15 February 2007

Office of the Company Secretary

Company Announcements Office Australian Stock Exchange 4^th Floor, 20 Bridge 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

Telstra Corporation Limited Financial Results for the Half Year ended 31 December 2006

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;
1. Media release:
1. Half year financial report for the half year ended 31 Dec 2006; and
1. Directors' report.

Telstra will conduct an analyst briefing at 9.15 AM and media briefing at 11.45 AM on the half year results. A webcast of the briefings will be available from 9.15 AM AEDT at http://www.telstra.com.au/abouttelstra/investor/calendarevent.cfm?ObjectID=1202 and transcripts will be lodged with the ASX when available.

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

Yours sincerely

Normale breaking

Douglas Gration Company Secretary

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

Half-year report

Telstra Corporation Limited and controlled entities

Appendix 4D

Half-year report

For the half-year ended 31 December 2006

Appendix 4D Half-year report 31 December 2006 Telstra Corporation Limited ABN 33 051 775 556

Results for announcement to the market

	Telstra Group Half-year ended 31 December

	2006	2005		Movement
	\$m	\$m.	\$m	%
Extract from the income statement.
Revenue	11,645	11,415	230	2.0
Other income (including finance income) $\ldots \ldots \ldots \ldots \ldots \ldots$	181	170	11	6.5
Profit for the period	1,712	2,142	(430)	(20.1)
Profit for the period available to Telstra Entity shareholders $\dots$ .	1,704	2.143	(439)	(20.5)

During the half-years ended 31 December 2006 and 31 December 2005, there were no individual transactions that had a sufficiently significant impact on our income statement that require specific disclosure, except for:

	Telstra Group
	Half-year ended
	31 December
	2006	2005
	\$m	\$m
Depreciation and amortisation
- accelerated amortisation of intangibles	14
- accelerated depreciation of property, plant and equipment	134
	148
Income tax benefit ,	(44)
Net items after income tax benefit $\ldots$ ,	104

As part of our transformation a decision was made last financial year to shut down certain networks, platforms and applications. This has resulted in the accelerated depreciation and amortisation of certain assets that, while currently in use, will be decommissioned.

Appendix 4D Half-year report 31 December 2006 Telstra Corporation Limited

Results for announcement to the market (continued)

Dividends declared per ordinary share

	Half-year ended 31 December
	2006	2005
	Œ
Dividends declared per ordinary share
Interim dividend	14.0	14.0
Special dividend to be paid with the interim dividend. $\dots$		6.0
Total interim dividend	14.0	20.0
Final dividends for the financial year ended 30 June provided for and paid during the interim period
Final dividend	14.0	14.0
Special dividend paid with the final dividend $\ldots$ , $\ldots$ , $\ldots$ ,		6.0
Total final dividend provided for and paid during the interim period.	14.0	20.0

Our interim and final ordinary dividends are fully franked at a tax rate of 30%.

Our interim ordinary dividend in respect of the half-year ended 31 December 2006 will have a record date of 2 March 2007 with payment to be made on 30 March 2007. Shares will trade excluding entitlement to the dividend on 26 February 2007.

Our final ordinary dividend in respect of the financial year ended 30 June 2006 was provided for and paid during the interim period. The final ordinary dividend had a record date of 25 August 2006 and payment was made on 22 September 2006.

Appendix 4D

$\pmb{4}$

Half-year ended 31 December 2006

Telstra Corporation Limited and controlled entities

Australian Business Number (ABN): 33 051 775 556

Contents and reference page

Appendix 4D Requirements	Reference
1. Reporting period and the previous corresponding period.	Refer to the 31 December 2006 half-year financial report lodged with this document.
2. Results for announcement to the market.	Refer page 2 for "Results for announcement to the market".
3. Net tangible assets per security.	Refer item 1 on page 5 of this report.
4. Details of entities where control has been gained or lost during the period.	Refer item 2 on page 5 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 3 of this report. Also refer to note 4: Dividends and note 8: Events after balance date in the 31 December 2006 half-year financial report lodged with this document for additional information.
6. Details of dividend or distribution reinvestment plans in operation and the last date for the receipt of an election notice for participation in an dividend or distribution reinvestment plan.	Refer item 3 on page 5 of this report.
7. Details of our joint venture and associated entities.	Refer item 4 on page 6 of this document for details on our jointly controlled and associated entities.
8. Accounting standards used in compiling reports by foreign entities (e.g. International Accounting Standards).	Not applicable.
9. If the accounts are subject to audit dispute or qualification, a description of the dispute or qualification.	Refer item 5 on page 6 of this report.

Appendix 4D

Half-year ended 31 December 2006

Net tangible assets per security

	Telstra Group
		Half-year ended
		31 December
	2006	2005
	¢	€
Net tangible assets per security $\ldots \ldots$	53.0	59.3

Details of entities where control has been gained or lost during the period

Entities where control has been gained during the period

· On 31 August 2006, we acquired a 55% shareholding (on an undiluted basis) in SouFun Holdings Limited (SouFun) for a total consideration of \$337 million including acquisition costs.

Entities where control has been last during the period

On 31 August 2006, our controlled entity Kaz Group Pty Limited sold its 100% shareholdings in controlled entities Australian Administration Services Pty Ltd, AAS Superannuation Services Pty Ltd and Atune Financial Solutions Pty Ltd for a total cash consideration of \$212 million (net of cash balances of the disposed entities).
On 28 November 2006, our controlled entity Sensis Pty Ltd sold its 61% shareholdings in our controlled entity Platefood Limited for a total consideration of \$10 million.

Refer to note 6 in the 31 December 2006 half-year financial report lodged with this document for further information.

Details of dividend or distribution reinvestment plans in operation

During the half-years ended 31 December 2006 and 31 December 2005, we had no dividend or distribution reinvestment plans in operation.

Appendix 4D

Half-year ended 31 December 2006

Details of investments in joint ventures and associated entities

Our investments in jointly controlled and associated entities are listed below:

		Telstra Group
		Ownership interest
		As at
		31 December	30 lune
		2006	2006
Name entity	Principal activities	%	%
Jointly controlled entities
FOXTEL Partnerships #	Pay television	50.0	50.0
Customer Services Pty Ltd	Customer service	50.0	50.0
FOXTEL Management Pty Ltd	Management services	50.0	50.0
FOXTEL Cable Television Pty Ltd	Pay television	80.0	80.0
Reach Ltd (incorporated in Bermuda) (a)	International connectivity services	50.0	50.0
TNAS Limited (incorporated in New Zealand)	Toll free number portability in New
(b)	Zealand	33.3	33.3
Money Solutions Pty Ltd	Financial advice and education services		50.0
Enhanced Processing Technologies Pty Ltd	Business process outsourcing	60.0	60.0
3GIS Pty Ltd (a)	Management services	50.0	50.0
3GIS Partnership (a)	3G network services	50.0	50.0
Bridge Mobile Pte Ltd (incorporated in
Singapore)	Regional roaming provider	12.5	12.5
m.Net Corporation Limited	Mobile phone content provider	26.3	26.4
Associated entities
Australian-Japan Cable Holdings Limited
(incorporated in Bermuda) (a)	Network cable provider	46.9	46.9
Telstra Super Pty Ltd	Superannuation trustee	100.0	100.0
Keycorp Limited	Electronic transactions solutions	47.6	47.6
Telstra Foundation Limited	Charitable trustee organisation	100.0	100.0
LinkMe Pty Ltd	Internet recruitment provider	40.7	40.0

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

Statement about the audit status

This includes both the FOXTEL partnership and the FOXTEL television partnership.

(a) Balance date is 31 December.

(b) Balance date is 31 March.

Our half-year report is based on the financial report of Telstra Corporation Limited and its controlled entities for the half-year ended 31 December 2006, which has been reviewed by Ernst & Young. Our half-year financial report is not subject to audit dispute or qualification. Refer to the 31 December 2006 half-year financial report for the independent review report provided to the members of Telstra Corporation Limited.

Telstra Corporation Limited and controlled entities Results and operations review Half-year ended 31 December 2006

Results ahead of quidance, company transformation continues

Results

Sales revenue grew by 2.0% or \$225 million to \$11,630 million $\textcolor{red}{\textcolor{blue}{\textbf{w}}}$
Sales revenue grew by 3.6% adjusting for the change in revenue recognition of the Melbourne Yellow™ Book
Operating expenses (before depreciation and amortisation) grew by 9.9% or \$621 million to \$6,880 million
EBIT declined by 15.7% or \$546 million to \$2,938 million
Profit after tax and minority interest declined by 20.5% or \$439 million to \$1,704 million
Cash operating capital expenditure (excluding investments) of \$2,509 million, up 22.8%
EXECUTE: 25 In the Search Orion Service Search Sears B scents
. Interim dividend declared of 14 cents per share, fully franked
Mobiles revenue grew by 11.8% or \$296 million to \$2,798 million
Broadband revenue grew by 43.7% or \$236 million to \$776 million
PSTN revenue declined by 5.6% or \$216 million to \$3,615 million

Financial Highlights Half-year ended 31 December 2006

Results ahead of quidance, company transformation continues

Telstra Corporation Limited and its controlled entities (Telstra) reported profit after tax and minority interest of \$1,704 million for the half-year ended 31 December 2006, a decrease of 20.5% on the prior half-year. Basic earnings per share (EPS) declined from 17.3 cents to 13.8 cents. Earnings before interest and tax (EBIT) decreased by 15.7% to \$2,938 million, slightly better than guidance.

Marains declined with a decrease in EBIT marain of 5.2 basis points to 25.3% and an EBITDA marain decrease of 4.0 basis points to 42.3% as expected while undergoing the largest spend year on our transformation.

Income

Total income grew by 2.2% or \$253 million in the current half-year to \$11,797 million. Revenue growth was achieved through increases in mobiles, broadband, CSL New World and IP access. However, revenue growth was partially offset by a decline in fixed telephony of 4.9%, which included a 5.6% decrease in PSTN revenue, as well as declines in specialised data, narrowband, and advertising and directories due to the deferral of Melbourne Yellow™ print directory production to January 2007. When removing \$174 million from the prior year performance relating to this print directory, total income grew by 3.8%.

In assessing the performance of the mobiles and broadband products throughout these financial highlights we have changed the presentation from the prior year. As wireless data cards operate on the mobile network and provide a broadband service we have grossed up the mobile and broadband revenues and physicals to include the results from EVDO and Next G™ data cards, this is consistent with industry practice. The elimination of the grossed up component is shown separately in the operating revenue summary.

Expenses

Operating expenses increased by 9.9% due to higher goods and services purchased, particularly subscriber acquisition costs supporting revenue growth, and increases in other expenses mainly due to transformation activity, increased promotions and advertising expenses and added expenses from entities acquired. This was offset by reduced labour costs as a result of lower staff numbers and use of the redundancy provision raised in fiscal 2006. Total expenses (before interest and tax) increased by 9.9%, which includes depreciation and amortisation growth of 9.9% driven by transformation activity.

Net finance costs grew by 18.2% to \$520 million due to higher average net debt levels and increasing interest rates.

Income tax expense decreased by 21.7% to \$706 million.

