advertising and directories)

Table 13 - Sensis (advertising and directories)

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)		%
Sensis (advertising and directories)	769	731	38	5.2

Sensis® (advertising and directories) revenue increased due to the launching of the new colour print features and E-mail/URL products resulting in 15.9% growth in White Pages® revenue. In addition, online and electronic products experienced growth of 32.0%, largely due to new customer take up and attractive product enhancements. Yellow Pages® revenue represents over 80.0% of Sensis® (advertising and directories) revenue and experienced growth of 2.1%.

Intercarrier services

Table 14 - Intercarrier services
	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)			%
Intercarrier services revenue	583	591	(8)	(1.4)

The decline in intercarrier services revenue was driven by:

Reduced volumes and terminating rates across both mobiles and PSTN/ISDN originating and ۰ terminating access. These rate reductions are consistent with the industry trend toward lower interconnect rates;
A reduction in wholesale transmission product revenue due to continued pricing pressure from ۰ oversupply of capacity in the market, and internet call volume reduction due to increased carriage rates, partly offset by an increase in wholesale ATM;

Partly offset by:

increased SMS interconnect revenues of 38.8%, driven by a 33.6% increase in traffic and a 4.0% increase in price.

Inbound calling products

Table 15 - Inbound calling products

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data)			%
Inbound calling products revenue	238	250	(12)	(4.8)
B party minutes (in millions)	1,351	1,343	8	0.6
A party calls (in millions)	473	462	11	2.4

Inbound number portability has had a large impact on revenue derived from Freecall $\text{TM}$ 1800 and the B party (called party) revenue of Priority® One3 $\text{TM}$ and Priority® 1300 products, decreasing by 15.2% and
4.3% re decline is considerably less than that experienced in the first half of the prior year as Telstra increases its customer base but at reduced prices.

Solutions management

Table 16 - Solutions management
	Half Year Ended 31 December
	2003	2002	Change	Change
		(in \$ millions)		%
Solutions management revenue	233	239	(6)	(2.5)

Revenue from solutions management is derived from managing all or part of a customer's information technology or telecommunications services as well as providing hosting solutions to corporate enterprise and SME.

Managed solutions declined by 3.7% due to the reduction of revenue from the Department of Employment and Workplace Relations contract and the reduction of radio services revenue due to the completion of the defence satellite contract in 2002. This was partly offset by increased revenue from major contracts and growth in managed wide area networks (WAN).

Corporate and SME hosting services experienced growth of 42.5% off a low base.

Other controlled entities

Table 17 - Other controlled entities

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)			%
Total controlled entity	738	874	(136)	(15.6)
Comprising:
Hong Kong CSL	377	484	(107)	(22.1)
Telstra Clear	282	273	9	3.3
Other CE	79	117	(38)	(32.5)
	738	874	(136)	(15.6)

Revenue from controlled entities declined by 15.6 % driven by:

Hong Kong CSL sales revenue declined due to unfavourable currency fluctuations of \$93 million $\bullet$ and unfavourable price competition of \$14 million;
The sale of Mobitel in October 2002, representing a decline of \$8 million; and $\bullet$
Telstra Multimedia sales revenue declined by \$27 million due to the customer sales and service $\bullet$ centres now being operated directly by Foxtel.

These decreases were partly offset by:

Growth in TelstraClear sales revenue of 3.3%, with New Zealand dollar revenue growth of 4.4%, and revenue for Telstra Europe due to the acquisition of customers & networks from Powergen in the UK.

Customer premises equipment

Table 18 - Customer premises equipment

	Half Year Ended 31 December
	2003	2002	Chanae	Change
	(in \$ millions)		-%
Customer premises equipment revenue	92	100	(8)	(8.0)

Revenue from customer premises equipment has declined by 8.0% due to the continued competition in the market for fixed line handsets.

Payphones

Table 19 - Payphones

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical data) %
Payphones revenue	72	75	(3)	(4.0)
Payphones (in thousands)	66	69	$\left(3\right)$	(4.3)

Payphones revenue decreased driven by:

a reduction in the number of Telstra operated payphones of 3.1% due to increased competition and $\bullet$ the gradual removal of coin only and credit card payphones;
a reduction in the number of privately operated payphone services of 10.9%; and ۰
substitution to other products, in particular mobiles. ۰

Other sales and services

Table 20 - Other sales and services

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)			₩
Total other sales and services
Telstra information and connection services	57	67	(10)	(14.9)
Customnet and spectrum	54	59	(5)	(8.5)
Virtual private network	11	15	(4)	(26.7)
Card services	36	48	(12)	(25.0)
Security Products	25	24	1	4.2
Conferlink	23	23	0	0.0
Commercial works	15	16	(1)	(6.3)
Cable Recovery	2	27	(25)	(92.6)
Bundling Pay TV	65	0	65	N/M
External Construction	34	97	(63)	(64.9)
Other	o	26	(26)	(100.0)
Total other sales and services	322	402	(80)	(19.9)

Telstra information and connection services are traditional voice services and the product group has shown declining revenue, as customers move to online directory services rather than using the traditional operator assisted and directory services.

Virtual private network (VPN) products declined due to the migration to ISDN and IP based products.

Card services declined primarily due to a reduction in Phoneaway® revenue from international calls, as customers migrate to cheaper calling cards. Nevertheless, Phoneaway® continues to be the preferred calling card for travellers within Australia, but generates a lower yield, as call minutes are mainly domestic as opposed to international minutes.

The reduction in cable recovery revenue is due to the planned completion of the cable recovery and recucling project.

External construction revenue declined 64.9% due to lower industry construction activity levels and the integration of the network, design and construction (NDC) business.

Revenue also increased \$65 million following the introduction of Foxtel Pay TV bundling by Telstra.

Other represents miscellaneous products and the decline includes a prior period accounting adjustment.

Other Revenue

Table 21 - Other revenue

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)		%
Total other revenue - reported	370	899	(529)	(58.8)
Less adjustments	276	788	(512)	(65.0)
Total other revenue - underlying	94	111	(17)	(15.3)
Comprising:
Dividends received/receivable	٥	1	(1)	N/M
USO Levy Receipts	55	33	22	66.7
Rental/Leases	13	18	(5)	(27.8)
Miscellaneous revenue	26	59	(33)	(55.9)
	94	111	(17)	(15.3)
Where adjustments comprise:
Revenue from sale of:
Property, plant and equipment	98	757	(659)	(87.1)
Controlled Entities	0	17	(17)	N/M
Listed securities and other corporations	23	7	16	N/M
Joint Ventures	o	3.	(3)	N/M
Associates	155	0	155	N/M
Business	о	4	(4)	N/M
Total adjustments	276	788	(512)	(65.0)

The reported other revenue reduction is primarily due to the sale of seven commercial properties for \$570 million in the prior year.

Excluding this revenue and other revenue generated from sales of assets and investments including IBMGSA investment sale of \$153m, other revenue declined 15.3%.

Miscellaneous revenue declined by 55.9% due to a reduction in contracted government tender revenue due to milestone achievements for the untimed local call and rural telecommunications infrastructure fund projects in the prior year.

USO Levy receipts revenue grew due to increases in government sponsored projects including Networking the Nation, Internet Assistance Program, Wireless South West and Island Watch projects.

Operating expenses

The following table illustrates reported and underlying¹ expenses for the half years ended 31 December 2003 and 2002.

Table 22 - Operating expenses
-------------------------------	--

	Half Year Ended 31 December
		2003		2002	Reported	Underluing ¹
	Reported	Underlying ¹		Reported Underlying ¹	Change %	Change %
			(in \$ million)
Expenses
Labour	1,635	1,635	1,624	1,624	0.7	0.7
Goods and services purchased	1,690	1,690	2,011	1,946	(16.0)	(13.2)
Other expenses	2,148	1,930	2,510	1,914	${14.4}$	0.8
Expenses before equity acc/depn/amort	5,473	5,255	6,145	5,484	(10.9)	(4.2)
Share of net loss from associates and joint
venture entities	29	29	969	28	(97.0)	3.6
Total expenses before depn/amort/interest	5,502	5,284	7,114	5,512	(22.7)	(4.1)
Total depreciation/amortisation	1,802	1,802	1,703	1,703	5.8	5.8
Total expenses	7,304	7,086	8,817	7,215	(17.2)	(1.8)

Reported operating expenses decreased by 17.2%, driven by the inclusion of the following items in the half year ended 31 December 2002:

\$965 million non cash write down of the investment in Reach Ltd;
\$41 million Reach contract exit costs; $\bullet$
\$3 million for the write down of other investments; and $\bullet$
\$593 million of costs relating to asset and investment sales. $\bullet$

In comparison, the half year ended 31 December 2003 included:

\$218 million of costs relating to asset and investment sales. $\bullet$

After excluding these items in the half years ended 31 December 2003 and 2002, operating expenses decreased by 1.8%. Excluding depreciation and amortisation, operating expenses decreased by 4.1%.

The decline in other operating expenses includes the benefits of recent cost reduction programs, such as service delivery, IT transformation, six sigma, the corporate centre review and other commercial initiatives.

Labour expense

Table 23 - Labour expense

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions except for statistical
		data)		%
Labour expense	1,635	1,624	11	0.7
Full time staff & equivalents ⁽ⁱ⁾	40,080	43,038	(2, 958)	(6.9)

$^{(i)}$ Includes NDC full time & equivalents. Corresponding labour expense for NDC were recorded in costs of external contracting and cost of sales prior to integration back into Telstra in August 2003.

Reported labour expenses increased by 0.7% driven by:

Salary increases of \$58 million or 4% due to enterprise agreements and annual reviews; $\bullet$
Increases in the use of part time and casual staff and overtime; $\bullet$
A change in the accounting treatment of NDC labour, from service contracts and cost of sales ۰ to labour expense; and
An increase in provisions due to assumptions reviews and changes. $\bullet$

These increases were partly offset by:

A decline in full time staff and equivalents of 6.9% to 40,080, which includes NDC staff $\bullet$ reductions;
٠ A reduction of annual leave and superannuation charges following adoption of AGAAP by Hong Kong CSL;
۰ A reduction in Hong Kong CSL labour expense due to exchange rate movements; and
A reduction in redundancy expense of \$8 million. ۰

While Telstra has continued on a superannuation employer contribution holiday during the year based on recommendations of the last actuarial review (as at 30 June 2000), the continuation of this is dependent upon the performance of the fund. An actuarial review is presently being prepared by the actuary, based on the fund's position as at 30 June 2003. It is possible that this will recommend recommencement of employer contributions at some point during 2004-05, albeit at a reasonably low level.

Goods and services purchased

Table 24 - Goods and services purchased

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)			%
Total goods and services purchased - reported	1,690	2,011	(321)	(16.0)
Less adjustments	0	65	(65)	N/M
Total goods and services purchased - underlying	1,690	1,946	(256)	(13.2)
Comprising:
Goods and services purchased - underlying
Cost of goods sold	288	336	(48)	(14.3)
Usage commissions	133	121	12	9.9
Handset subsidies	125	163	(38)	(23.3)
Network payments	871	1,037	(166)	(16.0)
Commercial Project Payments	66	133	(67)	(50.4)
Other	207	156	51	32.7
	1,690	1,946	(256)	(13.2)

Reported goods and services purchased decreased, partly attributable to the costs relating to the exit of the old Reach contract in the half year ended 31 December 2002. After excluding these costs, goods and services purchased declined by 13.2%.

Decreases in cost of goods sold were due to:

Foxtel customer sales and service centre now operated directly by Foxtel;
Exchange rate movements impacting our Hong Kong CSL business partly offset by higher costs ۰ associated with higher handset sales;
the reclassification of network payments associated with international PoPs to network payments; ۰

This was partly offset by an increase in handsets sales following more aggressive selling campaigns and the change in the business model, whereby customers purchase a phone outright or through Mobile Repayment Option (MRO).

Growth in usage commissions is driven by the increased popularity of the prepaid product and CDMA services with growth of 31.1% and 25% respectively.

Handset subsidies have declined primarily due to the reduced offerings and focus on selected special offerings. There is a significant decrease in amortisation from previously deferred handset subsidies from prior financial years partly offset by an increase in amortisation relating to current years deferred handset subsidies.

Network payments decreased due to reductions in international call volumes equating to \$48 million and charges from Reach for international network connections of \$109 million, following the commencement of a new pricing structure from January 2003. Additional benefit of \$37 million came from the more favourable \$US exchange rate in the current year. The decrease in network payments was partly offset by increased domestic network payments of \$38 million from higher volumes across mobiles and SMS terminating, coupled with the reclassification of costs associated with international PoPs from cost of goods sold of \$29 million. In addition Hong Kong CSL network payments declined \$28 million comprising an exchange rate impact of \$19 million and price reductions of \$9 million.

Commercial project payments largely comprise costs of construction activities provided by NDC to external parties. This has declined primarily due to closure of the international business and the downturn in the domestic construction industry, in addition to the integration of NDC into Telstra activities which has resulted in savings which are partially offset in labour and other expenses.

Other goods and services have increased primarily due to the introduction of Foxtel bundling in January 2003 equating to \$65 million. Payments are made to Foxtel for the services Telstra bundle and sell. This was partly offset by dealer incentives and fees that have declined slightly, with the deferment of incentives and fees to be amortised over the average life of a contract partly offset by increased volumes and higher incentive payments. In addition, paper purchasing and printing costs have declined due to favourable contract negotiation outcomes and lower commodity prices. Other goods and services also comprise information service provider payments and dealer commissions.

Other expenses

Table 25 - Other expenses

		Half Year Ended 31 December
	2003	2002	Change	Change
		(in \$ millions)		%
Total other expenses - reported	2,148	2,510	(362)	(14.4)
Less adjustments	218	596	(378)	(63.4)
Total other expenses - underlying	1,930	1,914	16	0.8
Comprising:
Rental expense on operating leases	265	296	(31)	(10.5)
Bad/doubtful debts	95	79	16	20.3
Reduction in value of inventories	1	3	(2)	(66.7)
Net foreign currency conversion losses/(qains)	4	15	(11)	(73.3)
Auditors fees	з	4	(1)	(25.0)
Service contracts and other agreements	742	847	(105)	(12.4)
Marketing	172	148	24	16.2
General administration	427	383	44	11.5
Other operating expense	221	139	82	59.0
Total other expenses - underlying	1,930	1,914	16	0.8
Where adjustments comprise:
Net book value of assets sold:
Property, plant and equipment	67	578	(511)	(88.4)
Investments in controlled entities	٥	12	(12)	N/M
Investments in joint associated entities	5	0	5	N/M
Investments in listed entities and other corporations	16	9	7	77.8
Businesses	$\left( 0 \right)$	(6)	6	N/M
Net book value of assets sold:	88	593	(505)	(85.2)
Reduction in value of investments	o	3	(3)	N/M
Other adjustments (IBMGSA Exit Costs)	130	0	130	N/M
Total Adjustment	218	596	(378)	(63.4)

The decrease in reported other expenses was driven by the cost of asset and investment sales, with the half year December 2002 including the sale of seven commercial properties. After excluding the cost of asset and investment sales other expenses increased 0.8% explained by:

An increase in other operating expenses primarily due to:
the integration of NDC into Telstra activities and the removal of the inter-company profit adjustment offset in service contracts and other agreements;
increases across repairs and maintenance, materials usage and vehicle operating costs, $\blacksquare$ also impacted by the NDC integration; and
a reduction in overhead costs capitalised due to a change to the IT overhead capitalisation $\blacksquare$ methodology and reduction of support costs subject to capitalisation.
An increase in general and administration costs, which has eventuated from the reclassification of some Telstra Enterprise Services IT costs on integration into Telstra activities, and is offset in rental expenses on operating leases. Increases across training/seminars, postage/freight/courier, and entertainment have also contributed to the increase.
An increase in bad and doubtful debts due to higher provisions and write off's including mobile ۰ repayment option and the cessation of the customer billing arrangement with Commander Communications, at 30 June 2003. Combined with the absence of any sale of debt recoveries in the half year ended 31 December 2003.

Marketing costs increased primarily due to new initiatives and sponsorships. With the Corporate $\bullet$ focus on the broadband product set as a major growth opportunity for Telstra, considerable resources have been devoted to the promotion of broadband, through various media advertising outlets, relative to the corresponding period.

The increases were partly offset by the following declines:

Service contracts and other agreements declined largely due to:
one off impacts in the half year ended 31 December 2002, such as; the reclassification of Wideband and associated recovery costs capitalised in prior periods equating to \$46 million. Service contracts and other agreements also decreased due to the cessation of the cable recovery and recycling project;
$\blacksquare$ the removal of the inter-company profit adjustment offset in other operating expenses, in addition to the integration of NDC into Telstra activities, with these savings offset across various expense categories; and
" cost reduction initiatives in the IT services area.
A decline in auditor fees, impacted by timing issues.
A decline in rental expenses on operating leases, which has eventuated from the reclassification of some Telstra Enterprise Services IT costs on integration into Telstra activities, and is offset in general and administration costs.
Currency conversion costs decreased primarily due to the currency losses in the half year ended 31 ۰ December 2002 from the revaluation of borrowings to reflect the fluctuation in exchange rates, with no such exposure in the half year ended 31 December 2003.

Share of net loss from associates and joint venture entities

Table 26 - Share of net loss from associates and joint venture entities

	Half Year Ended 31 December Change 2003 2002 (in \$ million)
			Change 96

29	969	(940)	(97.0)
0	941	(941)	(100.0)
29	28		3.6

Reported net equity accounted losses decreased primarily due to the non cash write down of the investment in Reach Ltd and the Reach contract exit benefit for the half year ended 31 December 2002.

After excluding these items, equity accounted losses remained relatively flat and comprised;

۰ Decreased losses of Reach, E-Card and increased profits from PT Mitra Global Telekomunikasi Indonesia.
Offset by increased losses in Foxtel, Xantic and reduced profit from IBMGSA and Australian Japan ۰ Cable (AJC).

Depreciation and Amortisation

Table 27 - Depreciation and amortisation

	Half Year Ended 31 December
	2003 2002 (in \$ millions)		Change	Change %
Total depreciation and amortisation	1,802	1,703	99	5.8
Comprising:
Depreciation	1,412	1,346	66	4.9
Amortisation (excl goodwill)	330	300	30	10.0
Amortisation (goodwill)	60	57	3	5.3
	1.802	1.703	99	5.8

Depreciation and amortisation increased due to the communications plant and software development asset additions, which is consistent with the level of capital expenditure over recent years. This was partially offset by a decline in other plant and equipment from the full depreciation of certain assets following the change to asset service lives in the half year ended 31 December 2002.

International

Hong Kong CSL Financial Summary

The following table shows information about Hong Kong CSL.