Business transformation

The business transformation is progressing well and some of the highlights achieved during the half-year include the launch of the Next G™ network, the ADSL 2+ launch, workplace productivity improvements, customer service improvements and benefits from market based management initiatives (i.e. subscription pricing). We have already bequn reducing the complexity in our business and have exited approximately 140 IT platforms and applications, and are starting to see the benefits from our revenue acceleration program, including broadband and mobiles growth, a reduction in PSTN decline and growth in online revenue. However, we are 13 months into our 5 year transformation plan and there is still a lot of work to be done.

The key financial impacts that you will see throughout this document include the following:

. Labour costs we have achieved a significant reduction in our total workforce numbers, with reductions in the number of contractors, agency staff and employed staff. This has had a positive impact on our salary and wage expense. Redundancy expenses have also declined for the half-year as costs associated with transformation were charged against the provision for redundancy raised at the end of fiscal 2006;
Provision for restructuring and redundancy costs under Australian accounting standards we made provision in fiscal 2006 for the expected costs of restructuring the business as part of our transformation. The total provision raised in June 2006 was \$427 million. As at 31 December 2006, the remaining balance of the total provision is \$288 million:
Depreciation we have accelerated the rate of depreciation of certain network and IT assets due to our intended retirement of the CDMA network and rationalisation of many of our IT platforms and software applications. This component has contributed \$148 million to the increase in depreciation and amortisation expenditure; and
other various operational costs have been impacted by the implementation of business transformation for the halfyear as highlighted throughout the document. In total transformation costs resulted in an increase in overall expenses of \$137 million from the prior half-year primarily within our service contracts and agreements expense.

Changes to accounting treatments

We have applied UIG 4: "Determining Whether an Arrangement Contains a Lease" (UIG 4) to the results reported for the first time in the half-year ended 31 December 2006. This UIG has impacted both the recognition and classification of some items in our income statement, balance sheet and cash flow statement. Prior period comparative numbers have been restated where appropriate to reflect the impact of adoption of UIG 4. For detailed information regarding the impact of UIG 4 on our financial information, refer to the December 2006 half-year financial statements. These are available on our investor relations website at www.telstra.com.au/abouttelstra/investor/index.cfm. These impacts have an immaterial impact on earnings.

Cash flow

Operating cash flow less investing cash flow (free cash flow) decreased by 55.9% for the half-year ended 31 December 2006 to \$862 million. This decline was due to a reduction in net cash provided by operating activities driven by higher levels of external expenditure, and increased cash used in investing activities as we launched our Next G™ network and continued working on the IP enablement of our network and IT transformation.

Capital expenditure

Cash capital expenditure for the half-year ended 31 December 2006 increased by 38.0% to \$2,846 million. Core operating expenditure increased by 22.8% to \$2,509 million. Higher capital expenditure was driven primarily by the IP enablement of our network, IT transformation, as well as the roll out of the Next G™ network. There was also an increase in our acquisitive investment expenditure by \$318 million largely related to our acquisition of SouFun.

Treasury operations

Telstra's financial position remains strong with current long-term credit ratings as of January 2007 of A. A2 and A+ from S&P, Moody's and Fitch respectively. All three rating agencies have Telstra on a "negative outlook" with major factors being uncertainty surrounding the regulatory environment, intensifying competition, technological advances and PSTN revenue declines.

The net debt position was \$14,473 million, a \$1,697 million increase on the equivalent balance at 31 December 2005, largely driven by lower net cash produced from the ongoing operations of the business offset by higher capital cash demands from our transformation investment. The balance sheet continues to have strong capital settings.

Dividend

A fully franked interim ordinary dividend of 14 cents per share has been declared and is payable on 30 March 2007. It is the current intention of the Board to declare fully franked ordinary dividends of 28 cents per share for fiscal 2007. This assumes that we continue to be successful in implementing our transformation strategy and there are no further material adverse requlatory outcomes during the course of fiscal 2007. The final amount of dividends declared for any year is a decision for the Board to make twice a year in its normal cycle having regard to our earnings and cash flows as well as future regulatory impacts and all other factors that affect our operations.

Outlook

We will continue to execute our strategy that was announced in November 2005. We have started the investment in our transformation and we have seen margin pressure continue as our revenue mix changes. Earnings have declined at both the EBITDA and EBIT lines, impacted by transformational spend and costs of goods and services purchased as we invest in the future revenue growth of the company particularly in 3GSM mobile services and broadband.

With our next generation networks, we continue to put in place the infrastructure to reduce our reliance on our traditional fixed line revenue streams and to grow our mobiles, internet and other next generation revenues while reducing the costs of operations.

As a result of our success in both the broadband and mobiles markets and lower than expected impacts, at this stage, of ULL take-up, we expect full year revenue growth to be between 2.5% to 3.0% and a significant turnaround in EBIT performance in the second half for a full year expectation of 3.0% to 5.0% EBIT growth. Our second half revenues will include revenue from the distribution of the Melbourne Yellow¹ book, deferred from the first half results of the prior corresponding period. The second half of fiscal 2006 also included a full half of transformation spend and the raising of a redundancy and restructuring provision. We do not expect to raise another redundancy and restructuring provision during fiscal 2007.

We expect depreciation and amortisation expense to remain high over the next few years as we invest heavily in transforming the network and IT base, together with accelerating depreciation and write-offs of certain assets that continue to be phased out in the 2007 fiscal year.

Cash flow will be impacted by our investment in capital expenditure over the next two to three years and free cash flow is expected to reflect this with gradual improvement from 07/08 assuming no investment in fibre to the node. Cash operating capital expenditure is expected to be in the range of \$5.4 billion to \$5.7 billion in fiscal 2007.

Our priority continues to be achieving our strategy to give customers a seamless user experience across all devices and platforms - fixed, wireless and internet - providing a 1-click, 1-touch, 1-button, 1-screen, 1-step solution, whether that customer is an individual, small business, large business, government agency or non-profit organisation.

For enquiries on these results contact:

John Stanhope Chief Financial Officer Telstra Corporation Limited

Anthony O'Brien Acting Director, Investor Relations Telstra Corporation Limited Phone: +61(3) 9634 8014, Email: [email protected]

Page

Half-year results and operations review - December 2006

for the half-year ended 31 December 2006	Number
Summary financial information
Results of operations ,	6
Cash flow summary.	7
Balance sheet summary	8

Segment information.	9
Statistical data summary	10

Analysis information
Operating revenues.	11
Fixed telephony,	13
- PSTN products ,	13
- ISDN products ,	18
- Inbound Calling Products , , , , , , , , , , , , , , , , , , ,	19
- Payphones	20
- Customer premises equipment	20
- Intercarrier access services ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	21
- Other fixed telephony with the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of t	21
Mobiles	22
Internet ,	26
IP& data access the children children control control control control control control control control control control control control control control control control control control control control control control control	28
Business services and applications the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contrac	29
Advertising and directories , , , , , , , , , , , , , , , , , , ,	30
Offshore controlled entities.	31
PayTV bundling	32
Other minor items.	33
Other revenue and other income.	34
Operating expenses.	35
Labour expense to bood to bood to bood the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the con	36
Goods and services purchased to concern conservative contract to conserve the conservative conservative conserved to conserve the conserved of the conserved of the conserved of the conserved of the conserved of the conserv	38
Other expenses.	40
Share of net loss of jointly controlled entities and associated entities entities and contained as a subsequence of net loss of jointly controlled entities	41
Depreciation and amortisation.	42
Net finance costs the contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract contract co	42
Income tax expense.	43
Sensis financial summary , , , , , , , , , , , , , , , , , , ,	44
CSL New World Mobility Group financial summary with a state of the content of the content of the content of the content of the content of the content of the content of the content of the content of the content of the conte	46
TelstraClear financial summary	47
Cash flow ,	48
Balance sheet ,	52
Glossary.	54
Restatement of previously reported results , , , , , , , , , , , , , , , , , , ,	56
Product restatement ,	58
Revenue half-yearly comparison with the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contra	59

Summary financial information

Results of operations

		Half-year ended 31 December
	2006	2005		Change 2006/2005
	$+1$	\$m		\$m (% change)

Sales revenue.	11,630	11,405	225	2.0%
Other revenue (excl. finance income)	15.	10	5.	50.0%
Total revenue (excl. finance income)	11,645	11,415	230	2.0%
Other income.	152	129	23	17.8%
Total income (excl. finance income).	11,797	11,544	253	2.2%
Labour expense	1,996	2,053	(57)	(2.8%)
Goods and services purchased	2,566	2,195	371	16.9%
Other expenses.	2,318	2,011	307	15.3%
Operating expenses.	6,880	6,259	621	9.9%
Share of net loss from jointly controlled and associated entities	۰.	1		0.0%
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA)	4,916	5,284	(368)	(7.0%)
Depreciation & amortisation	1,978	1,800	178	9.9%
Earnings before interest & income tax expense (EBIT).	2,938	3,484	(546)	(15.7%)
Net finance costs	520	440	80	18.2%
Profit before income tax expense.	2,418	3,044	(626)	(20.6%)
Income tax expense.	706	902	(196)	(21.7%)
Profit for the period the substitution of the state of the state of the state of the period of the state of the	1,712	2,142	(430)	$(20.1\%)$
Minority interests in net (profits)/loss.	(B)	1	(9)	n/m
Profit for the period available to Telstra Entity shareholders	1,704	2,143	(439)	(20.5%)
Effective tax rate.	29.2%	29.6%		(0.4)
EBITDA margin on sales revenue	42.3%	46.3%		(4.0)
EBIT margin on sales revenue.	25.3%	30.5%		(5.2)
			Change
	cents	cents	cents	% change
Basic earnings per share $(i)$ , , , , , , , , .	13.8	17.3	(3.5)	(20.2%)
Diluted earnings per share (i)	13.7	17.3	(3.6)	(20.8%)
Dividends paid or declared:
Interim dividend paid.	14.0	14.0
Special dividend paid with interim dividend.		6.0

(i) Basic and diluted earnings per share are impacted by the effect of shares held in trust for employee share plans and instruments held under executive remuneration plans.

n/m - not meaningful

Cash flow summary

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	555	\$m		\$m (% change)

Receipts from customers (inclusive of GST) $\ldots$ , , , , , , , , .	12,736	12,417	319	2.6%
Payments to suppliers/employees (inclusive of GST) Allances All Allen Allen Allen All Allen	(8,339)	(7,466)	(873)	11.7%
Net cash generated from operations	4.397	4,951	(554)	(11.2%)
Income taxes paid.	(966)	(1,003)	37	(3.7%)
Net cash provided by operating activities (i) with an array and array and array and array array array	3.431.	3,948	(517)	(13.1%)

Payments for property, plant and equipment.	(2, 114)	(1,761)	(353)	20.0%
Payments for intangibles with the contract of the contract of the contract of the contract of the contract of	(395)	(282)	(113)	40.1%
Capital expenditure before investments	(2,509)	(2,043)	(466)	22.8%
Investment expenditure	(337)	(19)	(318)	1673.7%
Capital expenditure.	(2, 846)	(2,062)	(784)	38.0%
Receipts from asset sales/other proceeds/dividends	247	36	211	586.1%
Interest received	30	34	(4)	(11.8%)
Net cash used in investing activities.	(2,569)	(1,992)	(577)	29.0%
Operating cash flows less investing cash flows	862	1,956	(1,094)	(55.9%)

Movements in borrowings/finance leases	1.179	229	950	414.8%
Staff repayments of share loans	11	11	$\tilde{\phantom{a}}$	$0.0\%$
Dividends paid	(1,739)	(2,485)	746	$(30.0\%)$
Finance costs paid.	(540)	(470)	(70)	14.9%
Purchase of shares for employee share plans	×.	(6)	6.
Net cash used in financing activities.	(1,089)	(2,721)	1,632	$(60.0\%)$

Net decrease in cash	(22i)	(765)	538	(70.3%)

(i) Please note: Due to the implementation of A-IFRS, we have revised the presentation of the cash flow summary and our statutory reported statement of cash flows. This has resulted in some reclassifications between our key cash flow totals (net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities). Consequently, the 2005 comparative totals disclosed for these lines have changed from the amounts disclosed as at 31 December 2005. The most significant change is the reclassification of our finance costs paid from operating into financing, and the reclassification of interest received from operating into investing.