Table 28 - Hong Kong CSL Financial Summary

	Half Year Ended 31 December
	2003	2002	2003	2002
		(in A\$ millions)
Total revenue	377	507	2014	2191
Total opex	253	354	1356	1528
EBITDA	124	153	658	663
EBIT	8	28	248	242
CAPEX	27	27	150	119
EBITDA margin	32.9%	30.2%	32.7%	30.3%

Amounts presented in HK\$ have been prepared in accordance with AGAAP. Amounts presented represent amounts included in Telstra's consolidated result.

Hong Kong CSL continues to perform in a challenging market. Hong Kong CSL is currently experiencing one of its worst economic climates in decades. Along with this, market conditions have been adversely affected by SARS and an ongoing price war.

Voice revenue has declined as a result of price competition, however this has been partially offset by strong growth in handset sales which has been mainly attributable to the introduction of new handset models. There has also been gradual and steady growth in data revenue through the launch of new MMS handsets and innovative contents and applications.

The decline in total revenue has been offset by cost reductions, resulting in EBITDA remaining relatively flat for the half year.

The revenue decline in A\$ has been exaggerated by the depreciating HK\$ against A\$.

Closer Economic Partnership Agreements (CEPA) with the Chinese government has been made and is expected to bring new business opportunities in the future. Along with this Hong Kong CSL has been certified as a Hong Kong Service Provider.

Reach Financial Summary

The following table shows information about Reach.

Table 29 - Reach Financial Summary

	Half Year Ended 31 December
	2003	2002
(In US\$ millions)
Total revenue	450	622
EBITDA	54	209
EBIT	(74)	124
Net Profit	(113)	61
(in A\$ millions)
Telstra 50% Share	N/A	57
Less Amortisation of Goodwill	NIA	(60)
Add Amortisation of Unrealised Profit	N/A	22
Equity accounted profit (Excl Investment Write off)	N/A	19
Net write down of investment in reach	N/A	(965)
Equity accounted profit/(loss)	N/A	(946)
Less Adjustments
Net write off of investment in reach	N/A	965
Reach contract exit	N/A	(24)
Equity Accounted profit/(loss) - underlying	N/A	(5)

Amounts presented in US\$ have been prepared in accordance with USGAAP. Amounts presented in A\$ represent amounts included in Telstra's consolidated result. Equity accounting of Reach ceased as at 31 December 2002. 2003 figures are yet to receive audit approval

REACH has been operating in a difficult environment for a sustained period of time and the industry is expected to remain challenging for a period of time. This has been mainly due to aggressive pricing and over supply of capacity.

To achieve the best results possible in the current market conditions REACH has focused on improving efficiency through effective IT systems integration as well as a continuous focus to reshape into a customer-centric organisation. In addition, there has also been good progress with the containment of costs for key expense drivers.

Cash management is a key financial focus.

To ensure the long term success of REACH, there will be a continued focus on improvements in customer service and productivity, along with the continued pursuit of growth in non-parent sales and to compete on the core competencies of the business.

REACH has been ranked among the top carriers of international voice traffic in the world as well as Asia Pacific's top IP backbone operator for the 3^rd consecutive year.

The outlook for the Reach businesses has not improved, with continuing heavy price competition for global bandwidth and international voice. As disclosed in contingent liabilities note 8 to the half year financial statements, we have become aware of a potential requirement to support Reach in meeting its financial commitments. Reach's 2004 business plan is currently being finalised.

TelstraClear Financial Summary

The following table shows information about TelstraClear.

Table 30 - TelstraClear Financial Summary

	Half Year Ended 31 December
	2003	2002	2003	2002
	(in A\$ millions)		(in NZ\$ millions)
Total revenue	283	273	321	311
Total opex	300	235	339	349
EBITDA	57	38	65	43
EBIT	(17)	(32)	(18)	(38)
CAPEX	52	47	59	55
EBITDA marqin	20.1%	13.9%	20.1%	13.8%

Amounts presented in NZ\$ have been prepared in accordance with AGAAP. Amounts presented represent amounts included in Telstra's consolidated result.

TelstraClear is the second largest full service carrier in New Zealand with approximately 12% revenue market share.

Revenue growth of 3.2% has been achieved from solid retail growth of 6.2%, offset by rate reductions in the wholesale international market.

Continuing operational efficiencies and improved cash management have reduced opex by 2.9%.

Leadership in Internet Protocol has led to significant corporate customer wins and Wireless Local Loop roll out in Auckland, Rotorua, Napier and Dunedin has increased the ability to reach both the small business and corporate markets.

TelstraClear has achieved and continues to seek improved requlatory and commercial outcomes.

Net borrowing costs

Table 31 - Net borrowing costs

2003	2002	Change	Change
(in \$ millions)
419	523	(104)	(19.9)
(37)	(52)	15	(28.8)
382	471	(89)	(18.9)
27	39	(12)	(30.8)
355	432	(77)	(17.8)
			Half Year Ended 31 December

Net borrowing costs declined for the half year ended 31 December 2003 primarily due to:

costs incurred in the prior year from closeout of interest rate swaps ٠
maturitu of:
O JPY5 billion in May 2003;
O USD\$300 unsecured notes in July 2003; and
O AUD\$204m bonds of which \$192m matured in July and August 2003.
reduced interest received on the PCCW converting note following the reduction to USD \$53 ٠ million in April 2003 from USD \$190 million.

Income Tax Expense

Table 32 - income Tax Expense

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)	%
Income Tax Expense - Reported	874	968	(94)	(9.7)
Less adjustments	97	(25)	122	288.0
Income Tax Expense - underlying	971	943	28	3.0

Reported income tax expense declined by 9.7% due to:

the consolidation of Telstra Multimedia Ltd into the Telstra tax group resulting in an $\bullet$ additional \$58 million reduction to income tax expense following Telstra's adoption of the tax consolidation legislation from July 1 2002 and the resetting of taxable asset values; and
fewer asset and investment sales in the current year.

The reduction in the reported effective tax rate from 45.7% to 27.6% is due to the above mentioned factors and the prior year write down of the investment carrying value in Reach.

Underlying profit before tax increased by 6.0% with underlying income tax expense only increasing by 3.0%. This is mainly due to higher non-deductible expenses in the prior year.

Cash flow

Table 33 - Cash flow data

	Half Year Ended 31 December
	2003	2002	Change	Change
	(in \$ millions)
Net cash provided by operating activities	2,925	2,951	(26)	(0.9)
Net cash used in investing activities	(1,098)	(835)	263	31.5
Free Cash Flow	1,827	2,116	(289)	(13.7)
Net cash used in financing activities	(2, 562)	(1, 818)	744	40.9
Net increase/(decrease) in cash	(735)	298	(1,033)	(346.6)
Free Cash Flow	1,827	2,116	(289)	(13.7)
Adjustment: Large, one off asset or investment sales		570	(570)	(100.0)
Free Cash Flow (excl large, one off asset or investment sales)	1,827	1,546	281	18.2

Free cashflow for the period declined primarily due to the impact of the sale of seven commercial properties in the prior year. After removing the impact of this sale, free cashflow growth is 18.2%, primarily driven by reduced capital expenditure.

Operating cashflow declined primarily due to the increase in company tax paid attributable to increases in the instalment rate and higher taxable income driven by lower tax depreciation deductions.

Reduction in interest paid is due to lower debt levels and prior year closure of interest rate swaps as well as a reduction in GST payments due to lower level of capital expenditure.

Net cash used in financing activities increased due to the share buy back of 238,241,174 million ordinary shares in November 2003.

Table 24 - Net cash used in investing activities

			Half Year Ended 31 December
	2003	2002	Change	Change
		(in \$ millions)		%
Switching	137	230	(93)	(40.4)
Transmission	199	195	4	2.1
Customer access	453	430	23	5.3
Mobile telecommunications networks	143	161	(18)	(11.2)
International telecommunications infrastructure	80	74	6	8.1
Capitalised software	174	311	(137)	(44.1)
Other	225	179	46	25.7
Operating capital expenditure	1,411	1,580	(169)	(10.7)
Capitalised interest included in above	(37)	(52)	15	(28.8)
Capital expenditure excluding capitalised interest	1,374	1,528	(154)	(10.1)
Add: patents, trademarks and licences (including 3G spectrum)	2	2	Ô	0.0
Add: investments	(1)	16	(17)	(93.8)
Capitalised expenditure (excl. int.) and investments	1,375	1,546	(171)	(11.1)
Sale of capital equipment, investments and other	(277)	(711)	434	(61.0)
Net cash used in investing activities	1,098	835	263	31.5
Capital expenditures (including interest) and investments	1,412	1,598	(186)	(11.6)
Domestic core operating capital expenditure ⁽ⁱ⁾	1,295	1,452	(157)	(10.8)

(i) Domestic core operating capital expenditure is operating capital expenditure excluding HKCSL & TelstraClear operating capital expenditure.

Operational capital expenditure for the half year ending December 2003, excluding any investments, declined by 10.7% to \$1.4 billion. The reduction in capital expenditure is due to tighter control over the capital expenditure program as a result of improved processes. The key areas of movement on capital expenditure for the half year include:

increased expenditure on the customer access network (CAN) expenditure due to the continuing ۰ increase in demand for ADSL Broadband technology. The Narrowband program has remained relatively consistent;
decreased expenditure in mobile technologies as the current CDMA 1xRTT deploument program ۰ and government sponsored works near completion. Expenditure on GPRS technology has also reduced because the core network expansion has been completed. This is offset in part by an increased spend in expanding CDMA coverage;
lower domestic switching expenditure due to lower demand for specialised services. Also more $\bullet$ efficient utilisation of existing infrastructure to support high speed products and efficient utilisation of existing headroom to meet customer demand. The lower spend was also due to some major software upgrade programs completed in 02/03; and
reduced expenditure on software development due to improvement in productivity, reduced cycle times and lower overhead capitalisation as the IT transformation begins to take effect.

Reduction of investing capital expenditure is due to the absence and need for a Foxtel equity injection in the first half of the year.

Sale of capital equipment, investments and other reduction includes the sale of IBMGSA, Commander, IT Servers and minor property sales.

Corporate Governance and Board Practices

The Telstra board aims for best practice in the area of corporate governance. This section describes the main corporate governance practices in place during the first half of fiscal 2004. Further information regarding our corporate governance and board practices can be found on our website, http://www.telstra.com.au/communications/corporate information.

The board

Telstra directors are accountable to shareholders for the proper management of Telstra's business and affairs and delegate responsibility for day-to-day management to the Chief Executive Officer (CEO). The board's key responsibilities are to:

establish, monitor and modify Telstra's corporate strategies;
ensure best practice corporate governance;
appoint the CEO and approve succession plans; ٠
monitor the performance of Telstra management;
ensure that appropriate risk management systems, internal control and reporting systems and compliance frameworks are in place and are operating effectively;
monitor financial results;
approve decisions concerning Telstra's capital, including capital restructures and dividend policy; and
comply with the reporting and other requirements of the Telstra Corporation Act.

The board has adopted a formal charter and separate operating principles that detail the role and responsibilities of the board and its members. The Board regularly reviews its performance and the performance of its committees.

Structure of the board

The maximum number of directors provided for by our constitution is 13 and we currently have 12 directors on the board. A casual vacancy to the board may be filled or an additional director appointed, up to the maximum number of directors, by either:

the directors after consulting with the Communications Minister; or
an ordinary resolution of shareholders.

The CEO is an executive director. The chairman, the deputy chairman and other members of the board are all non-executive directors and are independent of management and free of any business or other relationship that could materially interfere with the exercise of their unfettered and independent judgment.

The tenure of the CEO is linked to his executive office, while one third of all other directors are subject to retirement by rotation each year. Directors who retire by rotation may be re-elected. A director appointed by the directors is subject to re-election at the next Annual General Meeting. The board's general policy on board membership for non-executive directors is:

the maximum retirement age is 72 years; and
the maximum tenure is 12 years (ie. usually four terms of three years).

Directors and board committees are able to obtain professional advice independent of management or Telstra's advisers, at Telstra's cost.

A brief biography for each director can be found on our website, www.telstra.com.au/communications/corp/executives.cfm.

Meetings of the board

The board meets for both scheduled meetings and on other occasions to deal with specific matters that require attention between scheduled meetings.

The reqular business of the board includes business investments and strategic matters, governance and compliance, CEO's report, financial reports and, on a rotational basis, business unit reviews. The board also liaises with senior management as required and may consult with other Telstra employees and advisers and seek additional information.

Committees of the board

The board also operates through committees that hold responsibility for particular areas. The two main committees are the Audit Committee and the Appointments and Compensations Committee. Each committee operates in accordance with a written charter, operating principles and Telstra's constitution.

Audit Committee

The Audit Committee is a committee of the board of directors whose primary functions are to:

٠ assist the board in its oversight of the reliability and integrity of accounting policies and financial reporting and disclosure practices:
provide advice to the board on financial statements, due diligence, financial systems integrity and business risks to enable the board to fulfil its fiduciary and stewardship obligations; and
assist the board in establishing and maintaining processes to ensure that there is:
compliance with all applicable laws, regulations and company policies; and $\bullet$
an adequate system of internal control, management of business risks and safequard of $\bullet$ assets.

Subject to the role of the Auditor-General (as explained below), the Audit Committee (not management) is also responsible for approving all audit engagement fees and programs, as well as all non-audit engagements by Telstra's external auditors.

Membership of the Audit Committee

The Audit Committee is comprised of at least three members who must be non-executive directors who are independent of Telstra management and free from any relationship that, in the business judgment of the board, would interfere with the exercise of their independent judgment as a member of the committee. Each member must also have a working familiarity with basic finance and accounting practices.

In addition, the chairman of the Audit Committee must not be the chairman of the board of directors and no director may serve as a member of the committee if such director serves on the audit committees of more than two other public companies.

The members of the Audit Committee during the first half of fiscal 2004 were:

John Stocker (Chairman);
John Ralph: ٠
Charles Macek:
Anthonu Clark; and
Catherine Livingstone.

Meetings of the Audit Committee

The Audit Committee meets at least four times per year or more frequently as circumstances require. Board members are entitled to attend Audit Committee meetings and the committee may ask management, the external auditors and/or others to attend meetings and provide such input and advice as required. The committee may also meet separately with the CEO, management, the internal auditor and the external auditors in relation to matters that it wishes to discuss privately.

Relationship with the external auditor

In accordance with section 36 of the Telstra Act, it is a legislative requirement that the Auditor-General of Australia is the auditor of Telstra Corporation Limited for Australian Corporations Act purposes. The Auditor-General has appointed an agent, Ernst & Young, to assist in performing independent external audit duties at Telstra (Ernst & Young has performed this function since fiscal 2000).

The Audit Committee has the authority and responsibility to select, evaluate and, where appropriate, replace the external auditor for filings outside of Australia. Telstra, through the Audit Committee, has appointed Ernst & Young as its external auditor for filings outside of Australia and in this respect and for the purposes of these audits, Ernst & Young is responsible for financial reporting purposes rather than the Auditor-General.

The Auditor-General, as auditor of Telstra, owes duties to Telstra and its shareholders as a whole. The Auditor-General also owes statutory duties as an independent officer of the Commonwealth. Ernst & Young, as the external auditor appointed by Telstra for filings outside Australia, is accountable to the board of directors, Audit Committee and shareholders.

The Auditor-General and Ernst & Young are authorised to perform all "audit services", being an examination or review of the financial statements of the Company in accordance with the laws and rules of each jurisdiction in which filings are made for the purpose of expressing an opinion on such statements. The Audit Committee approves the provision of audit services as part of the annual approval of the audit plan.

The Auditor-General does not provide non-audit services. Telstra does not engage Ernst & Young to perform any of the following non-audit services:

bookkeeping services and other services related to preparing Telstra's accounting records or financial statements;
financial information system design and implementation services;
appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
actuarial services;
internal audit services;
management functions or human resources;
broker or dealer, investment adviser, or investment banking services; and
legal services or expert services unrelated to the audit.

Telstra Corporation Limited and controlled entities

In addition, Ernst & Young does not provide taxation advice of a strategic or tax planning nature.

All other non-audit services may only be provided by Ernst & Young if the Audit Committee and the Auditor-General have expressly approved the provision of the non-audit service and the performance of the non-audit service will not cause the total annual revenue to Ernst & Young from non-audit work to exceed the aggregate annual amount of Ernst & Young's audit fees. The Audit Committee must not approve the provision of a non-audit service by Ernst & Young if the provision of the service would compromise Ernst & Young's independence.

The Audit Committee expects the Auditor-General and requires Ernst & Young to submit annually to the Audit Committee a formal written statement delineating all relationships between the Auditor-General, Ernst & Young and Telstra or any of its controlled entities. The statement includes a report of all audit and non-audit fees billed by the Auditor-General and Ernst & Young during the most recent fiscal year, a statement of whether the Auditor-General and Ernst & Young are satisfied that the provision of the audit and any non-audit services is compatible with auditor independence and a statement regarding the Auditor-General's and Ernst & Young's internal quality control procedures.

The Audit Committee considers whether Ernst & Young's provision of non-audit services to the Company is compatible with maintaining the independence of Ernst & Young. The Audit Committee also submits annually to the board a formal written report describing any non-audit services rendered by Ernst & Young during the most recent fiscal year, the fees paid for those non-audit services and explaining why the provision of those non-audit services is compatible with auditor independence. If applicable, the Audit Committee recommends that the board take appropriate action in response to the Audit Committee's report to satisfy itself of Ernst & Young's independence.

Subject to the role of the Auditor-General, the Audit Committee will discuss with management the timing and process for implementing a five yearly rotation of the lead audit partner and review partner of Ernst & Young and will consider whether there should be a rotation of the audit firm itself.

Recurring processes

The Audit Committee, on an annual basis:

reviews its charter and operating principles to determine their adequacy for current ۰ circumstances and recommends to the board the formal adoption of the revised charter and operating principles for future operations of the Audit Committee;
meets separately with the internal auditor, the Auditor-General and Ernst & Young, with and without management, to discuss the results of their audits;
considers any report or other disclosures to be included in the Company's annual report or other communications to shareholders on the relationships between the Auditor-General, Ernst & Young and the Company; and
reviews with management, the Auditor-General and Ernst & Young, the financial report to be included in the annual report, including the Auditor-General's and Ernst & Young's responsibilities under generally accepted auditing standards, significant accounting policies, management judgments and accounting estimates and adjustments arising from the audit, and discusses the Auditor General's and Ernst & Young's judgments about the quality, not just the acceptability, of accounting principles as applied in the financial report.

Appointments and Compensation Committee

The Appointments and Compensation Committee (A&CC) is a committee of the board of directors whose primary functions include advising the board on matters regarding the composition and remuneration of the board, remuneration and appointment of the CEO and senior management, Telstra remuneration strategies and practices generally and the performance of the CEO. The A&CC performs the functions of, and is equivalent to, a nomination committee and a remuneration committee.

Membership of the A&CC

The A&CC is comprised of at least three members and all members must be independent non-executive directors, as determined by the board. The members of the A&CC during the first half of fiscal 2004 were:

Robert Mansfield; ٠
John Ralph; and
Donald McGauchie.

In December 2003, Charles Macek was also appointed a member of the A&CC.

Meetings of the A&CC

The A&CC meets at least two times a year or more frequently as required. The A&CC may request any Telstra employee to attend any meeting as it considers appropriate. However, if an employee has a material personal interest in a matter that is being considered at a meeting, he/she must not be present for consideration of that matter.

Business values, code of conduct and other company policies

Telstra has a number of internal operating policies and principles which promote ethical and responsible decision making and timely and balanced disclosure. The board is ultimately responsible for ensuring compliance by Telstra officers and employees with these policies and principles.

Telstra Values and Code of Conduct

We provide quidance to our directors, senior management and employees on the standards of personal and corporate behaviour required of all Telstra officers and employees and how to deal with business issues through our company values and code of conduct policies. Through these policies we reinforce the standards of ethical behaviour we expect from all employees, which are aimed at understanding and complying with the spirit and letter of legal and regulatory standards. We have a mandatory ethics training program for all employees to reinforce these standards. We also provide assistance to employees on the application and interpretation of the Telstra Values and code of conduct policies through employee help lines.

Whistleblowers

We have in place a Telstra Whistleblowing Service and whistleblowing policy which deal with illegal, unethical or improper business behaviour within Telstra. This service and policy provide protection for people who make disclosures, as well as the rights of anyone who may be named or affected by a report. They are also designed to complement existing policies and procedures such as the Telstra code of conduct policy and the fair treatment and equal employment opportunity procedures.

Share Trading Policy

We have in place a share trading policy that prohibits directors, senior management and certain other employees (and their associates) from engaging in short-term trading of our securities (including the acquisition of derivatives and financial and other products issued or created over Telstra's shares by Telstra or any third party). This policy also restricts the buying or selling of our securities to three "window" periods (between 24 hours and 1 month following the release of our annual results, the

release of our half-yearly results and the close of our AGM) and at such other times as the board permits. In addition, directors, senior management and relevant employees must notify the Company Secretary before they or their close relatives buy or sell our securities. Changes to the interests of directors in our securities are, as required by law, notified to the Australian Stock Exchange.

Furthermore, as required by law, buying or selling of our securities is not permitted at any time by any person who possesses price-sensitive information which is not generally available in relation to those securities.

Conflicts of Interest

The Corporations Act and our constitution require directors to disclose any conflicts of interest and to generally abstain from participating in any discussion or voting on matters in which they have a material personal interest. In addition, the board has developed procedures to be followed by a director who believes he or she may have a conflict of interest or material personal interest in a matter.

Continuous disclosure

We have in place a comprehensive continuous disclosure procedure which is reviewed and updated on a reqular basis. The aim of the procedure is to ensure that we release price-sensitive information in a timely fashion to the various stock exchanges on which our shares and debt securities are listed. Our procedure runs as follows:

ultimate management responsibility for continuous disclosure rests with the CEO and the Chief ٠ Financial Officer (CFO);
our Continuous Disclosure Committee (Committee), chaired by the Group General Counsel, advises the CFO and the CEO on disclosure matters. The Committee is responsible for an internal disclosure system which ensures that information that might be disclosable is identified and reviewed quickly. The Committee's membership includes the Group General Counsel, the Managing Director - Corporate Relations, the General Counsel - Finance & Administration, the Director - Business and Finance Services, the General Manager - Investor Relations and the Company Secretary;
senior management (including the CEO, the CFO, all other Group Managing Directors and their direct reports, all group financial controllers and all legal and regulatory counsel) must immediately inform the Committee of any potentially price-sensitive information or proposal as soon as they become aware of it;
a collective recommendation regarding disclosure is then made to the CFO and the CEO. If the matter is disclosable, an announcement is prepared and immediately sent via the Company Secretary's office electronically to all relevant stock exchanges.

We implement several practices internally to reinforce the importance of Telstra's continuous disclosure obligations and the need to keep the Committee informed about potentially disclosable matters. These practices are reviewed reqularly and include the following:

every director is made aware of our continuous disclosure obligations upon taking office and each member of senior management undertakes training with the General Counsel - Finance and Administration, in relation to Telstra's continuous disclosure obligations;
a weekly e-mail is sent to all senior management reminding them to notify the Committee immediately if they become aware of any potentially price-sensitive information or proposals;
the Committee maintains a list of issues which, although not yet disclosable, are monitored in case they become disclosable;
all proposed media releases and external speeches and presentations to be made by senior management are reviewed by internal legal counsel to determine whether they should be disclosed:
an internal policy is in place governing communications with and provision of information to shareholders, brokers, analysts and financial media;
the Legal and Requlatory Compliance and Risk Report prepared for the Audit Committee every quarter includes reporting on continuous disclosure; and
the Office of the Company Secretary maintains a record of all market announcements made. The announcements are also posted on our website after market release is confirmed.

Legal and Regulatory Compliance

We are committed to conducting our business in compliance with all of our legal and regulatory obligations. Compliance with these obligations is not just a legal requirement but is integral to our commitment to our customers, employees, shareholders and the community.

Whilst we have always had in place systems to ensure compliance with our legal and requlatory obligations, we have a more formal compliance program in place. Under this compliance program, each business unit has a plan setting out how they intend to achieve legal and regulatory compliance in their operations through initiatives such as training, dissemination of information and monitoring of compliance outcomes. A Legal and Regulatory Compliance and Risk Report is also prepared for the Audit Committee every quarter. This report provides the Audit Committee with an oversight of the initiatives being taken to achieve legal and regulatory compliance and information on the significant legal cases in which Telstra is currently involved.

Business risk management

Through our policies on risk oversight and management, we are committed to the management of risks throughout our operations to protect our employees, the environment, assets, markets, earnings, reputation and shareholder value. The Audit Committee provides advice to the board on the status of business risks to Telstra through an integrated risk management and assurance function.

The risk management and assurance function has promoted a common language and approach used by business units in identifying, measuring and prioritising business risks. The Audit Committee receives reports independently prepared by the Risk Management and Assurance Group, on significant business risks and the strategies to manage these risks.

In addition, we use risk financing techniques including insurance to reduce the financial impact of uncontrollable and catastrophic risks. A central treasury function manages the financial exposures to reduce the volatility of cash flows and asset values arising from interest rate and exchange rate movements in accordance with board approved limits.

Shareholder Communications Stratequ

We have implemented a number of initiatives to promote effective communication with our shareholders. These include the following:

maintaining an investor relations website; ٠
placing all relevant announcements made to the market and related information on our website:
webcasting certain events such as financial market briefings and our Annual General Meeting; and
using electronic communications to advise certain investors of significant matters that may be of interest to them.

Other Considerations

While the Commonwealth owns more than 50% of the shares in Telstra, we will remain subject to various ministerial and other controls to which other publicly listed companies are not subject. This includes a ministerial power to give us written directions that the Communications Minister believes are in the public interest (section 9 of the Telstra Corporation Act). Within these constraints, the board continues to strive to achieve best corporate governance practice.

Review of Corporate Governance and Board Practices

Telstra is committed to continually reviewing and updating its practices. Whenever any new corporate governance requirements and quidance notes are issued by the New York Stock Exchange, the US Securities and Exchange Commission or the ASX, the board evaluates and, where appropriate, implements the relevant proposals to ensure that we continue to aim to achieve best practice in corporate governance.

Adoption of International Financial Reporting Accounting Standards

The Australian Financial Reporting Council (FRC) has determined that Australian entities reporting under the Corporations Act 2001 must prepare their financial statements under International Financial Reporting Standards (IFRS) as adopted by the Australian Accounting Standards Board from 1 January 2005. This will involve completing a first time set of financial statements under IFRS for the half-year ended 31 December 2005 and for the financial year ended 30 June 2006. Comparatives will also be remeasured under IFRS and restated for the half-year ending 31 December 2004 and the financial years ending 30 June 2005 and 30 June 2004.

The Company has established a project team, monitored by a governance committee, to manage the convergence to IFRS and ensure we are prepared to report for the first time under IFRS in accordance with the timetable outlined above. Adoption of IFRS may result in changes to our accounting policies, procedures and financial reporting systems. We are currently evaluating the potential impact of applying IFRS on our statement of financial position and performance. At this stage of the project, it is not possible to quantify the potential impact of convergence to IFRS.

Application of critical accounting policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Australia. The preparation of our financial statements requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgements including those related to customer incentives, bad debts, inventories, investments, intangible assets, income taxes, financing activities, restructuring costs, retirement benefits, contingencies and litigation. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. This forms the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates in the event that our assumptions prove to be incorrect.

Our accounting policies have been developed over many years as the telecommunications industry and Generally Accepted Accounting Principles or "GAAP" have evolved. As our financial statements are prepared under Australian GAAP ("AGAAP") our accounting policies are necessarily compliant with all aspects of AGAAP.

In developing accounting policies, in addition to AGAAP requirements, we also consider telecommunications industry practice in other countries. Further to this, where there is no conflict with AGAAP we also align our accounting policies with USGAAP. This reduces the number of AGAAP/ USGAAP reconciliation differences required to be adjusted in note 11 to our half year financial statements.

In all material respects our accounting policies are applied consistently across the Telstra group of companies. To the extent that the accounting policies of entities we account for under the equity accounting method differ materially from ours, adjustments are made to the results of those entities to align them with our accounting policies. The critical accounting policies discussed below generally apply to all segments of the company.

The following are the critical accounting policies we apply in producing our AGAAP financial statements.

Carrying value of investments, goodwill and other intangible assets

We assess the carrying value of our investments in controlled entities, associates, partnerships and other investments, including acquired goodwill and other intangible assets, for impairment at least biannually based on their recoverable amount. Our assessments vary depending on the nature of the particular investment concerned and generally include methodologies such as discounted cash flow analysis, review of comparable entities' revenue or earnings multiples, or in the case of listed investees, monitoring of share prices. These methodologies sometimes rely on factors such as forecasts of future performance and long-term growth rates of the investee, selection of discount rates and appropriate risk weightings, and determination of appropriate comparable entities and multiples. If these forecasts and assumptions prove to be incorrect or circumstances change, we may be required to write down our investments.

As a result of these assessments, we have written down the carrying value of our investment in Reach which gave rise to a charge of \$965 million for the half year ended 31 December 2002. No such write downs occurred during the half year ended 31 December 2003.

Based on our most recent assessment of recoverable amount we believe that as at 31 December 2003 our investments, goodwill and other intangible assets are recoverable at the amounts at which they are stated in our half year financial statements.

Capitalisation of costs

When we incur costs, we classify them as either operating expenses or capital costs. We expense operating expenses to the statement of financial performance as they are incurred. We only capitalise costs where we consider that they will generate future economic benefits. Capital costs are recorded as assets and shown in our statement of financial position based on the asset class considered most appropriate to those costs. Management judgement is used in determining costs to be capitalised in relation to the following major asset categories:

Deferred expenditure ٠

We defer significant items of expenditure to the extent that they are recoverable from future revenue and will contribute to our future earning capacity. Expenditure is not deferred if it only relates to revenue that has already been recorded. We amortise this deferred expenditure over the average period in which the related benefits are expected to be realised (generally 5 years). Each year we also review expenditure deferred in previous periods to determine the amount, if any, that is no longer recoverable. The amount of deferred expenditure that is no longer recoverable is written off as an expense in the statement of financial performance. Our deferred expenditure after amortisation, including deferred mobile handset subsidies, was A\$906 million at 31 December 2003 and A\$719 million at 31 December 2002.

Capitalisation of software assets developed for internal use $\bullet$

We capitalise direct costs associated with the development of network and business software for internal use where we regard the success of a project to be probable. Management applies judgement to assess this probability.

We capitalise costs such as external direct costs of materials and services consumed, payroll and direct payroll-related costs for employees and contractors directly associated with a project and borrowing costs incurred while developing the software.

At 31 December 2003 our capitalised software assets for internal use, after amortisation, were A\$1,923 million and A\$1,974 million at 31 December 2002. If management has incorrectly assessed the probability of the success of a project we may be required to write down the value of the software assets we have recorded.

Constructed property, plant and equipment

The cost of our constructed property, plant and equipment includes purchased materials, direct labour, direct and indirect overheads, and borrowing costs. Under AGAAP, indirect overheads and borrowing costs cannot be directly attributed to constructed assets. As a result of this, the allocation of these costs between capital assets and operating expenses involves a degree of management judgement.

Indirect overheads are generally attributable to the construction of assets and do not usually vary with construction activity volumes. Examples of indirect costs include planning and design of construction projects and the management of construction contracts. Where the role of a part of the work force is predominantly management, design and construction of communication assets, we allocate all indirect overheads associated with the operations and management of that work force to the projects undertaken by them. Where some projects undertaken by an organisational area do not relate to capital projects, indirect overheads are only allocated to capital projects based on the proportion that capital projects make up of the total costs of that organisational area. The remaining costs of that work force are expensed as incurred.

Borrowing costs are capitalised on all assets constructed. We do not specifically borrow to fund

construction of assets due to the constant nature of our construction process. As a result the allocation of borrowing costs to these assets is general and does not reflect funds specifically borrowed for each asset.

Carrying value and depreciation of property, plant and equipment assets and software assets developed for internal use

Property, plant and equipment assets made up 66.5% of our total assets at 31 December 2003 and 62.7% at 31 December 2002. We therefore consider our accounting policies around the carrying value and depreciation of these assets to be critical. We have adopted the cost basis of recording our property, plant and equipment, rather than the fair value basis. We assess the recoverable amounts of our fixed assets bi-annually, based on expected future net cash flows discounted to their net present value.

Where a group of assets can be shown to be working together to generate net cash flows, this assessment is performed over the group of assets, rather than individually. If our estimates of future cash flows prove to be incorrect we may be required to write down assets in the future. In applying this policy we have not written down significant amounts of property, plant and equipment assets during the past three years.

In addition, we assess the appropriateness of the service lives of our property, plant and equipment assets on an annual basis. This includes a comparison against our service life estimates and international trends for other telecommunications companies. In relation to communications assets this assessment includes a determination of when the asset may be superseded technologically. If our assessments of useful life prove to be incorrect we may incur either higher or lower depreciation charges in the future, or in certain circumstances, be required to write down these assets.

Software developed for internal use is an exception to the above annual revision of service lives. With reference to global industry practice it was judged that for administrative simplicity, internally developed software would, on average, have a useful life of 6 years (5 years in 2002 and 2001).

Doubtful debts

We maintain provisions for doubtful debts based on an estimate of the inability of our customers to pay amounts due to us for services rendered to them. These provisions are based on historical trends and management's assessment of general economic conditions. If the financial condition of our customers deteriorates these provisions may not be sufficient and may lead to an increase in bad and doubtful debt expenses. We have no reason to believe that the provisions we have raised will not sufficiently cover bad debts arising out of the receivables we currently have on hand.

Our provision for doubtful debts was A\$202 million at 31 December 2003 and A\$201 million at 31 December 2002. Trade debtors before any provision for doubtful debts were A\$2,379 million at 31 December 2003 A\$2,389 million at 31 December 2002.

Telstra Corporation Limited (ABN 033 051 775 556)
Normalisation Schedule
Half Year Ended 31 December 2003

This schedule details the adjustments made to the reported results for the half years 31 December 2003 and 2002 to arrive at the underlying business performance.

\$m	December	А Asset	Β		December	December 02/03	А	c	Ð		December	Reported	Underlying	Underlying
	03/04 Reported	Investment	Tax consolidation		03/04 Underlying	Reported	Asset /		Reach		02/03 Underlying	Growth ₩	Growth %	M/ment
		Sales	benefit	Total Adjust.			Investment Sales Diminution		contract exit Total Adjust.
PSTN products Basic access	1.610				1,610	1,556					1,556	3.5%	3.5%	54
Local calls	778				778	796					796	(2.3%)	$(2.3\%)$	(18)
PSTN value added services	134				134	141					141	$(5.0\%)$	$(5.0\%)$	(7)
National long distance calls Fixed to mobile	578 808				578 808	582 753					582 753	(0.7%) 7.3%	(0.7% 7.3%	(4) 55
International direct	139				139	161					161	(13.7%	(13.7%	(22)
Total PSTN products	4,047				4,047	3,989					3,989	1.5%	1.5%	58
Mobiles Mobile services	1,733				1,733	1,632					1,632	6.2%	6.2%	101
Mobile handsets	186				186	172					172	8.1%	8.1%	14
Total Mobiles	1,919				1,919	1,804					1,804	6.4%	6.4%	115
Data and Internet Data	509				509	526					526	(3.2%)	(3.2%)	(17)
ISDN (Access and Calls)	471				471	496					496	$(5.0\%)$	$(5.0\%)$	(25)
Internet and IP solutions Total Data and Internet	463 1,443				463 1,443	391 1,413					391 1,413	18.4% 2.1%	18.4% 2.1%	-72 30
Sensis (advertising and directories)	769				769	731					731	5.2%	5.2%	38
Intercarrier services	583				583	591					591	$(1.4\%)$	$(1.4\%)$	(8)
Inbound calling products Solutions management	238 233				238 233	250 239					250 239	(4.8%) (2.5%)	$(4.8\%)$ (2.5%)	(12) (6)
Other Controlled Entities (excluding HK CSL & TelstraClear)	79				79	117					117	(32.5%)	(32.5%)	(38)
HK CSL TelstraClear	377 282				377 282	484 273					484 273	$(22.1\%)$ 3.3%	$(22.1\%)$ 3.3%	(107)
Customer premises equipment	92				92	100					100	$(8.0\%)$	$(8.0\%)$	(8)
Payphones Other sales & service	72 322				72	75 402					75	$(4.0\%)$	$(4.0\%)$ (19.9%	(3)
Sales revenue	10,456	-0	$^{\circ}$		322 10,456	10,468	$\mathbf{0}$	-0	$^{\circ}$		402 10,468	(19.9% $(0.1\%)$	$(0.1\%)$	(80) (12)

Other revenue Total revenue	370 10.826	(276) (276)	$^{\circ}$	(276) (276)	-94 10,550	899 11,367	(788) (788)	$\Omega$	-6	(788) (788)	-111 10,579	(58.8% (4.8%	$(15.3\%)$ (0.3%	(17) (29)