Balance sheet summary

	as at
	31 Dec 06	30-Jun-06		Change 2006/2005
	$4101 - 120$	\$m		\$m (% change)

Current assets	5,027	4,930	-97	2.0%
Intangibles	6,265	6,122	143	2.3%
Property, plant and equipment.	23.413	23,503	(90)	(0.4%)
Total non-current assets	31.525	31,261	264	0.8%
Total liabilities	(23, 436)	(23, 368)	(68)	0.3%
Net assets/shareholders' equity $\ldots$ , , , , , , , , .	13,116	12,823	293	2.3%
Gross debt.	(14, 930)	(13, 783)	(1, 147)	8.3%
Net debt	(14, 473)	(13,094)	(1,379)	10.5%
Ratios
EBITDA interest cover (times)	0.6	10.3	(0.9)	(8.7%)
Net debt to EBITDA	BW 1	1.4	0.1	7.1%
Return on average assets the contract of the contract of the contract of the Return of the Return of the Return	16.4%	15.7%		0.7%
Return on average equity	26.8%	24.1%		2.7%
Return on average investment	22.0%	21.4%		$0.6\%$
Net debt to capitalisation	52.5%	50.5%		2.0%

Seament information

	Segment revenue			Segment EBIT
		Half-year ended 31 December Half-year ended 31 December
	2006	2005	Change	2006	2005	Change
	Sm.	\$m	%	Sna	\$m.	%

Telstra Consumer, Marketing and Channels	4,679	4,481	4.4%	2,763	3,041	(9.1%)
Telstra Business	1,608	1,597	0.7%	1,299	1,302	$(0.2\%)$
Telstra Enterprise and Government	2,214	2,248	(1.5%)	1,291	1,302	(0.8%)
Telstra Wholesale	1,487	1,427	4.2%	1,451	1,318	10.1%
Sensis	885	1,012	(12.5%)	365	509	(28.3%)
Telstra International	820	709	15.7%	26.	32	(18.8%)
Telstra Operations.	115	123	(6.5%)	(1, 912)	(1,785)	7.1%
Other (i) $\ldots$	-52.	50	4.0%	(2, 343)	(2, 266)	3.4%
Eliminations	(215)	(232)	(7.3%)	(2)	31	(106.5%)
Total Telstra (ii)	11,645	11.415	2.0%	2,938	3.484	(15.7%)

(i) Results for the Other segment consists primarily of business unit results that do not qualify as segments in their own right. The Asset Accounting Group is the main contributor to the segment EBIT for this segment, which is primarily depreciation and amortisation charges.

(ii) For segment reporting purposes, certain items are disclosed or may be reallocated between business units as required by the applicable accounting standard, and as a result may differ from our internal reporting framework. Where no reasonable basis for reallocation exists the following should be noted:

As no reasonable basis for allocation exists, sales revenue associated with mobile handsets for the Consumer, Business and Enterprise and Government segments are allocated totally to the Consumer segment, with the exception of some products sold in relation to small to medium enterprises which are allocated to the Business segment. Ongoing prepaid and postpaid mobile revenues derived from our mobile usage is recorded in all three of these segments depending on the type of customer serviced. In addition, the majority of goods and services purchased associated with our mobile revenues are allocated to the Consumer segment.
Revenue derived from our BigPond Internet products are recorded in the customer facing business segments of Consumer, Business and Enterprise and Government. Certain distribution costs in relation to these products are recognised in these three business segments. Telstra Operations recognises certain expenses in relation to the installation and running of the broadband cable network. In accordance with our application of the business segment definition in relation to customer type, we have not reallocated these items to the Telstra BigPond business segment. These allocations reflect management's accounting framework and internal reporting system and accordingly no reasonable basis for reallocation exists.

Statistical data summary

	Half-year ended 31 December
	2006	2005	Change	% change
Billable traffic data (in millions)
Local calls (number of calls).	3,390	3,882	(492)	(12.7%)
National long distance minutes (i).	3,594	3,666	(72)	(2.0%)
Fixed to mobile minutes $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ld$	2,339	2,234	105	4.7%
International direct minutes	264	273	(9)	(3.3%)
Mobile voice telephone minutes (ii) , , , , , , , , , , , , , , , , , ,	4, 147	3,611	536	14.8%
Inbound calling products - B party minutes	1,659	1,482	(143)	(9.6%)
Inbound calling products - A party calls	510	502	8	1.6%
Number of short messaging service (SMS) sent	2,227	1,318	909	69.0%
Network and operations data (in millions)
Basic access lines in service (iii)
Residential	5.47	5.52	(0.05)	(0.9%)
Business , , , , , , , , , , , , , , , , , ,	2.27	2.37	(0.10)	(4.2%)
Total retail customers.	7.74	7.89	(0.15)	(1.9%)
Domestic wholesale.	2.12	2.14	(0.02)	(0.9%)
Total basic access lines in services	9,86	10.03	(0.17)	(1.7%)
ISDN access (basic lines equivalents) (in thousands) (iv)	1,226	1,205	21	1.7%
Mobile services in operation (SIO) (in thousands) (v) (vi)
3GSM.	1,024	20	1,004	n/m
2GSM.	6,210	6,955	(745)	(10.7%)
CDMA.	1,658	1,607	51	3.2%
Mobile services in operation	8,892	8,582	310	3.6%
Total wholesale mobile SiOs (in thousands)	51 O	101	28	27.7%
Online subscribers (in thousands) (vi)
Broadband subscribers - retail $\ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \$	1,839	1,188	651	54.8%
Broadband subscribers - wholesale (vii) www.asserous.com/asserous-asserous-asserous-	1,621	1,164	457	39.3%
Total broadband subscribers , , , , , , , , , , , , , , , , , , ,	3,460	2,352	1,108	47.1%
Narrowband subscribers , , , , , , , , , , , , , , , , , , ,	819	1,143	(324)	(28.3%)
Total online subscribers	4,279	3,495	784	22.4%
Total FOXTEL subscribers (in thousands)	1,182	1,074	108	10.1%
Employee data
Domestic full time staff (viii)	36, 184	39,115	(2, 931)	(7.5%)
Full time staff and equivalents (ix).	43,989	45,456	(1,467)	(3.2%)
Total workforce (x)	48,991	51,057	(2,066)	(4.0%)

(i) Includes national long distance minutes from our public switched telephone network (PSTN) and independently operated payphones. Excludes minutes related to calls
from non-PSTN networks, such as ISDN and virtual private

(ii) includes all calls made from mobile telephones including long distance and international calls, excludes data, messagebank, international roaming and CSL New World. (iii) Excludes incontact services (a free service with restrictive calling access) and advanced access services, such as ISDN services.

(iv) Expressed in equivalent number of clear voice channels. Comparatives have been restated to reflect updated assessment of channels per SIO on ISDN 10/20/30. The previous assessment was based on a calculation of channel

(vi) Includes wireless broadband SIOs (EVDO & HSDPA)

(vii) Within Broadband, retail products include cable, satellite, BigPond Wireless, ADSL and mobile data CDMA, while wholesale products include DSL Layer 1, DSL Layer 2, DSL layer 3, Spectrum Sharing and vISP Broadband. Total Broadband subscribers exclude Broadband component of ULL.

(iii) Excludes offshore, casual and part time employees. December 2005 has been restated, refer to Labour section for further information.
(ix) Includes all domestic and offshore employees, including controlled entities. D (x) Includes all domestic and offshore employees, including controlled entities, as well as contractors and agency staff. December 2005 has been restated, refer to Labour expense section for further information.

Operating revenues

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	Sm	\$m		\$m (% change)
Fixed telephony
Basic access.	1,663	1,657	6	0.4%
Local calls	432	553	(121)	(21.9%)
PSTN value added services.	125	123	$\overline{2}$	1.6%
National long distance calls.	408	471	(63)	(13.4%)
Fixed to mobile , , , , , , , , , , , , , , , , , , ,	749	761	(12)	(1.6%)
International direct $\ldots$ , $\ldots$ , $\ldots$	94.	106	(12)	(11.3%)
Fixed interconnection $\ldots \ldots \ldots \ldots \ldots \ldots \ldots$	144	160	(16)	$(10.0\%)$
Total PSTN products.	3.615	3,831	(216)	(5.6%)
ISDN products	383	420	(37)	(8.8%)
Inbound calling products $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	203	208	(5)	(2.4%)
Payphones	48	54	(6)	(11.1%)
Customer premises equipment	151	135	16	11.9%
Intercarrier access services.	87	69	18	26.1%
Other fixed telephony with the contract of the contract of the contract of the contract of the contract of the	156	163	(7)	(4.3%)
Total fixed telephony.	4,643	4,880	(237)	(4.9%)
Mobiles
Mobile services - retail	1,925	1,794	131	7.3%
Mobile services - wholesale $\ldots$	26.	16	10	62.5%
Mobile services - interconnection	296	318	(22)	(6.9%)
Mobile services - international roaming $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	157	131	26	19.8%
Mobile services - other	37.	32	5	15.6%
Total mobile services	2,441	2,291	150	6.5%
Mobile handsets	357	211	146	69.2%
Total mobiles.	2,798	2,502	296	11.8%
Internet
Narrowband	79.	117	(38)	(32.5%)
Retail broadband	492	331	166	50.2%
Wholesale broadband	279	209	70	33.5%
Other, $\ldots$ , $\ldots$ , $\ldots$ ,	10	9	$\mathbf{1}$	11.1%
Total internet	865	666	199	29.9%
IP & data access
Internet direct $\ldots$ ,	81	70	11	15.7%
Specialised data	604	451	(47)	(10.4%)
$P$ access $\ldots$ . .	193	152	41	27.0%
Wholesale internet & data, $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , .	111	100	11	11.0%
Total IP & data access , , , , , , , , , , , , , , , , , ,	789. 501	773 507	16	2.1% (1.2%)
Business services and applications (and account of the control of the control of the service of the Advertising and directories		944	(6)
CSL New World.	824 519	373	(120) 146	(12.7%) 39.1%
TelstraClear.	286	321	(35)	$(10.9\%)$
Offshore services revenue	173.	139	34	24.5%
Pay TV bundling	164	156	8	5.1%
Other minor items.	136	175	(39)	(22.3%)
Elimination for wireless broadband	(68)	(31)	(37)	119.4%
Sales revenue	11,630	11,405	225	2.0%
Other revenue , , , , , , , , , , , , , , , , , , ,	15.	10	5	50.0%
Total revenue ,	11,645	11,415	230	2.0%
Other income.	152	129	23	17.8%
Total income .	11,797	11,544	253	2.2%

In the following discussion, we analyse revenue for each of our major products and services. The principal areas of operating revenue growth for the half-year ended 31 December 2006 were:

mobiles reflecting the continued growth in the number of subscribers, increased demand for 3GSM services and higher minutes of use offset by continued pricing pressures;
broadband due to a significant increase in our subscriber base partially due to migration from narrowband products but also due to overall growth in the online market;
. CSL New World due to additional revenue received as a result of the merger between Hong Kong CSL and New World PCS in fiscal 2006: and
IP access driven primarily by the increased use of IP services by business customers (small to medium enterprises), the introduction of new products to meet customer needs and the increased use of the internet by businesses at greater bandwidth;

offset by a decline in:

PSTN products revenue as customers continue to move towards new products and services to satisfu their requirements and competition intensifies in the market, although the decline in retail lines in service has slowed considerably as has the revenue rate of decline;
. advertising and directories due to the deferral of the Melbourne Yellow™ print directory revenue to January 2007 due to changes in printing contracts to reduce costs;
specialised data as a result of products entering the mature phase of the product lifecycle with customers moving to better business solutions in IP access products;
· narrowband mainly due to migration to broadband; and
. ISDN due to a reduction in voice calls revenue as a result of pricing pressures and lower minutes of use, and decreased data calls revenue due to migration to alternative products such as ADSL and symmetrical HDSL.

We continue to see a shift in revenue from our traditional higher margin retail operations (such as our PSTN products) to our lower margin retail products (such as mobiles and broadband). In the latter area we have had two significant launches in this half-year with the release to the market of our Next G™ and ADSL 2+ product offerings. In the second half of fiscal 2006, we also introduced our first subscription price based offers into the consumer market to help address the decline of our traditional product revenues and to make pricing simple for our customers. We have also rolled out market based management throughout our business to enable us to better serve our customers' as we better understand their needs. These initiatives are showing positive signs in our revenue results.

Fixed telephony

	Half-year ended 31 December
	- 2006 -	2005		Change 2006/2005
		\$m.		\$m (% change)

PSTN products	3.615	3,831	(216)	(5.6%)
ISDN products	383	420	(37)	(8.8%)
Inbound calling products with an array and the contract of the contract of the contract of the contract of the	203	208	(5)	(2.4%)
Payphones	74 B.	54	(6)	(11.1%)
Customer premises equipment	Sinaalik 6455	135	16	11.9%
Intercarrier access services.	137.A	69	18	26.1%
Other fixed telephony with the contract of the contract of the contract of the contract of the contract of the	.	163		(4.3%)
Total fixed telephony revenue.		4,880	(237	(4.9%)

PSTN products

	Half-year ended 31 December
	2006 2005				Change 2006/2005
	Sm.	\$m.		\$m (% change)

Basic access revenue:
- Retail	1,278	1,308	(30)	(2.3%)
- Domestic wholesale	385	349	36	10.3%
Total basic access revenue.	1,663	1,657	6.	0.4%
Local call revenue	422.	553	(121)	(21.9%)
PSTN value added services revenue	3945	123	2	1.6%
National long distance call revenue.	408	471	(63)	(13.4%)
Fixed to mobile revenue www.communicationshipsers.communicationshipsers.com	749	761	(12)	(1.6%)
$international direct revenue$ ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	-96	106	(12)	(11.3%)
Fixed interconnection et	144	160	(16)	$(10.0\%)$
Total PSTN products revenue.	3,615	3,831	(216)	(5.6%)

Basic access lines in service (in millions)
Residential	5.47	5.52	(0.05)	$(0.9\%)$
Business.	2272	2.37	(0.10)	(4.2%)
Total retail et al.	7.74	7.89	(0.15)	(1.9%)
Domestic wholesale, $\ldots$ , , , , , , , , , , , , , , , , , , ,	92562	2.14	(0.02)	$(0.9\%)$
Total access lines in service	9.86	10.03	(0.17)	(1.7%)

Number of local calls (in millions) , , , , , , , , , , , , , , , , , , ,	3,390	3,882	(492)	(12.7%)
National long distance minutes (in millions) (i).	3,594	3,666	(72)	(2.0%)
Fixed to mobile minutes (in millions)	2,339	2,234	105	4.7%
International direct minutes (in millions)	264	273	(9)	(3.3%)

Note: statistical data represents management's best estimates.

(i) Includes national long distance minutes from our public switched telephone network (PSTN) and independently operated payphones. Excludes minutes related to calls from non-PSTN networks, such as ISDN and virtual private networks.

Total PSTN products revenue was \$3,615 million, which declined by 5.6% or \$216 million during the half-year. This decline has slowed when compared with the 7.6% decline in the December 2005 half.

There has been a general reduction in PSTN volumes, with a decline in retail and wholesale basic access lines for the half-year, although the decline in retail lines has slowed considerably. Volumes have reduced across local calls, national long distance calls, international direct calls and fixed interconnection. Yields have also declined in local calls, national long distance, fixed to mobile, international direct and fixed interconnection due to competitive pricing pressure and higher demand for alternative products.

During the second half of fiscal 2006, we introduced subscription pricing plans for our PSTN customers, which offer areater choice and value from the home phone, including untimed national long distance calls and low or no charge local calls. These plans have begun to impact positively on our PSTN performance for the current half-year.

Basic access

Our basic access revenue includes monthlu rental fees, installation charges and connection charges, from telephone service connections between a customer's premises and our PSTN network.

Basic access revenues are affected by:

housing growth;
· competition;
· demand for telephone services and additional lines;
· regulatory constraints in relation to wholesale basic access;
· migration to other products such as broadband and mobiles; and
price changes.

Under our basic access pricing structure, we have a range of access and call pricing packages to give our residential and business customers choice in the plan theu select, alona with a range of reward options. These pricing packages are reviewed reqularly to reflect the changing needs of customers. For the most part, wholesale customers receive the pricing plan which only incorporates the basic telephone service with local call rates, excluding long distance and fixed to mobile calls (with a "residential" and "business" differentiation still applying).

Our operating revenue from basic access services continues to be affected by competition. However the decline in retail lines in service has slowed considerablu from 4.1% in the December 2005 half and 3.4% for fiscal 2006. For the half-year the number of retail residential and business basic access lines decreased due to strong competition and migration to alternative products such as broadband and mobiles. In the retail segment, we saw a 1.7% decline in lines in service, mainly driven by the migration to other technologies which is underpinning the retail trend across PSTN revenues. Retail churn results in recent months have shown positive trends. Wholesale access lines in service have declined by 0.9% which is the first decline in a number of years.

Overall our operating revenue from basic access services increased. In the prior year, we introduced various basic access packages, which reduced the decline in yield in this area, despite an overall decrease in basic access lines in service.

The rental revenue decline has slowed due to a rise in line rental price charges from December 2005, which included a rise in basic access prices for wholesale and non preselected retail residential customers. In addition, penetration of higher value HomeLine plans including HomeLine Ultimate, a new subscription based plan introduced in April 2006, has contributed positively. Partly offsetting this was an increase in the discounts to Whole of Business customers and pensioners. Price increases for new service connections have also contributed to increased revenue.

Local calls

Our local call revenue from local call charaes, consists of revenue from local calls on our PSTN network and includes revenue from our MegaPop product which allows ISPs to offer untimed local call PSTN dial-up access for their customers via a single national dial-up 019 number. For the most part we charge for local calls without a time limit.

Our local call revenue is affected by:

the number of basic access lines in service and customers moving from our basic access service to our other access services, such as mobiles and broadband:
· competition;
· increasing use of email;
. customers migrating to mobile and fixed to mobile calling; and
pricing changes.

Local call revenue decreased by 21.9% or \$121 million, with both our retail and wholesale revenues being negatively impacted by ongoing product substitution from fixed calling to mobile voice calls and SMS, which is accelerated by the take up of capped mobile plans that have been heavily promoted by competitors. Substitution of data local calls continues to occur due to the migration of dial-up internet customers to broadband.

Generally, call volumes have continued to fall with a reduction in call volumes by 12.7%, reflecting the impact of customers migrating to other products, such as mobiles, fixed to mobile, and broadband products. Call volumes again declined at a faster rate than the decline in the number of lines in service. Prices have fallen due to ongoing discounting and the impact of subscription based pricing plans.

PSTN value added services

PSTN value added services revenue consists of a range of residential and business call completion products such as MessageBank®, silent lines, calling number display and call return.

Our revenue from PSTN value added services increased by 1.6% or \$2 million during the half-year.

Messaging and call completion products increased by 5.6% or \$5 million. Calling number display continued to grow due to attractive packaging discounts resulting in subscriber numbers increasing by 7%. Easycall revenue grew reflecting higher revenue per call impacted by subscription pricing plans.

Complex products declined by \$3 million driven by a reduction in revenue for a number of mature products, such as Indial, Siteline, Enhanced faxstream and other access products nearing the end of their lifecycle. Customers are also migrating to product offerings such as internet products and premium voice communication applications.

National long distance calls

Our operating revenue from national long distance consists of revenue from national long distance calls made from our PSTN network to the fixed network.

We generally charge for national long distance calls based on the time of day, day of week, destination and duration of the call, but packages are also offered on a capped price basis and under subscription pricing arrangements. A variety of promotions and pricing options are offered to encourage our customers to use our service and to inform them about the price and value of our service.

General economic conditions and customer perceptions about the cost and value of our service relative to competitor alternatives largely drive our national long distance call revenue. Competitive activity continues to negatively affect this revenue category directly through override and preselection and indirectly through competition for access lines. In addition, national long distance calls are impacted by customers migrating to mobile, broadband and fixed to mobile calling.

Our operating revenue from national long distance calls declined by 13.4% or \$63 million in the half-year. Competitor activity in the fixed line market continues to be high and most carriers have a fixed or mobile cap, or a combination of both in the market. This is having a direct impact on our national long distance revenues particularly where competitors are bundling these calls with broadband offerings. Volumes declined as a result of lower basic access services in operation and the impact of fixed to mobile substitution and other calling options available to customers.

Revenue per minute has declined and is the main contributor to the reduction in revenues year on year. There have been significant pricing and package changes in the last half-year which have impacted results. Despite a flagfall increase for all Homeline plans, national long distance has been impacted by the take up of subscription plans, one of which, Homeline Ultimate, has proven to be popular as it offers free STD calls. Changes to rates between distance bands have also contributed.

We continue to respond to competition offering a range of packages assisted by our market based management approach. However, with the strong growth in mobile and internet services in the Australian market, we expect national long distance call revenue to continue to be negatively impacted by ongoing migration of customers to mobile and internet products, and by the continued growth of subscription pricing plans.

Fixed to mobile calls

Our fixed to mobile revenue is generated by calls originating on our fixed networks and terminating on any mobile network. We generally charge for fixed to mobile calls based on time of day and mobile carrier, however packages are also offered on a capped price basis and subscription pricing plans. Our operating revenue for fixed to mobile calls is approximately split evenly between business and residential customers. The growth of the Australian mobile telecommunications market has driven revenue expansion in this product category in recent times. However, the introduction of capped plans in the mobile market has now impacted the volume of fixed to mobile activity as customers continue to slowly move their usage from our PSTN products to mobiles. The fixed to mobile environment is influenced by fixed to mobile preselection, whereby the carriage service provider (CSP) selected by a customer for national long distance calls automatically becomes the customer's provider for fixed to mobile calls.