Expenses Labour	1,635				1,635	1,624					1,624	0.7%	0.7%	11
Goods and services purchased	1,690				1,690	2,011			(65)	(65)	1,946	$(16.0\%)$	$(13.2\%)$	(256)
Other expenses	2.148	(218)		(218)	1,930	2,510	(593)	(3)		(596)	1,914	(14.4%	0.8%	16
Expenses before equity acc/depn/amort/interest Share of net loss from associates and joint venture entities	5,473 -29	(218)	$^{\circ}$	(218) - 6	5,255 29	6,145 969	(593)	(3) (965)	(65) 24	(661) (941)	5,484 28	$(10.9\%)$ $(97.0\%)$	(4.2% 3.6%	(229)
Total Expenses before depn/amort/interest	5.502	(218)	-0	(218)	5,284	7.114	(593)	(968)	(41)	(1,602)	5,512	(22.7%	(4.1%	(228)
EBITDA	5,324	(58)	$^{\circ}$	(58)	5,266	4,253	(195)	968	41	814	5,067	25.2%	3.9%	199
EBITDA excl associates/joint ventures	5,353	(58)	$^{\circ}$	(58)	5,295	5,222	(195)	-3	65	(127)	5,095	2.5%	3.9%	200
Depreciation	1.412				1,412	1,346					1,346	4.9%	4.9%	66
Amortisation (excl goodwill) Goodwill amortisation	330 60				330 60	300 57					300 57	10.0% 5.3%	10.0% 5.3%	30
Total depreciation/amortisation	1.802	-0	$^{\circ}$		1,802	1,703	$\theta$	$^{\circ}$	$\theta$		1,703	5.8%	5.8%	99
Total expenses	7,304	(218)	$^{\circ}$	(218)	7,086	8,817	(593)	(968)	(41)	(1,602)	7,215	(17.2%)	$(1.8\%)$	(129)
EBIT	3,522	(58)	$^{\circ}$	(58)	3,464	2,550	(195)	968	-41	814	3,364	38.1%	3.0%	100
EBIT excl associates/joint ventures	3,551	(58)	$\bullet$	(58)	3,493	3,519	(195)	-3	65	(127)	3,392	0.9%	3.0%	101
$(*)$ Net borrowing costs	355				355	432					432	$(17.8\%)$	$(17.8\%)$	(77)
Profit before tax	3,167	(58)	$^{\circ}$	(58)	3,109	2,118	(195)	968	41	814	2,932	49.5%	6.0%	177
( Tax (excl. unusuals effect)	874	39	58	97	971	968	(35)		$10 -$	(25)	943	(9.7%)	3.0%	28
Profit after tax (bef. Outside equity interests)	2,293	(97)	(58)	(155)	2,138	1,150	(160)	968	31	839	1,989	99.4%	7.5%	149
Outside equity interests						(34)			$^{\circ}$		(34)	N/M	N/M	34
Profit after tax Effective tax rate	2,293 27.6%	(97)	(58)	(155)	2,138 31.2%	1,184 45.7%	(160)	968	31	839	2,023 32.2%	93.7% $(18.1\%)$	5.7% $(1.0\%)$	115
EBITDA margin on sales revenue	50.9%				50.4%	40.6%					48.4%	10.3%	2.0%
EBIT margin on sales revenue	33.7%				33.1%	24.4%					32.1%	9.3%	1.0%
Earnings per share ⁽⁸⁾	17.9				16.7	9.2					15.7	94.6%	6.3%

Note: (*) Underlying interest & tax calculations represent management's best estimates
N/M refers to not meaningful

(i) 2002 EPS is based on 12,866m shares, 2003 EPS uses the weighted average number of shares on issue of 12,817m shares as a result of the share buyback completed on 24 November 2003.

Adjustments to derive Underlying results

31 December 2003

(A) Asset Sales (\$m)	NBV Proceeds		Profit	Tax Effect @30%	Profit after
Investments Commander Communications Ltd IBMGSA IBMGSA exit costs	24 154	16 5 130	8 149 (130)	if applicable 2 u. (39)	tax 6 149 (91)
Sale of listed & other invest. Other	178	151	27	(37) u.	64
Total investment sales	179	151	28	(37)	65
Property sales Fleet Other Plant & Equipment Total Asset sales Total Asset/Investment Sales	42 13 42 97 276	6 17 44 67 218	36 $\langle 4 \rangle$ (2) 30 58	٠ (2) (2) (39)	36 (4) 32 97

31 December 2002

(A) Asset Sales (\$m)
	Proceeds	NBV.	Profit
Investments
Mobitel	17	12	5
DataOne	3	Ω	3
New Skies - partial sale	6	10	(4)
Various	1	(1)	2
Sale of listed & other invest.	27	21	6
Sale of PABX business	2	(6)	8
Sale of Cambodian Internet Business	2	0	2
Total investment sales	31	15	16
Property sales	680	510	170
Fleet	20	22	(2)
Other Plant & Equipment	57	46	11
Total Asset sales	757	578	179
Total Asset/Investment Sales	788	593	195

(B) Tax Consolidation Benefit

lncome tax expense for half year ended 31 December 2003 includes a benefit of \$58 million relating to our election to form a tax
consolidation group from 1 July 2002. Under this legislation, certain tax values of a subsid

(C) Diminution (\$m)	Diminution	Associates	Total
PT Mitra Reach	٩ ьz	965	3 965
Total	$\sim$	965	968

(D) Reach contract exit (\$m)

Contract exit payments made to Reach Ltd	(65)
Reach equity accounted losses reflecting the exit payments.	24
Total	141

5 3 4) 2	Tax Effect @30% if applicable Ű Ű Ű Ű	Profit after tax 5 3 (4) $\overline{2}$
6 8 2	Ű Ű Ű	6 $\frac{8}{2}$
6	Ő	16
Ó $\frac{2}{1}$ $\frac{1}{2}$ $\frac{1}{95}$	11 (1) $\frac{25}{35}$ $\frac{35}{35}$	159 (1) (14) 144 160

Telstra Corporation Limited (ABN 033 051 775 556) Half Year Ended 31 December 2003

Summary Underlying" Quarterly Data	Q1	QTRPCP	Q2	QTR PCP	Half 1	YTD PCP	Q3	OTR PCP	Q ₄	QTR PCP	Full Year	YTD PCP	Q1	QTR PCP	Q2	OTRPCP	Half 1	YTD PCP
	Sep-02	$Sep-02$	Dec-02	Dec-02	Dec-02	Dec-02	Маг-03	Mar-03	Jun-03	Jun-03	Jun-03	Jun-03	$Sep-03$	Sep-03	Dec-03	Dec-03	Dec-03	Dec-03
kevenue
PSTN products
Basic access	765	10.2%	791	9.4%	1,556	9.8%	778	8.2%	748	0.7%	3,083	7.1%	791	3.4%	819	3.5%	1,610	3.5%
Local calls	397	$(13.0\%$	399	(6.3%	796	(8.7%)	384	(0.3%	387	0.3%	1,567	(4.6%)	394	(0.8%	384	(3.8%)	778	(2.3%)
PSTN value added services	68	3.0%	74	12.1%	141	6.8%	71.	9.2%	68	6.3%	280	6.9%	68	0.0%	66	$(10.8\%)$	134	$(5.0\%)$
National long distance calls	285	(6.3%	298	(2.9%	582	(4.7%	288	(6.2%	292	$(2.0\%)$	I.162	(4.4%)	292	2.5%	286	(4.0%	578	(0.7%)
Fixed to mobile	371	7.5%	382	5.5%	753	6.5%	375	5.9%	389	8.7%	1,517	6.9%	402	8.4%	407	6.5%	808	7.3%
International direct	80	(9.1%	86	(7.0%	161	(6.9%	73	(9.9%	71	(12.3%	307	(8.6%	68	(15.6%	71	(12.3%	139	(13.7%)
Total PSTN products	1,966	1.2%	2,024	2.7%	3,989	2.0%	1,969	3.0%	1,955	1.3%	7,916	2.1%	2,015	2.5%	2,033	0.4%	4,047	1.5%
Mobiles
Mobile services	817	2.9%	815	(2.6%	1,632	0.1%	775	(1.4%	820	(0.6%	3,227	(0.5%)	845	3.4%	889	9.1%	1,733	6.2%
Mobile handsets	69	\$6.8%	102	37.8%	172	45.8%	104	108.0%	110	89.7%	386	76.8%	97	40.6%	89	(12.7%	186	8.1%
Mobiles	886	5.7%	917	0.7%	1,804	3.1%	879	5.1%	930	5.3%	3,613	4.2%	942	6.3%	978	6.7%	1,919	6.4%
Data and internet
Data	264	(4.3%	262	(2.2%	526	(3.5%)	261	7.4%	267	1.5%	E.053	0.2%	260	(L.5%	249	$(5.0\%)$	509	$(3.2\%)$
ISDN (Access and Calls)	255	(T.9%	241	$(7.7\%$	496	(8.0%	227	(10.3%	227	$(7.7\%$	951	(8.3%)	237	(7.1%	233	(3.3%)	471	$(5.0\%)$
Internet and IP solutions	190	46.2%	201	37.7%	391	42.7%	I96	30.7%	227	25.4%	814	34.5%	235	23.7%	228	13.4%	463	18.4%
Total Data and Internet	709	3.8%	704	4.3%	1,413	4.1%	684	5.9%	721	4.5%	2,818	4.6%	732	3.2%	710	0.9%	1,443	$2.1\%$
Sensis (advertising and directories)	169	13.4%	562	2.4%	731	4.7%	214	18.9%	273	5.8%	1,217	7.2%	185	9.5%	584	3.9%	769	5.2%
intercarrier services	300	7.9%	292	0.7%	591	4.0%	280	2.6%	286	1.1%	L.157	2.9%	287	(4.3%	295	1.0%	583	(1.4%)
inbound calling products	126	(17.1%	124	(15.6%	250	${16.4%$	122	(12.9%	122	0.0%	494	(32.1%)	I19	(5.6%)	119	$(4.0\%)$	238	(4.8%)
Solutions management Various controlled entities (excl HK CSL & TClear)	114 63	2.7% (41.1%	125 53	13.6% (51.8%	239 117	8.1% (46.1%	113 SI	5.6% (49.0%	135 SS.	(9.4% (32.9%	487 221	2.1% (44.6%)	I26 31	10.5% (50.8%)	107 48	(14.4%) (9.4%	233 79	(2.5%) (32.5%)

Hong Kong CSL TelstraClear	244 $\sim$	(17.0% 0.0%	240 $\sim$	(14.9% 0.0%	484 $\sim$	(16.1% 0.0%	243 $\sim$	(7.3%) 0.0%	181 $\sim$	(25.2% 0.0%	908 $\sim$	(15.9% 0.0%	191 142	(21.7% 2.9%	186 140	(22.5%) 3.7%	377 282	(22.1%) 3.3%
Customer premises equipment	49	(3.9%	51	(3.8%	100	(3.8%)	49.	11.4%	45	(21.1%)	194	(4.9%)	46	(6.1%)	46	(9.8%	92	$(8.0\%)$
Payphones	37	(2.6%	38	[2.6%]	75	(3.8%)	38	(2.6%	35	(5.4%	I48	(3.9%	36	[2.7%]	37	$(2.6\%)$	T ₂	$(4.0\%)$
Other sales & service	205	19.9%	197	(23.2%	402	(4.5%	182	12.3%	190	(12.0%	774	(3.0%	180	(12.2%	141	(28.4%	322	(19.9%
Sales revenue	4,868	1.1%	5,327	(3.1%	10,195	(0.1%	4,824	2.6%	4,928	(0.4%	19,947	0.5%	5,032	0.5%	5,424	(0.7%	10,456	(0.1%
Other revenue	54	$(46.0\%$	-57	5.6%	111	(27.9%	47	(7.8%	104	20.9%	262	$(10.0\%)$	52	(3.7%)	42	$(26.3\%)$	94	(15.3%)
Total revenue	4,922	0.1%	5,384	(3.0%	10,306	(0.5%	4,871	2.5%	5,032	(0.1%	20,209	0.3%	5,084	0.5%	5,466	(1.0%	10,550	(0.3%)

Selected statistical data"
Basic access lines in service	10.39	(0.6%	10.34	(0.6%	10.34	(0.6%	10.34	(0.9%	10.31	(0.9%	10.31	(0.9%)	10.31	(0.7%	10.26	(0.8%	10.26	(0.8%
Local calis (number of calls)	2,527	(3.9%	2,491	(4.8%	5,019	(4.3%	2,395	(4.3%)	2,380	(5.6%	9,794	(4.6%)	2,435	(3.7%	2,396	(3.8%)	4,831	(3.7%)
National long distance minutes	2,346	3.4%	2,310	0.1%	4,656	1.7%	2,278	(0.3%)	2,227	(3.5%	9,161	(0.1%	2,193	(6.5%	2,150	(6.9%	4,343	(6.7%)
Fixed to mobile minutes	970	8.1%	985	5.3%	L,955	6.7%	990	7.6%	999	6.4%	3,944	6.9%	1,041	7.3%	1,058	7.5%	2,099	7.4%
international direct minutes	191	(2.7%	196	(3.7%	387	(2.9%)	180	(5.9%	173	(9.5%	740	(5.2%)	165	(13.4%	173	$(11.9\%)$	338	(12.7%
Mobile voice telephone minutes	1,270	$T_{\rm t}$ T $\%$	1,323	5.5%	2,594	6.3%	1.289	7.9%	1,372	12.7%	5,255	8.3%	1,473	15.9%	1,538	16.2%	3,011	16.1%
Short Message Service (SMS) (number of messages)	290	26.5%	342	35.0%	632	31.0%	380	42.0%	401	53.9%	1,413	39.8%	432	49.6%	910	44.0%	910	44.0%
Mobile services in operation (thousands)"	5,884	8.7%	6,098	8.2%	6,098	8.2%	6,338	9.3%	6,569	10.6%	6,569	10.6%	6,720	14.2%	6,985	14.5%	6,985	14.5%
SDN access (basic lines equivalents) (thousands).	1,225	(1.3%	1,190	(4.5%	I.190	(4.5%)	1,199	(2.4%	1,213	(4.4%	1,213	(4.4%)	I,216	(L.2%	1,224	2.9%	1,224	2.8%
Foxtel SIOs (thousands)	805	15.4%	809	4.5%	809	4.5%	816	2.8%	836	4.5%	836	4.5%	849	5.6%	862	6.6%	862	6.6%
Broadband subscribers (thousands)	206	120.1%	244	121.7%	244	121.7%	290	125.8%	361	113.6%	361	113.6%	439	113.1%	507	167.8%	507	107.8%
Narrowband subscribers (thousands)	1,084	15.4%	1,103	7.1%	I.103	7.1%	1,134	6.7%	1,158	9.6%	1,158	9.7%	1,180	8.9%	1,178	6.8%	1,178	6.8%
Total On-line subscribers (thousands)	1.290	24.4%	1.347	18.2%	1,347	18.2%	1.424	19.5%	1.519	24.0%	I.519	24.0%	1.619	25.5%	1,685	25.1%	1,685	25.1%

Footnotes:

(i) Fiscal 2002/2003 and its comparative year exclude TelstraClear, Keycorp and asset sales from the underlying revenue base. Fiscal 2003/2004 and its comparative year exclude asset sales from the revenue underlying base.

(ii) All percentages relate to growth on prior corresponding period.

(iii) Mobile Services in Operation(SIOs) are net of deactivated prepaid customers who were outside the recharge only period.

(iv) Statistical data is represented in millions unless otherwise stated.

Product definitions have been reviewed and where necessary comparatives have been adjusted to align with the new definitions.

Telstra Corporation Limited (ABN 033 051 775 556)

Half Year Ended 31 December 2003

Product reconciliation to align comparative figures with the reported format for year ended 31 December 2003

	Underlying previously released	Underlying New Hierarchy
	Dec-02	Dec-02	Movement		Amount		Amount
PSTN products	\$m	\$m	\$m	Included	\$m\$	Excluded	\$m
Basic access	1,559	1,556	(3)			Fax Duet	$\overline{3}$

Local calls	796	796	$\blacksquare$
PSTN value added services	138	141		3 Fax Duet	ব
National long distance calls	582	582	$\cdot$
Fixed to mobile	753	753	$\mathbf{r}$
International direct	162	161	(1)			Miscellaneous	$\mathbf{1}$
Total PSTN products	3,990	3,989	$\overline{1}$
Mobiles	1,802	1,804		2 Mobile satellite equipment	Z.
Data and Internet
Data	525	526		1 Miscellaneous	ŧ
ISDN (Access and Calls)	496	496	$\mathbf{r}$
Internet and IP solutions	389	391		2 DSL Layer 2 and 3S	z
Total Data and Internet	1,410	1,413	3
Sensis (advertising and directories)	731	731	$\blacksquare$
Intercarrier services	593	591	$\overline{(2)}$			DSL Layer 2 and 35	$\overline{2}$
Inbound calling products	250	250	$\blacksquare$
Solutions management	239	239	$\bullet$
Various controlled entities	698	874		176 TelstraClear now included in underlying ¹ results		273 NDC	97
Customer premises equipment	105	100	(5)			Mobile satellite equipment PABX	2 3
Payphones	75	75	$\overline{a}$
Other sales & service	302	402		100 NDC	97
				PABX	3
Sales revenue	10,195	10,468		273 TelstraClear now included in underlying results	273
Other revenue	111	111
Total revenue	10,306	10,579		273 TelstraClear now included in underlying results	273

i Underfying turnbers exclude Asset and Investment sales

Statement of Financial Position - detail

		Half Year Ended 31 December
	2003	2002	Change	Change
		(in \$ millions)		%
Current Assets
Cash Assets	559	1,365	(806)	(59.0)
Receivables	3,656	3,875	(219)	(5.7)
Inventories	239	252	(13)	(5.2)
Other Assets	674	553	121	21.9
Total Current Assets	5,128	6,045	(917)	(15.2)
Non-Current Assets
Receivables	596	1,274	(678)	(53.2)
Inventories	14	6	8	133.3
Investments - accounted for using the equity method	113	240	(127)	(52.9)
Investments - other	80	97	(17)	(17.5)
Property, Plant and Equipment	22,666	23,068	(402)	(1.7)
Future Income Tax Benefit	0	60	(60)	(100.0)
Intangibles - goodwill	1,958	2,006	(48)	(2.4)
Intangibles - other	1,050	1,298	(248)	(19.1)
Other Assets	2,428	2,719	(291)	(10.7)
Total Non-Current Assets	28,905	30,768	(1, 863)	(6.1)
Total Assets	34,033	36,813	(2,780)	(7.6)
Current Liabilities
Payables	1,944	2,377	(433)	(18.2)
Interest-bearing liabilities (borrowings)	1,488	2,080	(591)	(28.5)
Income Tax Payable	356	599	(243)	(40.6)
Provisions	371	381	(10)	(2.6)
Revenue Received in Advance	864	840	24	2.9
Total Current Liabilities	5,023	6,277	(1, 254)	(20.0)
Non-Current Liabilities
Payables	42	91	(49)	(53.8)
Interest-bearing liabilities (borrowings)	10,796	11,857	(1,061)	(8.9)
Provisions	762	843	(81)	(9.6)
Provision for Deferred Tax	1,895	2,077	(182)	(8.8)
Revenue Received in Advance	405	433	(28)	(6.5)
Total Non-Current Liabilities	13,900	15,301	(1,401)	(9.2)
Total Liabilities	18,923	21,578	(2,655)	(12.3)
Net Assets	15.110	15.235	(125)	(0.8)
Shareholders Equity
Contributed Equity	6,073	6,433	(360)	(5.6)
Reserves	(205)	7	(212)	N/M
Retained Profits	9,240	8,846	394	4,5
Shareholders' equity available to Telstra Entity Shareholders	15,108	15,286	(178)	(1.2)
Outside Equity Interest
Contributed Equity	1	206	(204)	N/M
Reserves	$\left( 0\right)$	28	(29)	N/M
Retained Profits	1	(285)	286	NΜ
Total Outside Equity Interest	$\overline{2}$	(51)	53.	N/M
Total Shareholders Equity	15,110	15,235	(125)	(0.8)

Media Release

12 February 2004

Telstra generates solid half year net profit

Telstra today announced a solid half-year result with 1.8 per cent domestic revenue growth, 5.7 per cent underlying net profit after tax growth and strong cash flows.