During the half-year, fixed to mobile revenue declined by 1.6% or \$12 million. The decline was driven by lower revenue per minute resulting from higher discounts associated with ongoing competitive pressure, including incorporating fixed to mobile calls in reward offerings. This increase in the level of discounting is representative of our increased campaign activity aimed at reducing customer churn to other providers and win customers in the market place.

This decline in revenue was partially offset by growth in call volumes mainly due to the continued expansion of mobile services in the Australian market. The positive volume growth was due to both a higher number of calls and minutes of use. This growth is consistent with the growth in the total market mobile SIOs, i.e. a higher number of mobiles on which fixed calls can terminate, and the higher number of calls.

International direct calls

Our operating revenue from international direct relates to revenue we generate from international calls made from Australia to a destination outside Australia (outbound). This revenue is largely driven by general economic conditions, international events, customer perceptions about the cost and value of our service, competition, migration to broadband alternatives and promotion and advertising.

Our international direct revenue declined by 11.3% or \$12 million primarily as a result of lower volumes and continued competitive pressure on price. Factors which have influenced this trend include the competitive pressures from calling cards, fixed to mobile substitution and the growth of Voice over IP in the market place. International direct minutes declined 3.3% for the half-year.

Fixed interconnection

Fixed interconnection is made up of local and non local PSTN/ISDN access interconnection services provided to other carriers. This category is a highly regulated area of the Australian telecommunications market.

Our operating revenue from fixed interconnection decreased by 10.0% or \$16 million driven mainly by a reduction in volumes. Volume declines are in line with cross company trends in PSTN traffic and have been particularly impacted by migration to mobiles and, to a small degree, ULL (unconditioned local loop) build.

ISDN products

ISDN is a flexible, switched network based on digital technology. It can support many applications at one time (such as voice, data and video) while using a single access point to the network. ISDN services are offered to residential and business customers across Australia. Our ISDN products revenue is impacted by offerings and packages in the broadband market, growth in the number of DSL enabled exchanges and migration to advanced data products such as IP solutions.

ISDN products

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	Sm.	\$m.		\$m (% change)
Access revenue	212	211		0.5%
Data calls , , , , , , , , , , , , , , , , , ,		65	(18)	(27.7%)
Voice calls.		144	(20)	(13.9%)
Total calls revenue		209	(38)	(18.2%)
Total ISDN products revenue.	- 382	420	(37)	(8.8%)
ISDN access lines (basic access line equivalents) (in thousands) (i) $\ldots$ ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	1.226	1.205	21	1.7%

Note: statistical data represents management's best estimates.

(i) Statistical data - consistent with 30 June 2006 we have adjusted comparative data to show a more accurate reflection of the market. Conversion factors have been adjusted in calculating ISDN access lines.

ISDN access revenue has increased marginally by \$1 million to \$212 million. ISDN 2 has improved by \$5 million on December 2005 due to reduced discounting offset by a decline in SIOs due to promotion and growth in Broadband and the number of DSL enabled exchanges. ISDN 10/20/30 declined by \$4 million as a result of a yield reduction associated with the acquisition of new services and whole of business deals.

ISDN data calls revenue declined by 27.7% or \$18 million as Local and National Calls decreased by \$11 million and \$7 million respectively. This result is due to customer migration to alternative products such as ADSL and symmetrical HDSL, which offer higher bandwidths at reduced prices, together with lower minutes of use.

ISDN voice calls comprising local voice, national voice and international voice calls made on the Integrated Services Digital Network (ISDN), declined by 13.9% or \$20 million, mainly due to the decline in Local and National Calls by \$13 million and \$7 million respectively. Revenue from ISDN Local voice is impacted by a revenue re-classification of Priority® One3 and 1300 A Party products from ISDN to Inbound calling and lower minutes of use. Both Local and National Voice Calls have experienced a fall in price due to pricing pressure.

Inbound calling products

Our operating revenue from inbound calling products consists principally of the fees we charge our business customers for the provision of inbound calling numbers:

for Freecall^™ 1800, the cost of the call, charged to the party called, with no cost incurred by the caller;
for Prioritu® 1300 and Prioritu® One3:

• the calling party from a PSTN service incurs a cost of 25 cents (including GST) from anywhere in Australia. Different charges apply for calls made from ISDN, mobiles and payphones; and

• the service owner incurs the other components of the call charges as applicable.

Our inbound calling products revenue therefore is driven by two different streams, the caller (A party) and the lessee of the inbound service (B party). The A party revenues are affected by substitution to other voice products such as mobiles and the Internet. B party revenues are affected by increased customer competition impacting prices.

Inbound calling products

	Half-year ended 31 December
	2006	2005		Change 2006/2005
		\$m		\$m (% change)
Inbound calling products revenue	$\overline{\phantom{000000000000000000000000000000000000$	208	(5)	(2.4%)

B party minutes (in millions)	1,339	1,482	(143)	(9.6%)
A party calls (in millions).	$\overline{\phantom{a}}$ s10	502		1.6%

Note: statistical data represents management's best estimates.

Revenue from inbound calling products declined 2.4% to \$203 million for the half-year ended 31 December 2006 mainly due to a decline in revenue from Freecall™ 1800 as a result of ongoing price competition and substitution to 1300 services.

Our revenue from Priority®One3 and 1300 B Party products declined in the half-year due to very competitive market pressures resulting in lower prices. Minutes of use and services in operation have declined by 11.1% in this category of calls after the loss of some large volume customers. This is offset by higher call volumes by 5% on our Priority® One3 and 1300 A Party products after calls from our ISDN and Siteline products to these numbers were reclassified in September 2005 to inbound calling. The volume increase is representative of a full 6 months of ISDN and Siteline revenue being classified in Priority® One3 and 1300 A Party products for the half-year ending December 2006.

In addition, there was revenue growth due to call charges for ISDN and Siteline calls made to One3 services increasing from a cost of a local call to 27.5 cents. Offsetting these increases is the continuing trend of calls to these numbers being made from mobile phones resulting in mobiles revenue being recorded.

Pauphones

Payphones

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	$\frac{1}{2}$	\$m		\$m (% change)
Payphone revenue electronic contracts in the contract of the contract of the Payphone revenue of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract	48	54	(6)	(11.1%)

Telstra owned and operated payphones (thousands)	$\overline{z}$	31	[4]	(12.9%)
Privately owned and operated payphones (thousands)	26	28	(2)	(7.1%)
Total number of payphones (in thousands)		59	(6)	(10.2%)

Note: statistical data represents management's best estimates.

Customer premises equipment . . . . . . . . . . . . . . . . . . .

Payphone revenue declined by 11.1% to \$48 million in the half-year ended 31 December 2006. This is a result of substitution to other products, particularly prepaid mobile phones and competitors' prepaid calling cards. We removed a number of low usage phones resulting in a reduction in the number of Telstra owned and operated pauphones due to this migration. There has also been a decline in privately owned and operated payphones of 7.1% as private operators removed their support for unprofitable payphones, again due to increased mobile phone usage.

Customer premises equipment

Customer premises equipment Half-year ended 31 December 2006 2005 Change 2006/2005 \$m $\mathsf{sm}$ \$m (% change)

Customer premises equipment (CPE) revenue increased by 11.9% to \$151 million. This increase was mainly driven by growth in Enhanced CPE products and PBX Products, offset by a decline in first and extension phones.

$3.5 + 1.$

135

11.9%

Enhanced CPE Products grew after Telstra Business Systems (TBS) packages increased in volume by 58% as a result of strong marketing activity and process improvements to support tools and processes.

PBX Products have increased mainly due to the half-year ended 31 December 2006 including revenue from acquired entities Converged Networks Pty Ltd (\$3 million) which was acquired in April 2006, and Touchbase Avaya (\$2 million) acquired in July 2006.

These increases were offset by a decline in revenues from first and extension phones due to ongoing substitution to mobiles.

Intercarrier access services

Our operating revenue from intercarrier fixed access products consists of revenue from facilities access, unconditioned local loop, switch ports and interconnect network services, wholesale operator services, local number portability and other wholesale access.

Intercarrier access services

	Half-year ended 31 December
	$\frac{2006}{5m}$	2005		Change 2006/2005
	.	\$m		\$m (% change)
Intercarrier access services.	COMMONSCRIPTION $\overline{\mathbf{a}}$	69	18	26.1%

Intercarrier fixed access revenue increased by 26.1% or \$18 million during the half-year ended 31 December 2006. The main driver in the growth has been facilities access which has grown by 35.0% or \$13 million due to other carrier/ service providers expanding their infrastructure by using TEBA (Telstra Equipment and Building Access). TEBA sites have increased year on year as service providers seek to extend DSL capability and prepare to build their own infrastructure.

Unconditioned local loop has increased by 25.2% or \$4 million due to competitors building their own networks. SIOs have increased by 100% but revenue is not reflective of this as regulatory pressure has led to a downward pricing adjustment. Local number portability has increased by 79.5% as our wholesale area of the business has increased their customers. This product allows customers to offer their end users the option of keeping their existing number when taking up either a wholesale local call or mobile service. Offsetting this growth is a decline in other wholesale access products revenue by \$2 million due to a reduction in commercial and pre-selection churn charges and wholesale billing service charges.

Other fixed telephony

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	Sm.	\$m		\$m (% change)

Telstra information and connection services $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	62	60		3.3%
Virtual private network with the contract of the contract of the contract of the virtual private results of th		9	(3)	(33.3%)
$\blacksquare$ International freedal , , , , , , , , , , , , , , , , , , ,				0.0%
Card services		27	(5)	(18.5%)
Satellite products				14.3%
Customnet and spectrum will be contained as a series of the contained and spectrum of the containing of the containing of the containing of the containing of the containing of the containing of the containing of the contai		56	(2)	(3.6%)
Total other fixed telephonu revenue.	---------------------------------------	163.		(4.3%)

In the half-year ended 31 December 2006 operating revenue from other fixed telephony decreased by 4.3% or \$7 million mainly due to a decline in card services, virtual private networks and customnet and spectrum offset by an increase in Telstra information and connection services.

Card services includes postpaid card services, such as Homelink, Telecard and OneNumber, and prepaid card services, such as Prepaid Home, Phoneaway, and say G'day. The decline in card services revenue reflects an overall decline in the number of services due to substitution to cheaper and more convenient calling products such as mobiles and because products such as Telecard and Homelink 1800 have entered the mature phase of the product lifecycle.

Virtual private network enables multi location customers to link premises in Australia and overseas to an integrated system without the use of leased lines. Virtual private network revenue has decreased due to the discounting of call rates arising from competitive pressures.

Customnet and spectrum is a fully managed telephone system that provides a premium voice communication application. The decrease in revenue is mainly due to declining local call revenue caused by substitution to products such as fixed to mobile and lower prices offered to customers.

Telstra information and connection services includes operator assisted calls, directory assistance, Sensis 1234 call connect and emergency reporting services. Sensis 1234 call connect is a premium directory service for residential and business information includina most telephone numbers, addresses, business operatina hours and URLs (where available). The increase in Telstra information and connection services revenue is due to increased Sensis 1234 call connect revenues arising from longer average handling times of calls as a result of additional content on offer, including updates on the weather, sporting events and film schedules. This is offset by a decline in usage of directory assistance as customers move to the Sensis 1234 product and a decline in international operator assisted calls.

Mobiles

Our operating revenue from mobiles consists of revenue from access fees and call charges, as well as other services comprising international roaming, mobile MessageBank®, Short message service (SMS) and other mobile data. Mobile data includes mobile wireless broadband products such as EVDO and HSDPA which work off our CDMA and 3GSM 850 networks respectively. Operating mobiles revenue includes revenue from the sale of mobile handsets and interconnection charges where calls from other carriers' customers terminate on our network.

In October 2006 we launched the Next G^TM network, a new 3GSM network operating on the 850 megahertz spectrum. We provided services over four primary mobile technologies, CDMA, 2GSM, 3GSM 850 and 3GSM 2100. We have had large amounts of our current subscribers migrating from our old networks onto our 3GSM networks and these account for 61.0% of current 3GSM SIOs. The new 3GSM 850 network is intended to reduce our level of network costs and complexity once our CDMA network is closed, and has enabled us to provide our customers with faster speeds, better coverage and enable them to access a far areater range of services and content than our older network. We continue to offer 3GSM services to our customers over our existing 3GSM 2100 network through our joint venture with Hutchison Telecommunication (Australia) Limited (Hutchison).

Mobiles

		Half-year ended 31 December
	2006	2005		Change 2006/2005
	\$m	\$m		\$m (% change)
Access fees and call charges.	1,975	1,387	(12)	$(0.9\%)$
International roaming	157	131	26	19.8%
Mobile messagebank.	106	94	12	12.8%
Mobile data.
- Short message service (SMS) (i), , , , , , , , , , , , , , , , , , ,	304	240	64	26.7%
- Non SMS data (ii).	176	105	71	67.6%
Total mobile data	480	345	135	39.1%
Total mobile services revenue - retail	2,119	1,957	162	8.3%
Mobile services revenue - wholesale	26	16	10	62.5%
Mobile services revenue - mobiles interconnection	295	318	(22)	(6.9%)
Total mobile services revenue	2,441	2,291	150	6.5%
Mobile handset sales	357	211	146	69.2%
Total mobile revenue (iii) ,	2,798	2,502	296	11.8%

3GSM mobile SIO (thousands) (iv)	1,024	20	1,004	n/m
2GSM mobile SIO (thousands) et al., et al., et al., et al., et al., et al., et al., et al., et al., et al., e	6,210	6,955	(745)	(10.7%)
CDMA mobile SIO (thousands)	1,658	1,607	51	3.2%
Total mobile SIO (thousands)	8,892	8,582	310	3.6%

Wireless broadband - SIO (thousands) (included in CDMA SIO & 3GSM above)	204	47	157	334.0%

Prepaid mobile SIO (thousands)	3,626	3,839	(213)	(5.5%)
Postpaid mobile SIO (thousands).	5,266	4,743	523	11.0%
Total mobile SIO (thousands)	8,892	8,582	310	3.6%

CDMA wholesale mobile SIO (thousands)	71	68	3	4.4%
GSM wholesale mobile SIO (thousands)	-58	33	25	75.8%
Total wholesale mobile SIO (thousands)	129	101	28	27.7%

Number of SMS sent (in millions) (i)	2,227	1,318	909	69.0%
Deactivation rate	10.4%	8.7%		1.7%
Mobile voice telephone minutes (in millions) (v)	4,147	3,611	536	14.8%
Average revenue per user per month $s$ 's (vi)	40.55	38.79	1.76	4.5%
Average revenue per user per month excluding wireless broadband \$'s (vi).	39.94	38.28	1.66	4.3%
Average prepaid revenue per user per month \$'s (vi).	11.71	10.81	0.90	8.3%
Average postpaid revenue per user per month \$'s (vi)	60.98	60.84	0.14	0.2%
Averade mobile data revenue per user ner month $\mathfrak{C}$ s (vii)	0.10	6.76	2.43	25.9%

Note: statistical data represents management's best estimates.

(i) Includes short messaging service (SMS) and multimedia messaging services (MMS)

(ii) Includes \$68 million of revenue (December 2005: \$31 million) relating to wireless broadband services (EVDO & HSDPA)

(iii) Excludes revenue from:

calls from our fixed network which we categorise as fixed to mobile; and
CSL New World which is recognised separately as controlled entity revenue.

(iv) Total third generation ("3G") SIOs include 3GSM SIOs and our EVDO wireless broadband SIOs included in CDMA. The number of 3G SIOs are 1,182k (3GSM: 1,024k plus EVDO: 158k).

(v) Includes all calls made from mobile telephones including long distance and international calls, excludes data, messagebank, international roaming and CSL New World.

(vi) Average retail revenue per user per month is calculated using average retail SIOs and includes mobile data, messagebank and roaming revenues. It excludes interconnection and wholesale revenue.

(vii) Includes mobile & broadband wireless revenues (EVDO & HSDPA).

As at the half-year ended 31 December 2006, mobile services revenue increased due to the continued growth in the number of mobile telephone subscribers. The demand was particularly for 3GSM services as SIOs, which reached over the 1 million mark along with expanding minutes of use, offset by continued pressure on prices. In addition, we experienced strong growth in data products including SMS, Blackberry, EVDO and HSDPA.

Mobile revenues have continued to grow during the half-year driven by the increase in capped price plans, heightened campaign activity particularly around Next G^™ services, and the increasing use of mobile data services such as Blackberry, EVDO and HSDPA. The large growth in EVDO and HSDPA has been highlighted by an increase in SIOs of 157k for the half-year. The EVDO increase in SIOs of 109k is also the key reason for CDMA SIOs growing year on year. While voice continues to be the largest contributor to mobiles revenue, mobile data, international roaming and messagebank are the fastest growing, now representing 30.4% of mobile services revenue for the half-year.

Access fees and call charges revenue declined by 0.9% to \$1,375 million in the half-year reflecting a decrease in CDMA and 2GSM. Results have been impacted during the year by the growth in capped price plans which has directly impacted revenue per minute. CDMA prepaid revenue per minute was impacted by a promotion which gave CDMA subscribers half price calls for a year and was included in prior half results. We moved from 4.8% of our mobile customers on capped plans in December 2005 to 10.3% in December 2006. Call minutes generally increased for each technology, but these benefits did not outweigh the negative impact on price for the period.

SIOs increased overall, but it was 3GSM 850 (net of 2GSM and 3GSM 2100) that drove the growth with a 259k or a 3.7% increase in SIOs. In addition, CDMA increased by 51k or 3.2% in SIOs due to higher EVDO SIOs. The GSM revenues benefited from an increased emphasis on 3GSM after the launch of Next $G^{TM}$ in October and the availability of new 3GSM handsets.

Revenue from international roaming grew by 19.8% to \$157 million in the half-year ended 31 December 2006. The rise was due to an increase in both outbound and inbound. Outbound roaming minutes and revenue per call have increased revenue. The increase in inbound roaming revenue is in line with world wide mobile growth trends and the increase of travellers to Australia using their own mobile phones.

Revenue from MessageBank® increased by 12.8% to \$106 million in half-year primarily due to growth in minutes resulting from higher mobile usage.

SMS and Multimedia Messaging Services (MMS) revenues increased by 26.7% to \$304 million after a significant increase in the number of messages sent. There is a component of migration from voice communication to message communication which is evident in the reported growth rates. This has been stimulated by a 1 cent text offer and other rewards and bonus options offered during the half-year. Non SMS data growth was also experienced mainly in the corporate segment through the Blackberry and Telstra Mobile Broadband™ products on the EVDO and 3GSM networks. Arriving with the launch of Next G™ was also the education of the market of new data services and that a higher speed network makes data use better which has led to a previously non-active data population now using data. This is reflected in the average overall mobile data revenue per user per month increasing by \$2.43 or 35.9%. Mobile data (excluding messaging) is now 8.3% of mobile ARPU.

Wholesale mobile service revenue increased for the half-year ended 31 December 2006 by 62.5% or \$10 million due to growth in the Wholesale GSM resale product.

Average revenue per user (ARPU) increased by \$1.76 to \$40.55 for the half-year ended 31 December on a blended basis. This has been driven by higher ARPUs experienced on our 3GSM base compared with those experienced on the other 2GSM technologies with an approximate \$20 per month ARPU premium being maintained. Data usage has been a key product driver of this increase. Volumes have increased by 76.0%.

Mobiles interconnection revenue has declined 6.9% to \$296 million. The main product driving this is mobiles terminating revenue which has been impacted by a retrospective regulatory pricing adjustment made on the mobiles terminating access (MTA) rate. The rate has dropped from 18 cents per call minute in 2005 to 15 cents per call minute in 2006. This was despite a 12.3% increase in termination volumes resulting from growth across the entire market. GSM wholesale domestic roaming grew in the half by \$22 million which corresponds directly to a \$7 million drop in CDMA roaming due to migration towards Hutchison's 3GSM products as an alternative to CDMA. SMS interconnect has grown by \$14 million due to an increase in traffic resulting from growth in mobile SIOs as well as a continued increase in the popularity of text messaging as a cheaper alternative to mobile voice calling.

Revenue from handset sales increased by 69.2% to \$357 million in the half-year ending 31 December 2006 primarily due to growth in the number of 3GSM mobile handsets sold. This growth is attributed to an increase in marketing campaign activity focusing on the launch of Next G™ network and the sale of 3GSM handsets. The move away from CDMA and 2GSM to higher priced 3GSM handsets has had the effect of increasing the average revenue of handsets sold.

The deactivation rate has increased in the half-year by 1.7% due to a decline in prepaid mobile SIOs of 213k as a result of pricing pressures of the market and introduction in May 2006 of a shorter access period for recharge.

Internet

Revenue from internet services is driven primarily by:

the increased use of the Internet by businesses and consumers;
the movement of our customers from basic access and associated calling products to other access services such as ADSL:
· demand for greater bandwidth services such as broadband; and
the increased need to access broadband services on a mobile basis.

While internet markets have been experiencing growth, competition has put pressure on our prices. We expect that these trends will continue.

Internet

		Half-year ended 31 December
	2006	2005		Change 2006/2005
	3m	\$m.		\$m (% change)

Narrowband	79.	117	(38)	(32.5%)
Retail broadband the contract of the contract of the contract of the contract of the contract of the contract o	497	331	166	50.2%
Wholesale broadband with the contract of the contract of the contract of the contract of the contract of the c	279	209	70.	33.5%
Other.	90.	9	1.	11.1%
Total internet revenue .	-865	666	199	29.9%

Broadband subscribers - retail (in thousands) (i)(ii) $\ldots$ , , , , , ,	1,839	1,188	651	54.8%
Broadband subscribers - wholesale (in thousands).	1,621 L	1,164	457	39.3%
Total broadband subscribers (in thousands)	3.460	2,352	1.108	47.1%
Narrowband subscribers - retail (in thousands)	-312)	1,143	(324)	(28.3%)
Total online subscribers.	4.279	3,495	784	22.4%

Average revenue per retail broadband subscriber per month (\$'s) and account of the control of	49.491	54.32	(4.83)	(8.9%)
Average revenue per retail broadband subscriber per month before wireless broadband (\$'s)	46.96	50.42	(3.46)	(6.9%)

Note: statistical data represents management's best estimates.