The reported net profit increased by \$1.1 billion to \$2.3 billion, up 93.7 per cent as compared with the same period last year in which the non cash writedown of the company's investment in Reach occurred.

CEO, Dr Ziggy Switkowski, said the reported net profit result, assisted by a strong focus on cost reduction, enabled earnings per share to grow by 94.6 per cent to 17.9 cents.

Dr Switkowski said the Telstra Board of Directors announced an increased interim ordinary dividend of 13 cents, an increase of one cent on the prior corresponding half, bringing the payment to shareholders for the half to \$1.6 billion, an increase of 8 per cent on the previous interim ordinary dividend.

He said he was pleased with the progress and momentum of the cost reduction program which saw total underlying expenses decline in the period by 1.8 per cent to \$7.1 billion. He emphasised that the program to take out up to \$800 million of costs over two to three years was on target.

"Our core domestic CAPEX spend, which reduced to \$1.3 billion for the half, and our cost reduction program have been carefully managed so as not to compromise service improvement nor investments in growth opportunities.

"As a result, free cash flow was up 18 per cent to \$1.8 billion (after adjusting for large asset sales). The total net operating cash flow generated in the half was \$2.9 billion reflecting the strength of Telstra's operations," he said.

Dr Switkowski said Telstra's mobile operations had an encouraging half year of performance achieving nearly 7 million services in operation and generating revenue growth of 6.4 per cent from $$1,804$ million to $$1,919$ million – an increase of $$115$ million.

Financial Highlights in summary were:

Reported earnings before interest and tax (EBIT) increased by 38.1 per cent to \$3.5 billion comprising a 4.8 per cent decline in reported revenues to \$10.8 billion (due to the sale of seven commercial properties for \$570 million recognised in the prior year) and a reported expense (before borrowing costs) decline of 17.2 per cent to \$7.3 billion, also impacted by the sale of properties last year;
Underlying sales revenue decreased by 0.1 per cent to \$10.5 billion, with growth across mobiles, internet and IP solutions, PSTN products, and Sensis (advertising and directories), offset by a decline in revenues from controlled entities, particularly from the foreign currency impact on HKCSL's result, other sales and service and ISDN;

039/2004

Underlying domestic sales revenue increased by 0.9 per cent to \$9.7 billion. Excluding revenue from NDC construction activity and cable recovery and recycling project, domestic revenue increased by 1.8 per cent to \$9.7 billion. Underlying total revenue (excluding interest) was flat at \$10.6 billion;
Underlying operating expenses (before depreciation, amortisation and interest) declined by 4.1 per cent to \$5.3 billion, driven by a decline in network payments and handset subsidies. Underlying total expenses (including depreciation and amortisation but before interest and tax) declined by 1.8 per cent to \$7.1 billion with underlying depreciation and amortisation growth of 5.8 per cent;
Underlying earnings before interest and tax increased by 3.0 per cent to \$3.5 billion, from reduced expenses;
Underlying profit after tax and outside equity interests increased by 5.7 per cent to \$2.1 billion, with reported earnings per share increasing to 17.9 cents based on a weighted average number of ordinary shares outstanding for the 6 months ended 31 December 2003 of 12,817.4 million; and
Underlying EBITDA margin expanded from 48.4 per cent to 50.4 per cent with the underlying EBIT margin growing from 32.1 per cent to 33.1 per cent.

Dr Switkowski said some of Telstra's other operational highlights for the period were:

Customer service performance continued to lift with Six Sigma projects expected to drive further improvements to meet customers' expectations;
Mobile voice telephone minutes increased by 16.1 per cent and total Mobile revenue was up by 6.4 per cent. This was due to an over-all increase of 14.5 per cent in services in operation; comprising a 13.2 per cent increase in GSM and 25 per cent increase in CDMA services in operation. Revenue from handset sales grew by 8.1 per cent;
Mobile network coverage grew significantly with four mobile base stations built per day over the period taking the total number of base stations to 7,157 - a jump of almost 18 per cent;
Online subscribers rose 25 per cent over-all due to a 108 per cent increase in Broadband subscribers and a 6.8 per cent increase in narrowband subscribers. As a result total Data and Internet revenue increased by 2.1 per cent comprising an 18.4 per cent increase in Internet and IP solutions. However, this was balanced by a 5 per cent fall in ISDN (Access and Calls) and a 3.2 per cent fall in Data revenue;
Overall underlying revenue for PSTN re-balanced products was up by 1.5 per cent. Mobile voice minutes were up by 16.1 per cent and Fixed to mobile minutes were up 144 million, a 7.4 per cent increase. Basic Access revenue was up by 3.5 per cent balanced by a 2.3 per cent fall in local call revenue. However there was a 12.7 per cent drop in International direct minutes leading to 13.7 per cent fall in international direct revenue;
Sensis (Advertising and Directories) revenue increased by 5.2 per cent due to the new colour print features and E-mail/URL products which combined with new customers lead to 16 per cent growth in White Pages® and 32 per cent growth in online and electronic products; and
The company conducted a successful \$1 billion share buy-back as part of a proactive capital management program.

Dr Switkowski provided the following comments in relation to the outlook for the company:

There is no change to the previous full year guidance of positive revenue growth with any cost growth being less than revenue growth;
Telstra core domestic capital investment is expected to be approximately \$2.9 billion for the full year;
$\blacksquare$ The Company continues to generate strong free cash flows and is operating within its stated capital management limits; and
The company expects to achieve a domestic growth rate in line with industry growth within two calendar years and to meet its \$800m cost reduction targets on the same timetable.

The dividend will be fully franked at a tax rate of 30 per cent. The dividend will have a record date of 26 March, 2004 with payment to be made on 30 April, 2004.

Media inquiries Stephen Morrison Media Relations Manager Telephone: 03 9634 5611 0417 053 501 Mobile: [email protected]

Telstra Media Releases are regularly posted on the Telstra newsroom: http://www.telstra.com.au/newsroom

Page number

$\mathbf 2$

$\overline{\mathbf{3}}$

$\bar{a}$

Telstra Corporation Limited and controlled entities

Australian Business Number (ABN): 33 051 775 556

Half-Year Financial Report

for the half-year ended 31 December 2003 Half-Year Financial Statements Statement of Financial Performance. . . . . . . . . . . . . . . . . . . Statement of Financial Position. . . . . . . . . . . . . . . . . . . Statement of Cash Flows . . . . . . . . . . . . . . . . . . . Statement of Changes in Shareholders' Equity ....................................

Notes to the Half-Year Financial Statements

Note 1	- Summary of accounting policies.
Note 2	- Items requiring specific disclosure
Note 3	- Income tax expense.
Note 4	- Dividends
Note 5	- Segment information.
Note 6	- Share of net loss from associates and joint venture entities
Note 7	- Investment changes in continuous contract contract contract contract contract contract contract the 21
Note 8	- Contingent liabilities and contingent assets.
Note 9	- Events after balance date
Note 10	- United States generally accepted accounting principles disclosures
	Directors' Declaration.
	Independent Review Report

Statement of Financial Performance

for the half-year ended 31 December 2003

Half-year ended 31 December 2003 2002 Note \$m \$m 10,456 10,468 Other revenue (excluding interest revenue). 370 899 10,826 11,367 Expenses Labour $\ldots$ 1,635 1,624 . Goods and services purchased 1,690 2,011 Other expenses 2,148 2,510 5,473 6,145 Share of net loss from associates and joint venture entities with an amound 2,6 29 969 5,502 7,114 Earnings before interest, income tax expense, depreciation and amortisation (EBITDA). 5,324 4,253 Depreciation and amortisation 1,802 1,703 Earnings before interest and income tax expense (EBIT). 3,522 2,550 $\sim$ 27 39 382 471 355 432 Profit before income tax expense 3,167 2,118 874 968 Net profit 2,293 1,150 Outside equity interests in net loss 34 Net profit available to Telstra Entity shareholders with a mass and contained a set of the 2,293 1,184 Other valuation adjustments to equity Net exchange differences on translation of financial statements of non-Australian controlled entities (43) (10) Reserves recognised on equity accounting our interest in associates and joint ventures. (9) 5 Fair value reserve recognised on acquisition of controlling interest in joint venture entity (1) Increase in opening retained earnings on adoption of new accounting standard 4 1,415 Valuation adjustments attributable to Telstra Entity (ዳን) shareholders and recognised directly in equity $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$ 1,409 2,241 2,593 - ordinary dividend $-13.0$ 12.0 -special dividend. 3.0 Total interim dividends per share 13.0 15.0 ولحاني وواولا 17.9 9.2		Telstra Group





	Ordinary activities
	Revenue
	Sales revenue












	Interest revenue.
	Borrowing costs.
	Net borrowing costs


	Income tax expense $\ldots$ , , , , , , , , .













	Total changes in equity other than those resulting from transactions
	with Telstra Entity shareholders as owners


	Interim dividends per share (cents)




	Basic and diluted earnings per share (cents) with a subsetedied and successful and set of a subseted by $2$

Statement of Financial Position

as at 31 December 2003

	Telstra Group
		as at
	31 Dec	30 June	31 Dec
	2003	2003	2002
Note	\$m	\$m	\$m.
Current assets	99, P.M
Cash assets.	559	1,300	1,365
Receivables	-3,656	3,619	3,875
Inventories	- 239	260	252
Other assets	674	578	553
Total current assets	5,128	5,757	6.045
Non current assets	They are
Receivables	596	877	1,274
Inventories. $\ldots$ .	$-14$	14	6
Investments - accounted for using the equity method $\ldots$ , ,	-113	159	240
Investments - other	- 80	96	97
Property, plant and equipment $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	22,666	23,012	23,068
Future income tax benefit Intangibles - goodwill	سائبان 1,958		60
$Intangibles - other$	1,050	2,018	2,006
Other assets $\ldots$	2,428	1,146 2,520	1,298 2,719
Total non current assets. $\ldots$	28,905	29,842	30,768
Total assets	34.033	35,599	36,813
Current liabilities
Payables , , , , , , , , , , , , , , , , , , ,	1,944	2,525	2,377
Interest-bearing liabilities because of the contract of the contract of the internal contract of the internal c	1,488	1,323	2,080
Income tax payable	356	660	599
Provisions	371	353	381
Revenue received in advance. $\dots$ .	864	973	840
Total current liabilities.	5,023	5,834	6,277
Non current liabilities
Payables	42	51	91
Interest-bearing liabilities www.www.www.www.www.www.www.www.ww	10,796	11,232	11,857
Provision for deferred income tax	-1,895	1,814	2,077
Provisions and a straight and	762	814	843
Revenue received in advance.	405	432	433
Total non current liabilities.	13,900	14,343	15,301
Total liabilities $\sim$ $\sim$ $\sim$	18,923	20,177	21,578
Net assets designed and contract and contract of the second service of the service of the service of the service of the service of the service of the service of the service of the service of the service of the service of the service	15,110	15,422	15,235
Shareholders' equity
Telstra Entity
Contributed equity $\ldots$		6,433	6,433
Reserves		(150)	7
Retained profits.	9,240	9,137	8,846
Shareholders' equity available to Teistra Entity shareholders	$-15,108$	15,420	15,286
Outside equity interests
Contributed equity.	$\sim$ $\sim$ $\pm$	1	206
Reserves	.		28
Retained profits/(accumulated losses)	1	1	(285)
Total outside equity interests with the contract of the contract of the contract of the contract of the contract of	2	2	(51)
Total shareholders' equity	15,110	15,422	15,235

Contingent liabilities and contingent assets $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$ . 8

$\ddot{\phantom{0}}$

Statement of Cash Flows

for the half-year ended 31 December 2003

	Telstra Group Haif-year ended 31 December


	$2003$	2002
	\$m	\$m
Cash flows from operating activities
Receipts from trade and other receivables (inclusive of goods and services tax (GST) (i)).	11,370	11,356
Payments of accounts payable and to employees (inclusive of GST (i)).	(6, 466)	(6, 513)
Interest received	$-27$	27
Borrowing costs paid.	(423)	(529)
Dividends received	$5.82 \pm 1.5$	$\mathbf 1$
Income taxes paid $\ldots$ . $\begin{array}{cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc$ $\sim$ $\sim$ $\sim$	(1,086)	(839)
GST remitted to the Australian Taxation Office (ATO) Almanus Almanus Almanus Almanus Almanus Almanus Almanus A	(498)	(552)
Net cash provided by operating activities.	2,925	2,951
Cash flows from investing activities
Payments for:
- property, plant and equipment	(1, 200)	(1, 231)
- internal use software assets $\ldots$	(174)	(297)
- patents, trademarks and licences	(2)	(2)
Capital expenditure (before investments)	(1,376)	(1,530)
- investment in associates and joint venture entities (including share buy-back) $\dots$	1	(15)
- shares in listed securities and other investments with a contract with a control of		(1)
Investment expenditure.	$\mathbf{1}$	(16)
Total capital expenditure	(1, 375)	(1, 546)
Proceeds from:
- sale of property, plant and equipment.	- 98.	692
-sale of shares in controlled entities		5
- sale of joint venture entities $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ld$		3
-sale of associated entities, , , , , , , , , , , , , , , , , , ,	155.
- sale of listed securities and other investments	$\sim$ $\sim$ 24	7
- sale of business , , , , , , , , , , , , , , , , , ,	$\tilde{\phantom{a}}$	4
Net cash used in investing activities with the contract of the cash of the contract of the contract of the contr	(1,098)	(835)
Cash flows from financing activities
Proceeds from:
$-$ borrowings $\ldots$ . .	2,128	4,302
Repayment of:
- borrowings. - Telstra bonds.	(1, 944)	(4, 129)
	(204)	(581)
- finance leases principal amount. Employee share loans	(3) 14	(14) 19
Dividends paid et al.,	(1, 544)
Share buy-back (ii)	(1,009)	(1, 415) $\overline{\phantom{a}}$
Net cash used in financing activities	(2,562)	(1, 818)
Net increase/(decrease) in cash	(735)	298
Foreign currency conversion	(6)	(3)
Cash at the beginning of the period	1,300	1,070
Cash at the end of the period	559	1,365

Statement of Cash Flows (continued)

Cash flow notes

(i) Goods and Services Tax (GST) and other like taxes

Our receipts from trade and other receivables includes estimated GST of \$988 million (2002: \$1,002 million) collected by us as agent for the ATO. Our payments of accounts payable and to employees include estimated GST payments made by us for goods and services obtained in undertaking both operating and investing activities. Estimated GST paid associated with operating activities amounted to \$376 million (2002: \$308 million) and estimated GST paid in relation to investing activities amounted to \$114 million (2002: \$142 million).

(ii) Share buy-back

On 24 November 2003 we completed an off-market share buy-back of 238,241,174 ordinary shares as part of our ongoing capital management program.

The cost of the share buy-back comprised a purchase consideration of \$1,001 million and associated transaction costs of \$8 million. Refer note 2 for further information.

(iii) Financing and investing activities that involved components of non cash

Property, plant and equipment

Our property, plant and equipment included capitalised borrowing costs of \$30 million for the half-year ended 31 December 2003 (2002: \$38 million). These amounts were included in borrowing costs paid in our statement of cash flows.

Software assets (internal use software assets)

Our software assets developed for internal use included capitalised borrowing costs of \$8 million for the halfyear ended 31 December 2003 (2002: \$14 million). These amounts were included in borrowing costs paid in our statement of cash flows.

(iv) Acquisitions and disposals

During the half-years ending 31 December 2003 and 31 December 2002 there were no significant acquisitions or disposals of investments.

Statement of Changes in Shareholders' Equity

for the half-year ended 31 December 2003

					Telstra Group
			Reserves
	Contributed	Asset	Foreign currency		Consolida- tion	Retained	Outside equity
	equity	revaluation conversion		General	fair value	profits	interests	Total
	\$m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Balance at 30 June 2002 - Increase to opening retained profits on	6,433	32	(55)	(17)	54	7,661	(2)	14,106
adoption of new accounting standard (ii) - change in outside equity interests' capital, reserves and accumulated losses						1,415		1,415
(apart from net loss)							(16)	(16)
$-$ net profit/(loss) $$ - reserves recognised on equity accounting our interest in associates and						1,184	(34)	1,150
joint venture entities consumers and - adjustment on translation of financial statements of non-Australian controlled			$\mathbf{1}$	4				5
entities - fair value adjustment on acquisition of controlling interest in joint venture			(10)					(10)
entity					(2)	1	1
- fully franked final dividend $(i)$ . $\dots$						(1, 415)		(1, 415)
Balance at 31 December 2002 - change in outside equity interests' capital, reserves and accumulated losses	6,433	32	(64)	(13)	52	8,846	(51)	15,235
(apart from net profit/(loss))						$\left(8\right)$	55	47
- net profit/(loss) ,. - reserves recognised on equity accounting our interest in associates and						2,245	(1)	2,244
joint venture entities - adjustment on translation of financial statements of non-Australian controlled			(22)	(1)				(23)
entities - fair value adjustment on acquisition of controlling interest in joint venture			(151)					(151)
entity - transfer of foreign currency translation reserve and general reserve on sale of					(2)	3	(1)
controlled entities and associates $\ldots$			(3)	22	$\overline{a}$	(19)
- fully franked interim dividend $(i) \ldots$ .						(1,930)		(1, 930)
Balance at 30 June 2003	6,433	32	(240)	8	50	9,137	$\overline{2}$	15,422

Statement of Changes in Shareholders' Equity (continued)

for the half-year ended 31 December 2003

					Telstra Group
			Reserves
	Contributed	Asset	Foreign currency		Consolida- tion	Retained	Outside equity
	equity		revaluation conversion	General	fair value	profits	interests	Total
	\$m	\$m.	\$m.	\$m	\$m	\$m	\$m	\$m
Baldnce at 30 June 2003	6,433	32	(240)		50	9,137		15,422
- net profit $\ldots$						2,293		2.293
- reserves recognised on equity
accounting our interest in associates and
joint venture entities with a subset of the								(9)
- adjustment on translation of financial
statements of non-Australian controlled
entities								(43)
- fair value adjustment on acquisition of
controlling interest in joint venture
entity
$-$ share buy-back (iii) $\ldots \ldots \ldots \ldots$	(360					(649)		(1,009)
- fully franked final dividend $(i)$						(1, 544)		(1, 544)
Balance at 31 December 2003	6,073	32	(292)	8	47	9,240	2	15,110

(i) Franked at 30% tax rate

(ii) Due to the first time application of accounting standard AASB 1044: "Provisions, Contingent Liabilities and Contingent Assets" during the half-year ended 31 December 2002, we adjusted the opening balance of retained profits at 1 July 2002 by the amount of the dividend provided for as at 30 June 2002.

(iii) On 24 November 2003 we completed an off-market share buy-back of 238,241,174 ordinary shares as part of our ongoing capital management program. The ordinary shares were brought back at \$4.20 per share, comprising a fully franked dividend component of \$2.70 per share and a capital component of \$1.50 per share.

The cost of the share buy-back comprised a purchase consideration of \$1,001 million and associated transaction costs of \$8 million.

The cost has been split between contributed equity and retained profits within shareholders' equity to reflect the substance of the buy-back. Refer to note 2 for further information.

Notes to the Half-Year Financial Statements

1. Summary of accounting policies

In this financial report, we, us, our, Telstra and the Telstra Group - all mean Telstra Corporation Limited, an Australian corporation and its controlled entities as a whole. Telstra Entity is the legal entity, Telstra Corporation Limited.

Our half-year financial report is a general purpose financial report and is to be read in conjunction with our Annual Financial Report as at 30 June 2003. This should also be read together with any public announcements made by us in accordance with the continuous disclosure obligations arising under Australian Stock Exchange listing rules and the Corporations Act 2001, up to the date of the Directors' Declaration.

1.1. Basis of preparation of this financial report

This half-year financial report has been prepared in accordance with the requirements of the Australian Corporations Act 2001, Accounting Standards applicable in Australia, including AASB 1029: "Interim Financial Reporting", other authoritative pronouncements of the Australian Accounting Standards Board, and Urgent Issues Group Consensus Views.

Our half-year financial report does not include all notes of the type normally included in the Annual Financial Report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Telstra Group as a full financial report.

This half-year financial report is prepared in accordance with historical cost, except for some categories of investments which are equity accounted.

For the purpose of preparing this half-year financial report, each half-year has been treated as a discrete reporting period.

Note 10 contains a reconciliation of the major differences between our financial report prepared under Australian generally accepted accounting principles (AGAAP) and those applicable under United States generally accepted accounting principles (USGAAP).

1.2. Changes in accounting policy

The accounting policies adopted in preparing our halfyear financial report are consistent with those applied in the financial year ended 30 June 2003, apart from:

Revenue arrangements with multiple deliverables It is our policy to prepare our financial statements to satisfy both AGAAP and USGAAP and, in cases where there is no conflict between the two, we ensure that we incorporate the more detailed requirements in both AGAAP and USGAAP financial statements.

In November 2002, the Emerging Issues Task Force in the US reached a consensus on Issue No. 00-21 (EITF 00-21), "Revenue Arrangements with Multiple Deliverables". EITF 00-21 is applicable to us from 1 July 2003.

EITF 00-21 requires that where two or more revenuegenerating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting under EITF 00-21 should be accounted for separately. When the deliverables in a multiple deliverable arrangement are not considered to be separate units of accounting the arrangement is accounted for as a single unit.

1. Summary of accounting policies (continued)

1.2. Changes in accounting policy (continued)

Revenue arrangements with multiple deliverables (continued)

We allocate the consideration from the revenue arrangement to its separate units based on the relative fair values of each unit. If the fair value of the delivered item is not available, then it is allocated revenue based on the difference between the total arrangement consideration and the fair value of the undelivered item. The revenue allocated to each unit under EITF 00-21 is then recognised in accordance with our revenue recognition policies described in note 1.19 "Revenue" of the 30 June 2003 financial report.

We currently have a number of arrangements with our customers that are considered to be separable into separate units of accounting under EITF 00-21. These are:

mobile handsets that are offered as part of a mobile network contract or sold as part of a prepaid phone package;
broadband internet installation kits where a modem $\bullet$ is provided and satellite internet packages; and
$\bullet$ advertising in the Yellow Pages printed and online directories.

We have assessed the requirements of EITF 00-21 and determined that there is no material impact on our statement of financial performance or statement of financial position as at and for the half-year ended 31 December 2003.

1.3. Adoption of International Financial Reporting Accounting Standards

Comparatives will also be remeasured under IFRS and restated for the half-year ending 31 December 2004 and the financial years ending 30 June 2005 and 30 June 2004.

We have established a project team, monitored by a governance committee, to manage the convergence to IFRS and ensure we are prepared to report for the first time under IFRS in accordance with the timetable outlined above.

Currently the major areas of our focus are issues associated with adoption of IAS 12 - Income Taxes, IAS 16 - Property, Plant & Equipment, IAS 19 - Employee Benefits, IAS 36 - Impairment of Assets and IAS 32/39 -Financial Instruments. Adoption of IFRS may result in changes to our accounting policies, procedures and financial reporting systems. We are currently evaluating the potential impact of applying IFRS on our statement of financial position and performance. At this stage of the project it is not possible to quantify the potential impact of convergence to IFRS.

1. Summary of accounting policies (continued)

1.4. Further clarification of terminology used in our statement of financial performance

Under the requirements of AASB 1018: "Statement of Financial Performance" we must classify all of our expenses (apart from any borrowing costs and share of net loss from associates and joint venture entities) according to either the nature (type) of the expense or the function (activity to which the expense relates).

We have chosen to classify our expenses using the nature classification as it more accurately reflects the tupe of operations we undertake. On this basis, our goods and services purchased includes payments made to other carriers to terminate international and domestic outgoing calls and international transit traffic, cost of the purchase of goods sold and the purchase cost of mobile handsets from third party suppliers. This category does not include any indirect or fixed costs, and therefore is not identical to the equivalent functional expense category.

Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) reflects our net profit prior to including the effect of interest revenue, borrowing costs, income taxes, depreciation and amortisation. We believe that EBITDA is a relevant and useful financial measure used by management to measure the company's operating profit. In consideration of the capital intensive nature of our business, EBITDA is a useful supplement to net income in understanding cash flows generated from operations that are available for income taxes, debt service and capital expenditure.

In addition, we believe EBITDA is useful to investors because analysts and other members of the investment community largely view EBITDA as a key and widely recognised measure of operating performance.

Earnings before interest and income tax expense (EBIT) is a similar measure to EBITDA, but takes into account the effect of depreciation and amortisation.

1.5. Rounding

All dollar amounts in this financial report (except where indicated) have been rounded to the nearest million dollars (\$m) for presentation. This has been done in accordance with Australian Securities and Investments Commission (ASIC) Class Order 98/100, dated 10 July 1998, issued under section 341(1) of the Corporations Act 2001.

1.6. Comparative figures

Where necessary, we adjust comparative figures to align with changes in presentation in the current half-year.

	Half-year ended 31 December
	2003	2002
	\$m	$\mathsf{sm}$
2. Items requiring specific disclosure
The following items form part of the ordinary operations of our business and their disclosure is considered relevant in explaining the financial performance of the group.
Our net profit has been calculated after crediting/(charging) specific revenue and expense items from our ordinarų activities as follows:
Items included in other revenue: - proceeds on sale of our investment in IBM Global Services Australia Limited (i).	- 154
- proceeds on sale of properties (iii).		570
Total specific other revenue items $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ld$	154	570
Items included in other expenses: - net book value of investment and modification of information technology services contract with IBM Global Services Australia Limited (i). - book value on sale of properties (iii) ,	(135)	(439)
Total specific other expense items	(135)	(439)
Item included in share of net loss from associates and joint venture entities - write down of the carrying value of our investment in Reach Ltd (iv)		(965)
Net specific items. Income tax benefit/(expense)	19 39	(834) (41)
Net specific items after income tax expense with the context of the context of the context of the context of t	58	(875)

During the half-year ended 31 December 2003, we recognised the following transaction as requiring specific disclosure:

(i) On 28 August 2003, we sold our 22.6% shareholding in our associated entity IBM Global Services Australia Limited (IBMGSA) with a book value of \$5 million. Proceeds from the sale of this investment amounted to \$154 million, resulting in a profit before income tax expense of \$149 million. As part of the disposal we negotiated changes to a 10 year contract with IBMGSA to provide information technology services.

This modification to our service contract with IBMGSA resulted in an expense of \$130 million being recognised and the removal of \$1,596 million of expenditure commitments disclosed as at 30 June 2003. The net impact on our profit before income tax expense of this transaction was a profit of \$19 million (\$58 million after an income tax benefit).

2. Items requiring specific disclosure (continued)

The following item had a significant impact on our statement of financial position during the half-year ended 31 December 2003:

(ii) On 24 November 2003, we completed an off-market share buy-back of 238,241,174 ordinary shares as part of our ongoing capital management program. The ordinary shares were brought back at \$4.20 per share, comprising a fully franked dividend component of \$2.70 per share and a capital component of \$1.50 per share. The Commonwealth of Australia did not participate in the share buy-back.

The shares bought back were subsequently cancelled, reducing the number of fully paid ordinary shares on issue. In total, 1.85% of our total issued ordinary shares, or 3.71% of our non Commonwealth owned ordinary shares, were bought back.

The movement in the number of issued, fully paid ordinary shares is as follows:

	Half-year ended
	31 Dec 2003 Number of shares
	a kang panahang at takawapan kan
Balance at 30 June 2003. 12,866,600,200
Shares bought back (238,241,174)
Balance at 31 December 2003 12,628,359,026

Our weighted average number of ordinary shares for the half-year ended 31 December 2003 used in the calculation of basic and diluted earnings per share was 12,817,398,218.

The cost of the share buy-back comprised a purchase consideration of \$1,001 million and associated transaction costs of \$8 million.

In accordance with the substance of the buy-back, shareholders' equity decreased as follows:

	Half-year ended 31 Dec 2003 \$m
Contributed equity www.communications.com Retained profits www.communications.com	$(360)$ (649) (1,009)

During the half-year ended 31 December 2002, we recognised the following transactions as requiring specific disclosure:

(iii) On 1 August 2002, we sold a portfolio of seven office properties for \$570 million. The carrying value of these properties was \$439 million at the time of sale. We entered into operating leases totalling \$518 million in relation to these properties on normal commercial terms of between five and twelve years, most of which commenced on 19 August 2002.

(iv) As at 31 December 2002, we made the decision to write down the carrying amount of our investment in our 50% owned joint venture, Reach Ltd (REACH). This resulted in a reduction of our investments accounted for using the equity method in our statement of financial position and an increase to our share of net loss from associates and joint venture entities in the statement of financial performance, amounting to \$965 million.

The write down occurred due to the depressed conditions in the global market for international data and internet capacity resulting in high levels of excess capacity, intense price competition and lower than expected revenues.

	Half-year ended 31 December
	$-2003$	2002
	\$m	\$m

3. Income tax expense

Notional income tax expense on profit differs from actual
income tax expense recorded as follows:

Profit before income tax expense	3.167	2,118

Notional income tax expense on profit calculated at 30%	950	635

Which is adjusted by the tax effect of:
Effect of lower rates of tax on overseas income	$\cdots$ (7)	(14)
Research and development concessions.	(4)	(3)
Share of net loss from associates and joint venture entities. $\ldots$ , , , , ,	$\mathbf{1}$	294
Profit on sale of non current assets	(58)	(21)
Non-deductible depreciation and amortisation	- 33	16
Reduction in the value of investments and intercompany receivables	$\sim$ 40	12
Assessable foreign source income not included in accounting profit [2010]	$-13$	34
Under/(over) provision of tax in prior years	22	(26)
Additional effect of prior year reset tax values on entering tax consolidation (i),	$\sim$ (58)
Other adjustments	(18)	41
Income tax expense on profit	874	968

Income tax expense comprises the following items:
Current taxation provision	821	929
Movement in future income tax benefit		(25)
Movement in deferred income tax liability		90
Over provision of tax in prior years $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	(36)	(26)
	874	968

(i) During fiscal 2003, legislation was enacted that enabled the Telstra Entity and its Australian resident wholly owned entities to be treated as a single entity for income tax purposes. The Telstra Entity elected to form a tax consolidated group from 1 July 2002. As a result, the Telstra Entity, as the head entity in the tax consolidated group, recognises tax entries for all entities in the tax consolidated group in addition to its own.

As part of the election to enter tax consolidation, the head entity in the group was able to elect to reset the tax values of a subsidiary member under certain allocation rules. At 30 June 2003, the reset of tax values resulted in a tax benefit of \$201 million. Further analysis subsequent to this date has resulted in a further reset of tax values and an additional tax benefit of \$58 million. These benefits reflect the increase in future tax deductions available from these reset values.

4. Dividends

Due to the application of accounting standard AASB 1044: "Provisions, Contingent Liabilities and Contingent Assets" for the half-year ended 31 December 2002 and subsequent reporting periods, a provision can no longer be raised at balance date if the dividend is declared after that date. As a result, during the half-year ended 31 December 2002, we changed our accounting policy to reflect this position and we now provide for a dividend in the period in which it is declared. There has been no change in the timing of dividends declared by the directors and as a result we will continue to make a public announcement of the dividend after balance date.

Our dividends provided for and paid during the half-year are listed below:

	Half-year ended 31 December
	2003	2002
	\$m	\$m
Ordinary shares Final ordinary dividend for the financial year ended 30 June provided for and paid during the interim period	The Corporation and the car 1.11111111111111111111111111111111111 1.544	1.415
Dividends per share (cents)	beautiful and a state the company of the company
Final ordinary dividend for the financial year ended 30 June provided for and paid during the interim period	The company the company's 12.0	11.0

As the interim dividend for the half-year ended 31 December 2003 was not declared, determined or publicly recommended as at 31 December 2003, no provision for dividend was raised prior to, or as at, that date in the statement of financial position. The interim dividend is reported as an event after balance date (refer note 9).

5. Segment information

We report our segment information on the basis of business segments as our risks and returns are affected predominantly by differences in the products and services we provide through those segments.

Business segments

During the half-year we formed a new group being Telstra Technology, Innovations and Product. This brings together product development areas, network technologies, IT systems and Telstra Research Laboratories.

For segment reporting purposes, the Telstra Group is organised along the following segments:

Telstra Consumer and Marketing is responsible for:
serving consumer customers with fixed, wireless and data products;
management of Telstra brands, advertising and sponsorship; and
Implementing our bundling initiatives.
Telstra Country Wide is responsible for: $\bullet$
customers outside the mainland state capital cities, and in Tasmania and the Northern Territory.
Telstra Business and Government is responsible for: $\bullet$
the provision of the full range of products and services to corporate, small to medium enterprises and government customers; and
managing our interests in our North American, Japanese and European retail operations.
Telstra International is responsible for:
delivering business growth through enhancing the value of our existing international investments and developing new business opportunities; and
. managing our interest in the Asia-Pacific region, including our operations in Hong Kong, India, China and New Zealand.
· Infrastructure Services' responsibilities include:
management and delivery of telecommunications infrastructure and related services:
operational service and delivery of the entire fixed and mobile networks, along with online products and platforms; and
end-to-end project management, planning, design, construction, integration, operations and maintenance of communications networks and systems for Telstra and other telecommunications companies.
· Telstra Wholesale is responsible for:
the provision of telecommunications services and related information applications that are based on the Telstra network infrastructure to other carriers, carriage service providers and ISPs.
Telstra Technology, Innovation and Products is responsible for:
the overall planning, design and construction management of our domestic fixed communication networks and associated systems to deliver technology solutions to support our products, services and customer support;
the office of the Chief Information Officer; and
product development and the Telstra Research Laboratories.

5. Segment information (continued)

. BigPond, Media Services and Sensis is responsible for:
management and growth of Telstra's internet products, services and content, for both broadband and narrowband delivery;
management of Telstra's broadband cable network:
management of Telstra's interest in the FOXTEL partnership; and
management and growth of the information, advertising and directories business, including print, voice and online products and services.
Corporate areas include:
Legal & Office of Company Secretary provides legal services and company secretarial services across Telstra and is responsible for corporate security and liaison with law enforcement agencies;
Regulatory, Corporate and Human Relations responsible for managing our relationships and positioning with key groups such as our customers, the media, governments, industry, community groups and staff. It manages personnel, health and safety, environment, remuneration and training. It also has responsibility for regulatory positioning and negotiation;
· Human Resources responsibilities include recruitment, learning and development, and human resources management;
Corporate Development encompasses the functions of business development, commercial analysis, corporate strategy, mergers and acquisitions, strategic projects and investor relations: and

Finance & Administration - encompasses the functions of business and finance services, treasury, productivity, risk management and assurance, and corporate services. It also includes the financial management of the majority of the Telstra Entity fixed assets (including network assets) through the Asset Accounting Group. Telstra Technology, Innovation and Products manages the annual capital expenditure of these assets on behalf of our other business segments.

The Corporate areas and BiqPond, Media Services and Sensis group are not reportable segments and have been aggregated in the "Other" segment.

For segment reporting purposes the TelstraClear group is reported as part of the International segment. However, for internal management reporting purposes TelstraClear is reported as part of Telstra Business and Government.

During the half-year there has been a change in segment accounting policy in relation to how certain charges are allocated across segments. Previously, outpayments for use of the networks were allocated to other segments via transfer pricing. As a result of the cessation of transfer pricing, these costs are now directly allocated to the appropriate segments. Prior year comparatives have been adjusted to reflect this change in policy.

Maria Alexander

Notes to the Half-Year Financial Statements (continued)

5. Segment information (continued)

The following tables detail the major segments, based on the reporting structure as at 31 December 2003.