(i) Telstra internet direct (Retail ADSL) are not included in retail broadband revenue and subscriber numbers. (ii) Our broadband subscribers include 204k subscribers relating to our wireless broadband products for December 2006 and 47k for December 2005.

Our narrowband products allow customers to connect to the internet from any telephone line in Australia. Our broadband products allow customers to experience an "always on" connection to the Internet, although this is not available to all lines due to technology limitations. During the half-year there was continued demand for capacity combined with competitive pricing which resulted in customers migrating their narrowband services to broadband. This trend placed additional price pressure on our narrowband products and resulted in a significant decline in our narrowband revenues.

There are a range of internet products and packages offered under our BigPond brand. Telstra BigPond home and business packages offer dial-up modem services to residential and business customers across Australia. Telstra BigPond broadband provides broadband internet services to consumer and business customers via HFC (Hybrid Fibre Coaxial) cable, ADSL (including ADSL 2+), satellite and wireless on the Next G™ and CDMA networks.

For the half-year ended 31 December 2006, our internet revenue grew by 29.9% or \$199 million to \$865 million. The subscriber base for our broadband products grew significantly, partially due to migration from narrowband products

but also due to growth in the overall online market. As at 31 December 2006, we had approximately 3.5 million broadband customers with over 1.8 million of these being retail customers. There has been a significant rise in demand resulting from competitive pricing strategies.

Narrowband revenue decreased by 32.5% to \$79 million for the half-year. Home subscribers have declined by 30% to approximately 684k and business subscribers by 21% to approximately 135k. The decline in narrowband revenue highlights the growing impact of dial-up to broadband migration. We expect this trend to continue with further price adjustments likely to occur as broadband prices fall and customers require higher speeds.

Retail broadband revenue increased by 50.2% to \$497 million for the half-year, mainly due to strong increases in SIOs, although overall ARPU declined half on half. Broadband ARPUs have however been maintained compared with the second half of fiscal 2006. ADSL, cable and wireless have been key drivers of the SIO growth, with ADSL increasing by 51.4% to 1,303k subscribers and cable increasing by 19.8% to 308k subscribers. Wireless contributed to overall subscriber growth with BigPond EVDO launched in August 2005 and HSDPA on the Next G™ network launched in October 2006. These products contributed 157k to the increase in our subscribers over the last 12 months. BigPond marked its 10^th anniversary in November with the launch of national high speed broadband network. The network delivers significantly increased speeds from exchanges offering ADSL 2+ services. The introduction of a number of key price and value campaigns has also stimulated broadband take up including, high-speed cable plans, price/value offers which included a combination of discounting access and installation offers, various sales channel and marketing initiatives and competitive differentiation such as appealing and popular content offers.

As our customers migrate from narrowband to broadband our overall blended ARPU has increased from December 2005 to December 2006. This result is due to broadband subscribers increasing at a greater rate than narrowband migration. Broadband subscribers have a substantially higher APRU than narrowband and the proportional mix of customers has changed.

Wholesale broadband revenue increased by 33.5% to \$279 million for the half-year ended 31 December 2006, driven by a continuing strong market demand for high bandwidth services stimulated by retail competition. Wholesale DSL internet grade has grown by 33.7% to \$251 million driven by SIO growth of 29.6% to 1,391k, combined with delayed ULL build activity and a stable average revenue per user. Spectrum sharing services has also contributed to revenue growth, after strong SIO growth from 90k to 230k.

Other revenue, which is made up of media content and BigPond webhosting services, increased by 11.1% or \$1 million over the half-year. BigPond webhosting services primarily relates to the hosting of fully functional personal or business websites for customers, however the majority of the revenue growth can be attributed to media content with movie, music, games and sport content all growing over the period.

IP & data access

IP & data access
	Half-year ended 31 December
	2006	2005		Change 2006/2005
	SID	\$m.		\$m (% change)

Internet direct	81	70	11	15.7%
Specialised data:
- Frame relay	136	157	(21)	(13.4%)
- ATM	70	46	(6)	$(13.0\%)$
- Digital data services.	592	104	(22)	(21.2%)
- Leased lines	50 M	112	$\overline{\mathbf{z}}$	1.8%
- International private lines	W.	14		0.0%
- Other specialised data	-18	18		0.0%
Total specialised data.	-404	451	(47)	(10.4%)
IP access	-193	152	41	27.0%
Wholesale internet & data.	83 B	100	11	11.0%
Total IP & data access revenue	789	773	16	2.1%

Domestic Frame access ports (in thousands) (and accommodation of the contract of the Domestic Fig. 2.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.		33	(4)	(12.1%)

Note: statistical data represents management's best estimates.

Our operating revenue from IP and data access products consists of revenue from Internet direct, specialised data, IP Access and Wholesale internet and data. This product suite is used primarily by small to large enterprise customers. IP and data access has increased by 2.1% or \$16 million driven mainly by IP access, internet direct and wholesale internet and data. IP access has grown due to newer technology attracting a migration of small business and enterprise customers from mature products in specialised data.

Internet direct has increased by 15.7% to \$81 million due mainly to Telstra Virtual ISP where a commercial deal signed has helped increase SIOs by 38k or 100%. The Telstra Virtual ISP product brings together our MegaPoP national dial-IP platform with our wholesale internet solution to provide dedicated dial-up ports that customers can on-sell to end users.

Specialised data has declined by 10.4% to \$404 million in revenue due to the maturing nature of the products in this category with most customers moving to IP Access products which provide better business solutions. Digital Data Services (DDS), is a maturing product with majority of customers now opting for symmetrical HDSL solutions. Digital data access has declined as wholesale customers are leaving this product and building their own networks. The maturity in DDS products has lead to a decline in revenue of 21.2% or \$22 million.

Frame revenue has declined by 13.4% to \$136 million due to frame products maturing and customers migrating to newer technologies particularly Symmetrical HDSL. ATM has declined 13.0% to \$40 million due to customers moving to other leased lines, IP MAN and IP WAN. The migration of ATM customers to other leased lines has resulted in a revenue increase in this category, offset by voice graded dedicated lines due to customers migrating to DSL based or wireless technologies like IP MAN and IP WAN.

Our operating revenue from IP access is driven primarily by the increased use of IP services by business customers (small to medium enterprises), the introduction of new products to meet customer needs and the increased use of the internet by businesses at greater bandwidth. IP access has grown by 27.0% to \$193 million due to new subscribers in

Symmetrical HDSL, IPWAN and IPMAN/Ethernet. Symmetrical HDSL has increased SIOs by 52.0% with increased revenue of \$18 million underlining the growth phase of this product due to the demand for broadband/VPN networks.

IPMAN/Ethernet and IP WAN have increased revenue in the IP access category by \$25 million. IP MAN/Ethernet products have increased volume by 49.0% due to the capability to provide 'next generation' data access services with high-speed IP and Ethernet access solutions respectively for large to medium corporate enterprises. This is particularly underlined by the government sector's demand for wideband internet protocol. IP WAN growth can be attributed to increased discounting and the beneficial impact of being part of bundled solutions such as Connect IP.

Wholesale internet and data has increased by 11.0% or \$11 million mainly due to wholesale leased transmission increasing revenue by \$11 million driven by transmission growth. Main reasons behind the growth include an increase in end user bandwidth demand driven by corporate networks, internet usage, ISPs growing DSL network coverage and requiring backhaul and mobile providers requiring additional backhaul to support bandwidth requirements for their 3GSM networks. The SIOs for transmission have increased by 3k or 26.0%. Wholesale VPN (virtual private networks) also arew by \$4 million as wholesale customers found an attractive alternative to deliver better internet solutions, offset by our wholesale internet products which have declined by \$6 million due to pricing pressures in the market place.

Business services and applications

Our operating revenue from business services and applications is derived from managing all or part of a customer's communications and IT solutions and services covering:

· managed network services which is network based voice and data products, including CPE management, radio networks and new wireless based technologies;
IT services which is managed customer infrastructure (e.g. desktop and end user devices), hosting and application development. In addition, IT services also includes professional consulting and deployment services;
business applications including IP telephony, end to end conferencing solutions and products that support transaction services; and
. our eBusiness and global data centre.

Business services and applications

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	$\sin$	\$m.		\$m (% change)

Managed network services with the contract of the contract of the contract of the material state of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contra	$\begin{array}{r} 136 \ \hline 279 \end{array}$	154	(18)	$(11.7\%)$
IT services		298	(19)	(6.4%)
Business applications.	61	54		13.0%
Other.	.		24	n/m
Total business services and applications revenue entitled and an amount of the service of the service state.	$\sim$ $\sim$ $\sim$	507		(1.2%)

For the half-year ended 31 December 2006, business services and applications revenue declined 1.2% to \$501 million mainly due to lower managed network services and IT services revenue.

The decrease in managed network services revenue of 11.7% or \$18 million was driven by reductions in managed voice and data products, together with managed WAN and radio. Managed voice and managed data declined due to reduced project activity, lower CPE leasing and product substitution to IP telephony. Managed WAN and managed radio was lower across a number of customers and also experienced lower construction activity.

IT services revenue declined by \$19 million to \$279 million for the half-year mainly due to the sale of Australian Administration Services (AAS) in August 2006. The half-year to December 2005 included a full 6 months of revenue compared to only 2 months in the current half-year. This decline was partially offset by revenue earned from a number of new government contracts signed, along with the Department of Defence's Central Office IT Infrastructure Support Services contract signed in December 2005 which is a five-year contract for an estimated \$200 million.

Business applications has primarily grown due to IP telephony as customers transition from traditional systems to converged voice and data platforms, together with improved contact solutions revenues, particularly network computer telephony integration (CTI).

Other revenues have increased due to the recoanition of managed industrial network services being reported separately from the external construction product this half-year. Overall the revenue from this product has remained flat after an increase in sales offset by a change in the recognition policy for project losses. Previously losses were recognised over the life of the project whereas this now occurs up front.

Advertising and directories

Our advertising and directories revenue is predominantly derived from our wholly owned company, Sensis, and its controlled entities. The Sensis group provides innovative advertising and search solutions through a print, online, voice, wireless and satellite navigation network.

The majority of Advertising and Directories revenue is derived from our print and online directories - Yellow^™ and White Pages® - which have grown steadily overall due to the introduction of new print and directory advertising initiatives.

Advertising and directories

			Half-year ended 31 December
	2006 $\frac{1}{2}$ --------------------------------------	2005 \$m		Change 2006/2005 \$m (% change)
Advertising and directories revenue	824	944	(120)	(12.7%)

The half-year revenue result was impacted by the deferral of the Melbourne Yellow^™ print directory production from December 2006 to January 2007. Excluding the impact of the revenue deferral of \$174 million from our prior year results, our Advertising and Directories revenue grew by 7.0%. The acquisition of SouFun has also contributed \$24 million to the Advertising and Directories revenue during the half-year.

For a detailed description of the performance in this area, please refer to the Sensis financial summary on page 44.