Half-year ended 31 December 2003

Business Units	Consu- mer & Market- ing $(a)$	Telstra Country Wide (a)	Telstra Business & Gover- nment (a)(c)	Telstra Inter-	Infra- structure national Services	Telstra Whole- sale	Techno- logy, Innovat- ion and Product	Other (b)	Elimina- tions	Total of segments
	\$m	\$m	\$m	\$m	\$m	\$m	Sm	\$m	\$m	\$m
Sales revenue from external
$c$ ustomers. $\ldots$ . Other revenue from external	2,868	2,622	2,153	659		1,270		851		10,456
customers (before interest).	2	57	186	1	6		2	128	(12)	370
Total revenue from external customers (before interest) $\sim$ $\sim$ $\sim$ $\sim$ Less revenues from sale of	2,870	2,679	2.339	660	38	1,270		979	(12)	10,826
investments and dividends.			185	1					(7)	179
Segment revenue from external
customers	2,870	2,679	2,154	659	38	1,270		979	(5)	10,647
Add inter-segment revenue Total segment revenue	2,870	2,679	18 2,172	14 673	27 65	135 1,405	23 26	5 984	(222) (227)	10,647
Segment result under AGAAP Less share of equity accounted net	1,579	2,355	1,483	$(11)$ .	(753)	1,299	(800)	(1,763)		3,393
losses/(profits).	(1)		(2)					30		29
Less net book value of investments sold Add revenues from sale of			27						(7)	21
investments and dividends			185	1					(7)	179
Earnings before interest and income tax expense (EBIT) - segment result
under USGAAP.	1,580	2,355	1,643	(12)	(753)	1,299	(800)	(1,794)		3,522

(a) These segment results do not reflect actual segment results achieved due to the majority of costs of goods and services associated with sales revenues for all three of these segments being allocated totally to the Telstra Consumer and Marketing segment. This allocation reflects management's accountability framework and internal reporting system and accordingly no reasonable basis for allocation to the three segments exists.

(b) Sales revenue for the other segment relates primarily to revenue earned by our subsidiary Sensis Pty Ltd. The Asset Accounting Group is the main contributor to the segment result for this segment, which is primarily depreciation and amortisation charges.

(c) Included in the revenues from sale of investments and dividends is the sale of our 22.6% share in our associated entity IBM Global Services Australia Limited (IBMGSA). Refer note 2 for further information.

5. Segment information (continued)

Half-year ended 31 December 2002

Business Units	Telstra Consu- mer & Market- ing (a)	Telstra Countru Wide $(a)$	Telstra Business & Gover- nment (a)	Telstra Inter- (b)	Infra- national structure Services	Telstra Whole- sale	Telstra Techno- logy, Innovat- ion and Product	Other $(c)$ (d)	Elimina- tions	Total of segments
	\$m	\$m	5m	\$m	\$m	\$m	\$m	\$m	\$m	\$m
Sales revenue from external
customers. Other revenue from external	2,805	2,528	2,206	768	137	1,181		843	w	10,468
customers (before interest)	8	40	8	52	7		13	771		899
Total revenue from external customers (before interest) Less revenues from sale of	2,813	2,568	2,214	820	144	1,181	13	1,614		11,367
investments and dividends Segment revenue from external	1		2	29						32
customers. Add inter-segment revenue	2.812 $\blacksquare$	2.568	2,212 20	791 13	144 357	1,181 129	13 27	1,614 43	÷ (589)	11,335
Total segment revenue ou dodou ou	2,812	2,568	2,232	804	501	1,310	40	1,657	(589)	11,335
Segment result under AGAAP [100] Less share of equity accounted net	1.553	2,265	1,537	(21)	(678)	1,203	(660)	(1,649)	(48)	3,502
$losses/(profits)$ Less net book value of investments	(1)		2	944				24		969
sold, Add revenues from sale of			(6)	21					$\ddot{}$	15
investments and dividends $\ldots$	1		2	29						32
Earnings before interest and income tax expense (EBIT) - segment result
under USGAAP.	1,555	2,265	1,543	(957)	(678)	1,203	(660)	(1,673)	(48)	2,550

(a) These segment results do not reflect actual segment results achieved due to the majority of costs of goods and services associated with sales revenues for all three segments being allocated totally to the Telstra Consumer and Marketing segment. This allocation reflects management's accountability framework and internal reporting system and accordingly no reasonable basis for allocation to the three segments exists.

(b) Included in the share of equity accounted net losses/ (profits) is the write down of our investment in our 50%

owned joint venture, Reach Ltd. Refer note 2 for further information.

(c) Included in other revenue from external customers is the sale of the seven office properties for \$570 million. Refer note 2 for further information.

(d) Sales revenue for the other segment relates primarily to revenue earned by our subsidiary Sensis Pty Ltd. The Asset Accounting Group is the main contributor to the segment result for this segment, which is primarily depreciation and amortisation charges.

5. Segment information (continued)

	Half-year ended
	31 December
	2003	2002
information about our products and services	\$m	\$m.

Sales revenue from
Basic access	$\sim$ 1,610	1,556
Local calls	778	796
PSTN value added services ,	$\sim 134$	141
National long distance calls	$-578$	582
Fixed to mobile	808	753
International direct $\ldots$ , , , , , , , , .	139	161
Mobile services and handsets	$-1,919$ .	1,804
Data and internet services	1,443	1,413
Sensis ^® (advertising and directories) $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	769	731
Customer premises equipment (and all all all all all all all all all al	. 92	100
Payphones.	72 ²	75
Intercarrier services	-583	591
Inbound calling products	238	250
Solutions management.	$233 -$	239
Various controlled entities $\ldots$ ,	5.738 s. Do	874
Other sales and services.	322	402
	10.456	10,468

6. Share of net loss from associates and joint venture entities

	Ownership interest
	as at		Half-year ended
	31 December		31 December
	2003	2002	2003	2002
Note	96	%	Sm.	\$m
Our (gains)/losses from associates and joint venture entities were as follows:

foint venture entities.
- FOXTEL Partnerships	50.O	50.0		23
- Stellar Call Centres Pty Ltd	50.0	50.0		(1)
- Xantic B.V.	35.0	35.0		2
- Reach Ltd (iii).	50.0	50.0		946
			36	970
Associated entities
- IBM Global Services Australia Limited (i)		22.6	(3)	(5)
- Australian-Japan Cable Holdings Limited		39.9		(2)
- Solution 6 Holdings Limited (ii) No. 1		13.2		2
- ECard Pty Ltd	$\sim$ 50.0	50.0		6
- PT Mitra Global Telekomunikasi Indonesia 9	20.4	20.4	(S)	(2)
			(7)	(1)
			29	969

(i) Refer to note 7 for details regarding change in ownership interests from 30 June 2003.

(ii) On 8 May 2003, we sold 1 million of our shares in Solution 6 Holdings Limited reducing our ownership interest from 13.2% to 12.7%. On 19 June 2003, we sold our remaining 32 million shares for \$17 million.

(iii) During the half-year ended 31 December 2002, our net loss from Reach Ltd (REACH) included the following components:

	Half-year ended 31 Dec 2002 \$m

Our share of REACH's profits up to suspension of
equity accounting.
Notional goodwill amortisation up to suspension
of equity accounting
Recognition of deferred profit up to suspension of
equity accounting
Write down of the carrying value
of our investment (note 2)	965
	946

7. Investment changes

The changes in the composition of the Telstra Group

from 30 June 2003 are as follows:

			Immediate parent
Name of entity	Country of incorporation	Date of change in investment	% Change	% of equity held after change in investment
Disposais and liquidations
Controlled entities
Worldcorp Holdings (S) Pte Ltd (i). $\ldots$ Singapore		17 October 2003	100.0
Worldcorp Publishing Pte Ltd (i).		17 October 2003	100.0
Associated entities
IBM Global Services Australia Limited (ii). Australia		28 August 2003	22.6
CityLink Limited (iii).		1 October 2003	27.1
myinternet Limited (iv).		19 December 2003	21.1
Listed securities
Commander Communications Limited $(v)$ Australia		18 July 2003	16.4
Other significant investment changes
Telstra New Zealand Holdings Limited (vi) New Zealand		1 July 2003
Telstra eBusiness Services Pty Ltd (vi) Australia		28 November 2003

(i) Non-operating companies that were dissolved.

(ii) On 28 August 2003, we sold our 22.6% shareholding in our associated entity IBM Global Services Australia Limited for \$154 million. Refer note 2 for further details.

(iii) On 1 October 2003, we sold our 27.1% shareholding in our associated entity CityLink Limited for \$0.7 million.

(iv) On 19 December 2003, we participated in a share buy-back undertaken by myinternet Limited that resulted in us disposing of our entire ownership interest in this entity for nominal consideration.

(v) On 18 July 2003, we sold our remaining 16.4% interest in Commander Communications Limited for \$24 million. (vi) The following entities changed names during the period:

NDC New Zealand Limited changed its name to Telstra New Zealand Holdings Limited on 1 July 2003.
InsNet Pty Ltd changed its name to Telstra eBusiness Services Pty Ltd on 28 November 2003.

8. Contingent liabilities and contingent assets

There have been no significant changes from 30 June 2003 to quarantees, indemnities and support provided by us, or to legal actions we are involved in, apart from:

As at 30 June 2003, we provided guarantees over the performance of third parties under defeasance arrangements, whereby lease payments are made on our behalf by the third parties over the remaining terms of finance leases. As at 31 December 2003, the lease payments over the remaining period of the leases (approximately 12 years) amount to \$918 million (30 June 2003: \$1,042 million). The reduction is predominantly due to movements in exchange rates and semi-annual repayments.

The Telstra Entity and its partners, News Corporation Limited and Publishing and Broadcasting Limited, and Telstra Media Pty Ltd and its partner, Sky Cable Pty Ltd, have previously entered into agreements relating to pay television programming with various parties. At 31 December 2003, we have commitments of \$2,046 million (30 June 2003: \$2,208 million) under these agreements relating mainly to minimum subscriber quarantees. The reduction of \$162 million from 30 June 2003 is predominantly due to movements in exchange rates and a further six month expiry of these guarantees.

As we are subject to joint and several liability in relation to agreements entered into by the Foxtel partnership, we would be contingently liable if our partners in this relationship failed to meet any of their obligations. Our contingent liabilities arising from the above agreements have also decreased by \$162 million during the period.

Since the 30 June reporting date we have become aware that a potential requirement for an amount no greater than \$65 million may exist to support Reach Ltd (Reach), an associate, to meet its financial commitments. Reach's 2004 business plan is currently being finalised.

9. Events after balance date

The directors are not aware of any matter or circumstance that has occurred since 31 December 2003 that, in their opinion, has significantly affected or may significantly affect in future years:

our operations;
the results of those operations; or
the state of our affairs:

other than:

On 9 January 2004, our 50% owned pay television joint venture FOXTEL entered into a \$550 million bank facility arrangement to fund its full digital conversion and launch of new digital services. The use of this facility is subject to certain conditions being met and full repayment is due on 30 September 2008.

As part of this arrangement, our controlled entity Telstra Media Pty Ltd as a FOXTEL partner, and FOXTEL itself have pledged their relative assets as collateral in favour of the banks.

In addition, we and FOXTEL's other ultimate shareholders, News Corporation Limited and Publishing and Broadcasting Limited, have entered into an Equity Contribution Deed (ECD). Under the ECD, FOXTEL is required to call on a maximum of \$200 million in equity contributions in certain specified circumstances such as necessary to avoid default of a financial convenant. These equity contributions are based on ownership interests and, as a result, our maximum contingent liability is \$100 million. The ECD expires on 30 April 2009. On 20 January 2004, we completed the sale of our 20.4% shareholding in our associated entity PT Mitra Global Telekomunikasi Indonesia (MGTI). Revenue from the sale of this investment amounted to \$50 million, resulting in a profit before income tax expense of \$21 million.

In addition, we were also released from our contingent liabilities in relation to MGTI as disclosed in our 30 June 2003 financial report. These contingencies included our liability for calls against standby equity under the joint venture agreement (\$25 million) and our several liability if the other shareholders defaulted on their share of the standby equity call (\$102 million). It also included a limited recourse pledge over our shareholding in MGTI to support MGTI's obligations under a previous loan agreement entered into. The debt drawn down at 30 June 2003 amounted to \$106 million.

On 12 February 2004, the directors of Telstra Corporation Limited declared a fully franked interim dividend of 13 cents per ordinary share, payable on 30 April 2004 to those shareholders on record at 26 March 2004. A provision for dividend payable has been raised as at the date of declaration, amounting to \$1,642 million.

The financial effect of the above transactions after balance date have not been recognised in our statements of financial performance, financial position or cash flows for the half-year ending 31 December 2003.

10. United States generally accepted accounting principles disclosures Reconciliations to financial reports prepared using USGAAP

Our consolidated financial report is prepared in accordance with accounting principles generally accepted in Australia (AGAAP). The principles of AGAAP differ in certain respects from accounting principles generally accepted in the United States (USGAAP).

For an explanation of the significant differences between AGAAP and USGAAP, refer to note 30 of the 30 June 2003 financial statements. The following tables are provided to supplement those disclosures for the half-year ended 31 December 2003.

	Hair-year ended 31 December
	2003	2002
	\$m	\$m

Reconciliation of net income to USGAAP

AGAAP net income reported in statement of financial performance. $\ldots$	2,293	1,184
Adjustments required to agree with USGAAP
Property, plant and equipment	(46)	(223)
Retirement benefit (expense)/gain	(51)	73
Income tax benefit.	. 9.	101
Derivative financial instruments and hedging activities	$-143$	(182)
PCCW converting note.	- 7	(7)
Equity accounting and write-off adjustments for Reach Ltd	- (80)	767
Fair value / general reserve adjustments	توارد بالح	6
Goodwill adjustments.	61.	(191)
Consolidation of employee share plan trusts (a), $\ldots$ , , , , , , , , , , , , , , , , , , ,	з
Net income per USGAAP	2.339	1,528

Statement of financial performance measured and classified per USGAAP
Operating revenue	10,456	10,468
Operating expenses:
Labour	1,686	1,551
Goods and services purchased (i)	1,456	1,834
Depreciation and amortisation	$\sim$ 1,801	1,728
Other operating expenses enterpreted to contain the container and the contact of the contact of the contact of	2,290	2,079
Total operating expenses	7,233	7.192
Operating income	3,223	3,276
Net interest expense	$-(354)$	(475)
Dividend income ,	ولوديا إحد	1
Share of net (losses)/profits of associates and joint venture entities $\ldots$ ,,,,,,,,,,,	(98)	27
Other income/(expense).	458	(169)
Net income before income tax expense and minority interests $\ldots \ldots \ldots \ldots$	$\overline{3,229}$	2,660
Income tax expense	894	857
Net income before minority interests and cumulative effect adjustments $\dots\dots\dots$	2,335	1,803
Minority interests	$\omega$	34
Net income before cumulative effect adjustments	Tomas 2,335	1,837
Cumulative effect of change in accounting principles, net of tax (a)	4	(309)
Net income per USGAAP	2,339	1,528

$37\,$

Notes to the Half-Year Financial Statements (continued)

10. United States generally accepted accounting principles disclosures (continued) Reconciliations to financial reports prepared using

USGAAP (continued)

	Half-year ended 31 December
	2003	2002
	\$m.	\$m
USGAAP Earnings per share
Net income per USGAAP	2,339	1,528
	₫	₫
Basic earnings per share before cumulative effect of change in accounting principles. Cumulative effect of change in accounting principles (net of tax):	18.4	14.4
Transition impairment of CSL goodwill		(2.4)
Consolidation of employee share plan trusts.
Basic earnings per share per USGAAP (cents)	18.4	12.0
Dilutive earnings per share before cumulative effect of change in accounting principles Cumulative effect of change in accounting principles (net of tax):	$-18.3$	14.3
Transition impairment of CSL goodwill entertainment and the contract of the contract of the contract of CSL goodwill entertainment of the contract of the contract of the contract of the contract of the contract of the cont		(2.4)
Consolidation of employee share plan trusts.
Diluted earnings per share per USGAAP (cents)	18.3	11.9
Reconciliation of weighted average number of ordinary shares and common share equivalents used for earnings per share calculations	Number (in millions)

Number of shares used for AGAAP earnings per share calculations $\ldots \ldots \ldots \ldots$ Adjusted for:		12,867
- weighted average TESOP 97 and 99 options outstanding during the period - treasury stock not considered to be outstanding (a)	(67) (21)	(76)

Number of shares used for USGAAP basic earnings per share calculations [ [ ] [ ] [ ] [ ] [ ] [ ] [ ]	12,729	12,791

Weighted average number of employee share options exercised during the period . . . $\mathbin{\lvert}$ 38 Number of shares used for USGAAP diluted earnings per share calculations $\ldots$ . $\equiv$ $12,767$ 12,828

	Half-year ended 31 December
	$\sim$ $\sim$ 2003	2002
	sm	\$m
Total comprehensive income disclosure
Net income per USGAAP.	Single Street $\sim$ $2,339$	1,528
USGAAP other comprehensive loss	(246)	(256)
USGAAP Total comprehensive income	2.093	1,272

10. United States generally accepted accounting principles disclosures (continued)

Reconciliations to financial reports prepared using

USGAAP (continued)

	As at 31 December
	2003	2002
	\$m	\$m

Reconciliation of shareholders' equity to USGAAP

AGAAP shareholders' equity per statement of financial position et al., et al., et al., et al.	15,110	15,235
Cumulative adjustments required to agree with USGAAP
Property, plant and equipment	$\sim$ 50 $\cdot$	196
Listed investments (available-for-sale securities)	- 50	80
Retirement benefits $\ldots$ , $\ldots$ , $\ldots$	4,166	4,160
Income tax.	(1,001)	(1, 159)
Minority interests business is a contract of the material contract of the Minority of Minority and Minority of	(2)	51
Employee share loans ,	(184)	(211)
Derivative financial instruments and hedging activities. $\ldots$ , ,	(395)	(310)
PCCW converting note	$\sim$ 1	7
Sale of Global Wholesale Business to Reach Ltd	(882)	(882)
Equity accounting and write-off adjustments for Reach Ltd $\ldots$ , , , ,	$-619$	792
Consolidation adjustment for Telstra CSL Limited	253	817
Fair value / general reserve adjustments $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	(54)	(58)
Goodwill adjustments	(155)	(191)
Consolidation of employee share plan trusts (a)	(63)
Shareholders' equity per USGAAP	17,513	18,527

Statement of financial position measured and classified per USGAAP
Current assets
$\mathsf{Cash} \ldots \ldots \ldots \ldots \ldots$ .	- 562	1,365
Accounts receivable, net	- 3,430	3,859
Inventories. $\ldots$ .	239	252
Deferred tax asset $\ldots$	$\sim$ 172	244
Other assets $\ldots$ . . . .	674	553
Total current assets with the contract of the contract of the contract of the contract of the contract of the	5,077	6,273

Non current assets
Receivables $\ldots$ , .	110	202
Derivative financial instruments www.communicatives.communicatives	416	1,372
Inventories.	$-14$	6
Investments - accounted for using the equity method $\ldots$ , , ,	-116	241
Investments - other non current	$207 -$	528
Property, plant and equipment	45,016	43,642
Accumulated depreciation of property, plant and equipment $\ldots$ , $\ldots$ , $\ldots$ , ,	(22, 133)	(20, 194)
Goodwill, net	- 1,909	2,483
Other intangible assets, net	1,050	1,298
Prepaid pension assets $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	$-4,166$	4,154
Other assets $\ldots$ . . . . . . .	2,352	2,375
Total non current assets.	33,223	36,107
Total dasets , , , , , , , , , , , , , , , , , , ,	38,300	42,380

10. United States generally accepted accounting principles disclosures (continued)

Reconciliations to financial reports prepared using

USGAAP (continued)

	As at 31 December
	$-2003$	2002
	\$m	sm.
Statement of financial position measured and classified per USGAAP (continued) Current Babilities
Payables ,	1,944	2,371
Borrowings - short term debt.	$-1,205$	1,259
Borrowings-fong term debt due within one year	- 283	821
Income tax payable	$-357$	599
Provisions	371 1.	381
Revenue received in advance.	882	858
Total current liabilities.	5.042	6,289
Non current liabilities
Payables		91
Derivative financial instruments $\overline{a_1, a_2, a_3, a_4, a_5, a_6, a_7, a_8, a_9, a_1, a_2, a_3, a_4, a_5, a_6, a_7, a_8, a_9, a_9, a_1, a_2, a_3, a_4, a_1, a_2, a_3, a_4, a_5, a_6, a_7, a_8, a_9, a_9, a_1, a_2, a_3, a_4, a_1, a_2, a_3, a_4, a_1, a_2, a_3, a_4, a_1$	$\sim$ 630 $\,$	420
Borrowings - long term debt	10,743	12,255
Deferred tax liability.	3,068	3,420
Provisions	762	843
Revenue received in advance.	540	586
Total non current liabilities.	15,743	17,615
Total ({ab}}}\files	20,785	23,904
Minority interests and account of the contract of the contract of the contract of the Minority of the Contract of the Minority of the Contract of the Minority of the Contract of the Minority of the Minority of the Minority		(51)
Shareholders' equity
Contributed equity.	$-6,073$	6,433
Share loan to employees	(184)	(211)
Additional paid in capital from employee share plans (a) $\ldots \ldots \ldots \ldots \ldots$		333.
Treasury stock (a).	(117)
Total share capital www.www.www.www.www.www.www.www.www.ww	6,154	6,555
Accumulated other comprehensive loss		(51)
Retained earnings	12,159	12,023
Total shareholders' equity ,.	17,513	18,527
Total liabilities and shareholders' equity $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	38,300	42,380

(i) Cost of sales includes both direct and indirect costs involved in the sale of the Company's goods and services. For a service company this would commonly include depreciation and other indirect costs associated with the provision of services. However, we do not report our costs according to this description and classify all of our expenses according to the nature of the expense, referred to as "goods and services purchased" in relation to the sale of goods and services. Goods and services purchased mainly comprises:

Network service capacity from external communication service providers;
Mobile handsets sold to customers;
Cost of goods sold (other than mobile handsets); and
Directory paper costs.

Goods and services purchased does not equate to cost of sales due to the non inclusion of depreciation and other indirect costs associated with the provision of our telecommunications services.

United States generally accepted accounting principles disclosures (continued) Reconciliations to financial reports prepared using USGAAP (continued)

(a) Additional explanation of significant differences between AGAAP and USGAAP

Consolidation of Variable Interest Entitles

We have adopted FASB Interpretation No. 46 revised December 2003 (FIN 46), "Consolidation of Variable Interest Entities", in relation to the Telstra Employee Share Ownership Plan Trust (TESOP97), the Telstra Employee Share Ownership Plan Trust II (TESOP99) and the Telstra Growthshare Trust, in accordance with the effective dates outlined in FIN 46.

FIN 46 requires a beneficiary to consolidate a variable interest entity if it is the primary beneficiary of that entity. The primary beneficiary is defined as having a variable interest in a variable interest entity that will absorb a majority of the entity's expected losses.

TESOP97, TESOP99 and the Telstra Growthshare Trust are variable interest entities. We consolidate these trusts under USGAAP as we are considered to be the primary beneficiary of the trusts. Under AGAAP we do not consolidate or equity account these trusts as we are not the beneficiary of the trusts or significantly influence the trusts.

Telstra Growthshare Trust

The Telstra Growthshare Trust has purchased \$117 million worth of shares in Telstra Corporation Limited at 31 December 2003. This represents a total of 21,002,481 shares. The purchase of these shares has been fully funded by Telstra Corporation Limited. Under USGAAP these shares are recorded as treasury stock, thereby reducing total share capital. These shares are not considered to be outstanding for the purposes of computing basic and diluted earnings per share.

Cumulative Trust contributions made by Telstra Corporation Limited to the Telstra Growthshare Trust from commencement up to 31 December 2003 totalled \$49 million. These contributions were recorded as compensation expense under AGAAP and prior to the adoption of FIN 46 were reversed against additional paid in capital for USGAAP purposes. These contributions are used by the Trust to purchase Telstra shares on market to underpin the issue of restricted share, performance rights and deferred share options. On consolidation of the Trust, these contributions are now recorded against additional paid in capital under USGAAP.

Telstra Corporation Limited provides a loan to the Telstra Growthshare Trust to purchase shares on market to underpin the issue of options. The loan balance at 31 December 2003 is \$65 million. On consolidation of the Trust, this loan is eliminated, together with any associated interest.

United States generally accepted accounting principles disclosures (continued) Reconciliations to financial reports prepared using USGAAP (continued)

(a) Additional explanation of significant differences between AGAAP and USGAAP (continued)

Consolidation of Variable Interest Entities (continued)

Finance Lease Agreements

We entered into US finance leases for communications exchange equipment in fiscal 2000 and fiscal 1999 with the following entities which are incorporated in the Cayman Islands.

Coleman Leasing Limited
Coventry Leasing Limited
Croswell Leasing Limited
Clarke Leasing Limited
Gurner Leasing Limited
Sutherland Leasing Limited

We have prepaid all lease rentals due under the terms of the leases.

These entities lease the communications exchange equipment from the ultimate lessor and then sublease the equipment to us. We have quaranteed that the lease payments will be paid by these entities to the ultimate lessor as scheduled over the lease terms.

These entities are considered to be variable interest entities under FIN 46. Our maximum potential exposure to loss as a result of our agreements with these entities at 31 December 2003 is \$918 million. This amount has been disclosed as a contingent liability under AGAAP in note 8 to these financial statements.

Revenue Arrangements with Multiple Deliverables

As discussed in note 30(w) "Recently issued United States accounting standards" of the 30 June 2003 financial statements, we have adopted Emerging Issues Task Force consensus No. 00-21 (EITF 00-21), "Revenue Arrangements with Multiple Deliverables", from 1 July 2003 for both our AGAAP and USGAAP financial statements.

EITF 00-21 prescribes the determination of multiple revenue-generating activities and whether those activites contain more than one unit of accounting. Revenue from arrangements involving multiple deliverables that contain more than one unit of accounting must be allocated among the units based on their relative fair values. For further information regarding our adoption of EITF 00-21 refer to note 1.2.

We have assessed the changes required by EITF 00-21 to have no material impact on our statement of financial performance or statement of financial position as at and for the half year ended 31 December 2003.

Directors' Declaration

The directors of Telstra Corporation Limited have made a resolution that declared:

(a) the financial statements and notes, set out on pages 2 to 29, of the Telstra Group:
(i) comply with the Accounting Standards, the Corporations Regulations 2001 and Urgent Issues Group Consensus Views;
(ii) give a true and fair view of the financial position as at 31 December 2003 and performance, as represented by the results of the operations and cash flows, for the half-year ended 31 December 2003; and
(iii) in the directors' opinion, have been made out in accordance with the Corporations Act 2001.
(b) at the date of this declaration, in the directors' opinion, there are reasonable grounds to believe that Telstra Corporation Limited will be able to pay its debts as and when they become due and payable.

For and on behalf of the Board

Bot. Manglield. J. E. Swithoush

Robert C Mansfield Chairman

Ziggy Switkowski Chief Executive Officer and Managing Director

Date: 12 February 2004 Melbourne, Australia

Independent Review Report

To the Members of Telstra Corporation Limited

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for the Telstra Group (the Telstra Entity and the entities it controlled during the period) for the half-year ended 31 December 2003.

The directors of the Telstra Group are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the Telstra Group, and that complies with Accounting Standards AASB 1029 "Interim Financial Reporting", in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Review approach

Thave conducted an independent review of the financial report in order to make a statement about it to the members of the Telstra Group and in order for the company to lodge the financial report with the Australian Stock Exchange and the Australian Securities and Investments Commission.

The review was conducted in accordance with Australian National Audit Office Auditing Standards, which incorporate the Australian Auditing Standards, applicable to review engagements, in order to state whether, on the basis of the procedures described, anything has come to my attention that would indicate that the financial report is not presented fairly in accordance with the Corporations Act 2001, Accounting Standard AASB 1029 "Interim Financial Reporting" and other mandatory financial reporting requirements in Australia, so as to present a view which is consistent with my understanding of the Telstra Group's financial position and of its performance as represented by the results of its operations and cash flows.

A review is limited primarily to inquiries of company personnel and analytical procedures applied to the financial data. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance is less than given in an audit. Thave not performed an audit and, accordingly, I do not express an audit opinion.

I have also reviewed the quantification of the major differences between accounting principles generally accepted in Australia compared to accounting principles generally accepted in the United States of America, which is presented in note 10 to the financial report. I have reviewed note 10 in order to state whether, in all material respects, anything has come to my attention that would indicate that it does not present fairly, the major differences between accounting principles generally accepted in Australia and accounting principles generally accepted in the United States of America, in so far as they apply to the Telstra Group.

Independent Review Report (continued)

Independence

I am independent of the Telstra Group, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

I have contracted an accounting firm for the purpose of providing my review of the financial report. This firm has been engaged to undertake other non-audit services by Telstra. The provision of these services has not impaired my independence.

Statement

Based on my review, which is not an audit, I have not become aware of any matter that makes me believe that the financial report of the Telstra Group is not in accordance with:

(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Telstra Group at 31 December 2003 and of its performance for the half-year ended on that date; and
(ii) complying with Accounting Standard AASB 1029 "Interim Financial Reporting" and the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.

Further, as a result of my review, I have not become aware of any matter that makes me believe that note 10 does not present fairly the major differences between accounting principles generally accepted in Australia and accounting principles generally accepted in the United States of America, in so far as they apply to the Telstra Group.

of faut

PJ Barrett Auditor-General

Date: 12 February 2004 Canberra, Australia

Directors' report

The directors present their report on the consolidated entity (Telstra Group) consisting of Telstra Corporation Limited and the entities it controlled at the end of or during the half-year ended 31 December 2003. Financial comparisons used in this report are of results for the halfyear ended 31 December 2003 compared with the half-year ended 31 December 2002.

Results of operations

Telstra's net profit for the half-year was \$2,293 million (2002: \$1,184 million). This was after:

deducting income tax expense of \$874 million (2002: \$968 million); and
adjusting for net losses attributable to outside equity interests in controlled entities of \$nil (2002: \$34 million).

Earninas before interest and income tax expense was \$3.522 million, representina a \$972 million (38.1%) increase on the prior corresponding period result of \$2,550 million.

Review of operations

Our net profit increased by \$1,109 million to \$2,293 million. This increase arose largely because of the \$965 million previous comparable period write down of the investment in our 50% owned joint venture Reach Limited.

Sales revenue decreased by \$12 million to \$10,456 million in the half-year ended 31 December 2003, attributable to:

the continuing impact of our rebalancing initiatives, resulting in an increase in basic ۰ access (\$54 million) partly offset by a decrease in local call (\$18 million) and international direct revenues (\$22 million). Fixed to mobile revenues also increased (\$55 million) due to continued strong growth in the number of mobile services; and
growth in mobile services and handsets (\$115 million), internet and IP solutions (\$72 million) and Sensis® (advertising and directories) revenues (\$38 million). Offsetting this growth is a decline in ISDN (access and calls) (\$25 million) and revenues from various controlled entities (\$136 million), in particular the Hong Kong CSL Group and Telstra Multimedia Pty Ltd. Other sales and services also declined (\$80 million) primarily due to reduced external construction revenues.

Other revenue decreased by \$529 million to \$370 million, primarily due to the decline in revenue from the sale of assets and investments. Included in the prior corresponding halfyear was revenue from the sale of seven office properties for \$570 million. In the current half-year we recognised revenue from the sale of our 22.6% shareholding in our associated entity IBM Global Services Australia Limited (IBMGSA) of \$154 million.

Operating expenses (excluding borrowing costs, share of net loss from associates and joint venture entities and income tax expense) decreased by \$573 million to \$7,275 million. The decrease in the half-year ended 31 December 2003 was due to:

lower goods and services purchased of \$321 million, attributable to reduced network ٠ payments, a reduction in handset subsidies and our cost reduction programs;
lower other expenses mainly due to the decline in the carrying value associated with $\bullet$ assets and investments sold. Included in other operating expenses in the prior corresponding half-year was the carrying value of the seven office properties sold of \$439 million. This decline was partially offset in the current half-year by a modification to an information technology services contract with IBMGSA that resulted in a \$130 million expense being recognised upon sale of our shareholding in this entity; and

• the increase in depreciation and amortisation of \$99 million due to continued growth in our communications plant asset base and capitalised software development.

Net borrowing costs decreased by \$77 million to \$355 million, primarily due to lower borrowing costs as a result of the maturity of some of our interest-bearing liabilities offset by lower interest derived from the PCCW converting note. We also incurred additional borrowing costs in the prior corresponding period due to the close out of interest rate swaps.

Income tax expense decreased by \$94 million to \$874 million, giving an effective tax rate of 27.6%. The income tax expense benefited from a final adjustment as part of our election to enter tax consolidation. The benefit to income tax expense in the half-year ended 31 December 2003 amounted to \$58 million, which was attributable to a further reset of tax values.

Our free cash flow decreased by \$289 million to \$1,827 million, primarily due to lower proceeds from asset and investment sales, offset by a decrease in capital expenditure. Operating capital expenditure declined by 10.1% to \$1,376 million due to continued tight control of our capital expenditure program. Proceeds from assets and investment sales also declined due to the prior corresponding half-year including proceeds of \$570 million from the sale of seven office properties. This decrease was partially offset in the current half-year by the sale of our investment in IBMGSA for \$154 million.

Our cash flow used in financing activities increased by \$744 million, predominantly due to the share buy-back undertaken. On 24 November 2003, we completed an off-market share buyback of 238,241,174 ordinary shares as part of our ongoing capital management program. The cost of the share buy-back comprised purchase consideration of \$1,001 million and associated transaction costs of \$8 million.

Dividends

The directors have declared a fully franked interim ordinary dividend of 13 cents per share (\$1,642 million). The dividend will be franked at a tax rate of 30%. The interim ordinary dividend will have a record date of 26 March 2004 with the payment to be made on 30 April 2004.

Our fully franked final ordinary dividend for the financial year ended 30 June 2003 of 12 cents per share (\$1,544 million) was provided for and paid during the half-year. The dividend was franked at a tax rate of 30%. The final ordinary dividend had a record date of 26 September 2003 and the payment was made on 31 October 2003.

At present, it is expected that Telstra will be able to fully frank declared ordinary dividends out of fiscal 2004 earnings. However, the directors can give no assurance as to the future level of dividends, if any, or of franking of dividends. This is because it depends upon, among other factors, our earnings, Government legislation and our tax position.

Directors

Directors who held office during the half year and until the date of this report were:

Robert C Mansfield John T Ralph Zygmunt E Switkowski Samuel H Chisholm Anthony J Clark John E Fletcher Belinda J Hutchinson Catherine B Livingstone Charles Macek Donald G McGauchie William A Owens John W Stocker

chairman and director - deputy chairman and director - chief executive officer and managing director

There were no changes to the directors holding office at the annual general meeting held on 14 November 2003.

Rounding of amounts

The Telstra Entity is a company of the kind referred to in the Australian Securities and Investments Commission class order 98/100, dated 10 July 1998 and issued pursuant to section 341(1) of the Corporations Act 2001. As a result, amounts in this report and the accompanying financial report have been rounded to the nearest million dollars, except where otherwise indicated.

This report is made in accordance with a resolution of the directors.

Robert C Mansfield Chairman

P. Swithowski

Ziggų Switkowski Chief Executive Officer and Managing Director 12 February 2004

AI assistant

TELSTRA GROUP LIMITED — Interim / Quarterly Report 2004

65927_rns_2004-02-11_a1161c07-ce1d-49f8-8db1-4774e8f42b0d.pdf

Office of the Company Secretary

ELECTRONIC LODGEMENT

Re: Telstra Corporation Limited Financial Results for the Half Year ended 31 December 2003

Telstra Corporation Limited and controlled entities

Appendix 4D Half-year report

Telstra Corporation Limited ABN 33 051 775 556

Results for announcement to the market

Contents and reference page

$\mathbf{1}$ .

Details of entities which control has been gained or lost having a material affect $\overline{2}$ .

Details of dividend or distribution reinvestment plans in operation 3.

Details of associates and joint venture entities 4.

Details of associates and joint venture entities (continued) 4,

Our investments in joint venture entities are listed below:

5, Statement about the audit status

Telstra Corporation Limited Half year end results and operations review Half year ended 31 December 2003

Good profit growth with strong cash management

Financial highlights

Statement of financial performance for the half year ended 31 December 2003

Cash flow summary

For the half year ended 31 December 2003

Statement of financial position summary

Statement of Financial Position

Statistical data summary

Summary of operating results

Revenue

Expenses

Treasury operations

Dividend

Operating and Financial Review

Results of operations

Table 1 - Results of operations

Operating revenues

PSTN Products

Basic access

Table 3 - Basic access

Local calls

Table 4 - Local calls

PSTN value added services

Table 5 - PSTN value added services

National long distance calls

Fixed to mobile calls

Telstra Corporation Limited and controlled entities

International direct

Mobiles

Data

Table 10 - Data

ISDN

Table 11 - ISDN

Internet and IP solutions

Table 12 - Internet and IP solutions

Sensis (advertising and directories)

Intercarrier services

Inbound calling products

Table 15 - Inbound calling products

Solutions management

Other controlled entities

Table 17 - Other controlled entities

Customer premises equipment

Payphones

Table 19 - Payphones

Other sales and services

Table 20 - Other sales and services

Other Revenue

Table 21 - Other revenue

Operating expenses

Labour expense

Goods and services purchased

Other expenses

Table 25 - Other expenses

Share of net loss from associates and joint venture entities

Table 26 - Share of net loss from associates and joint venture entities

Depreciation and Amortisation

Table 27 - Depreciation and amortisation

International

Hong Kong CSL Financial Summary

Table 28 - Hong Kong CSL Financial Summary

TELSTRA GROUP LIMITED Interim / Quarterly Report 2004

Telstra Corporation Limited (ABN 033 051 775 556)
Normalisation Schedule
Half Year Ended 31 December 2003