Offshore controlled entities

The offshore controlled entities category relates to our offshore subsidiaries, which provide a variety of products and services within their various regions of operation. Included in this category are the following significant offshore controlled entities:

. CSL New World Mobility Group (CSLNW), which generates its revenues from the Hong Kong mobiles market. CSLNW was formerly known as Hong Kong CSL Limited, until March 2006 when this entity merged with Hong Kong based mobile company New World PCS. As a result of this transaction, we own 76.4% of the merged entity;
· TelstraClear, which generates its revenues from providing full integrated services to the New Zealand market; and
other offshore controlled entities predominantly in the Telstra Enterprise and Government segment, which mainly generate revenues from the provision of global communication solutions to multinational corporations through our interests in the United Kingdom, Asia and North America.

Offshore controlled entities - revenue

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	Sm	\$m.		\$m (% change)

CSL New World,	519	373	146	39.1%
TelstraClear	286	321	(35)	(10.9%)
Other offshore controlled entities	Experimental de la provincia de la provincia de la provincia de la provincia de la provincia de la provincia	139	34	24.5%
Total offshore controlled entities revenue	$\sim$ $\frac{1}{2}$	833	145	17.4%

Consolidated revenue from offshore controlled entities increased for the half-year ended 31 December 2006 by 17.4% to \$978 million. This growth was primarily due to the following factors:

. CSLNW revenue growth of 39.1% to \$519 million was driven by strong growth in mobile services revenue and mobile handset revenue. This growth was mainly due to additional revenue of \$121 million being generated as a result of the merger between Hong Kong CSL and New World PCS in March 2006. Mobile services revenue was driven by rising data, international voice and prepaid revenue. However this was offset by declining local voice revenue due to the impact of sustained pricing pressure. Mobile handset revenue growth was mainly due to the merger and handset promotions being well received by the market. Revenue growth was also effected by a \$9 million unfavourable foreign exchange rate impact.
· TelstraClear experienced a net decline in revenue of 10.9% to \$286 million. There were significant declines in calling revenues largely due to lower usage and falls in the customer base along with a decline due to fewer one-off implementation charges. Internet revenue declined due to market led price erosion and a smaller customer base mainly in the business segment. Revenue was also negatively impacted by the NZ\$ exchange rate, with a \$20 million foreign exchange impact. Access revenue growth partially offset the other categories of decline, mainly due to increased gateway revenue in the business segment.

• The 24.5% growth to \$173 million growth in other offshore controlled entities revenue was mainly due to growth in Asia, US and Europe. The Asian market business grew by \$14 million mainly due to continued strong sales growth in the established Telstra Singapore and Telstra Hong Kong businesses. The KAZ business also exhibited strong growth in the same region. The US business grew by \$10 million mainly as a result of a major contract to provide telecommunications solutions over an integrated global IP-based network. Predominantly the growth resulted from the Service Provider Channel in the USA, particularly Global Crossing and to a lesser degree Broadwing. Revenue growth in Europe of \$9 million was mainly due to increases in data and hosting revenue growth through PSINet. This growth was partly offset by the continued erosion of the Powergen and Cable Telecom customer bases.

For further detail regarding the performance of our major offshore subsidiaries CSLNW and TelstraClear, refer to the business summaries on pages 46 and 47.

Pay TV bundling

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	Sm.	\$m.		\$m (% change)
Pay TV bundling revenue contained and account of the contact of the contact of the contact of the contact of t		156		5.1%

FOXTEL Pay TV bundling subscribers (thousands)		287	22	7.7%
Austar Pay TV bundling subscribers (thousands)	38.	54	(16)	(29.6%)
Total Pay TV bundling subscribers (thousands)	347	341		1.8%

Note: statistical data represents management's best estimates.

Total pay TV bundling revenue grew by 5.1% to \$164 million for the half-year ended 31 December 2006, with FOXTEL revenue growing \$11 million, offset by a decline in AUSTAR revenue of \$3 million.

FOXTEL bundled services revenue grew by 8.6% to \$145 million after an increase in subscribers by 7.7%, largely due to the FOXTEL conversion campaign during the half-year targeting both new customers and existing analogue customers. Higher revenue per user and a reduction in discounts also contributed to the revenue growth. FOXTEL on the Next G^™ handsets was made available in October 2006 and as a result it is yet to have any significant impact on revenue growth.

At 31 December 2006, analogue services in operation represented approximately 1% of FOXTEL subscribers compared with 21.4% at the same time last year. We are in the process of closing the analogue network and as a result analogue services remaining will be minimal.

The AUSTAR bundled services revenue decline for the half-year of 14.1% to \$19 million was mainly due to a declining subscriber base, as a result of limited marketing activity undertaken throughout the period.

Other minor items

Other minor items
		Half-year ended 31 December
	2006	2005		Change 2006/2005
	\$m.	\$m		\$m (% change)

HFC cable usage, , , , , , , , .	1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 - 1999 $40^{\circ}$	41	(1)	(2.4%)
Commercial and recoverable works	$\mathbf{u}$	25	(11)	(44.0%)
External construction.	18	59	(41)	(69.5%)
0ther.		50	14	28.0%
Total other minor items revenue	136	175	(39)	(22.3%)

Operating revenue from other minor items decreased by 22.3% to \$136 million for the half-year ended 31 December 2006. The revenue decline was mainly due to lower external construction and commercial and recoverable works.

External construction revenue decreased by 69.5% to \$18 million. External construction revenue, which is generated by the delivery of communications network infrastructure solutions, declined mainly due to a \$24 million reclassification of revenue into managed industrial networks, part of business services and applications, and a decrease in revenue from carrier customers. All carrier customer projects are progressively being wound down as we move out of this business. These decreases were marainallu offset bu an increase in activitu relatina to the construction of the 3GSM 2100 network in conjunction with our joint venture partner, Hutchison.

Commercial and recoverable works revenue declined 44.0% to \$14 million mainly due to the conclusion of certain contracts, the discontinuing of network build projects for our competitors and the shift from using full-time staff to contractors for recoverable work, thereby reducing expenditure, but also reducing revenue on this activity.

HFC cable usage is made up of revenue received from FOXTEL for cable installations and service calls. Revenue decreased marginally as a result of a decline in cable field works as FOXTEL are taking up their own installation activity. This decrease was partially offset by an increase in revenue share due to higher subscriber numbers and continuing migration from analogue to digital.

Other revenue increased by 28.0% to \$64 million mainly due to increases in overdue account payments revenue as a result of a \$4 increase for overdue bills \$200 and higher, and pricing plan adjustments revenue increasing due to incorrect pricing based on some of our plans.

Other revenue

Other revenue
			Half-year ended 31 December
	2006	2005		Change 2006/2005
	$\frac{1}{2}$	\$m		\$m (% change)
Rental Income	$\sim$	10		50.0%

Rental income growth was mainly due to changes to some of our data centre leases, along with a sublease agreement relating to the office space Australian Administrative Services (AAS) continues to occupy.

Other income

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	Sm.	\$m.		\$m (% change)

Proceeds from sale of property, plant and equipment.	95.	17	(2)	(11.8%)
Proceeds from sale of investments.	242		242
Asset/investment sales	257.	17	240	n/m

Cost of property, plant & equipment	165 U.S	(8)	(3)	37.5%
Cost of investment the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contrac	(194)		(194)
Cost of asset / investment sale with the contract of the contract of the sale of asset / investment sale with the contract of the contract of the contract of the contract of the contract of the contract of the contract of	(205)	(8)	(197)	n/m
Net gain/loss on assets/investment sale to account the contract of the contract of the same of the same of the	1928	q	43	477.8%

USO levy receipts	25	28	(3)	(10.7%)
Government subsidies $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	89	63	(12)	$(19.0\%)$
Miscellaneous income	24.	29	(5)	(17.2%)
Other income discussed as a series of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the cont	-100	120	(20)	(16.7%)
Total other income ,	51 P.	129	23	17.8%

Total other income increased by 17.8% to \$152 million for the half-year ended 31 December 2006.

Income growth in this area was driven by proceeds from sale of investments of \$242 million. This mainly related to the sale of Australian Administration Services (AAS) in August 2006, the superannuation administration business of our KAZ Group, for \$231 million, recognising a net gain on sale of approximately \$44 million. We also sold Platefood Limited, which provided search marketing software and search results to directories and media companies, in November 2006. Proceeds from this sale were \$10 million, with a net gain on sale of \$4 million.

The decline in revenue for the half-year ending 31 December 2006 was mainly due to less revenue being received in relation to the Broadband Connect Australia scheme compared with the prior year. Also contributing to the decline was the timing of the final Esten scheme payment, which is not due until the second half of 2007. The Esten scheme provides funding for mobile coverage in designated rural areas.

Operating expenses

	Half-year ended 31 December
	2006	2005		Change 2006/2005
	Sm	\$m.		\$m (% change)

Labour expense	1,996	2,053	(57)	(2.8%)
Goods and services purchased	2,566	2,195	371	16.9%
Other expenses.	2,318	2.011	307	15.3%
	6,880	6.259	621	9.9%
Share of net loss from jointly controlled and associated entities				0.0%
	6,881	6.260	621	9.9%
Depreciation and amortisation.	1,978	1,800	178	9.9%
Total operating expenses.	8,859	8.060	799	9.9%

In the half-uear ended 31 December 2006, our total operating expenses (including share of net loss from iointlu controlled and associated entities) was \$8,859 million, compared with \$8,060 million in the prior corresponding period. Our operating expenses have been impacted by the following factors:

· higher goods and services purchased mainly relating to cost of mobile sales as a result of increased market campaign activity, especially following the launch of the Next G™ network;
. costs associated with transformational initiatives, mainly related to service contracts and other agreements, amounting to \$137 million;
growth in depreciation on our communications plant asset base along with the impact of a service life review of our asset base as part of transformation activities. The impact of this service life review increased depreciation expense by \$148 million in the current half-year;
· additional operating expenses of \$152 million in the half year ended 31 December 2006 from our acquisition activity including the SouFun acquisition, as well as the inclusion of a full six months of expenses relating to entities we acquired in the second half of fiscal 2006. This included expenses relating to Adstream and New World PCS. Offsetting this increase is a reduction to our expenses of \$33 million, attributable to our divestment of Australian Administrative Services (AAS) in August 2006;
. lower labour expenses as a result of reduced staff numbers and the utilisation of the restructuring and redundancy provision raised at the end of fiscal 2006, which has the effect of lowering our redundancy expense compared with the prior half-year; and
lower network payment costs as a result of reduced mobile terminating access rates and lower net costs flowing through from REACH, resulting in lower offshore outpayments.

Labour expense

Labour expense includes:

· salary, wages and related on-costs, including superannuation costs, share based payments, workers' compensation, leave entitlements and payroll tax;
costs of engaging contractor labour and agency costs; and
restructuring costs, including redundancy expenses.

In the table below, our domestic full time employees include domestic full time staff, domestic fixed term contracted staff and expatriate staff in overseas subsidiary entities. Domestic full time employees do not include casual and part time employees or employees in our offshore subsidiary entities. Our full time employees and equivalents include the total of our domestic and offshore full time employees, and casual and part time employees measured on an equivalent basis. Our total workforce includes domestic and offshore full time, casual and part time employees as well as contractors and staff employed through agency arrangements measured on an equivalent basis.

During fiscal 2006, we undertook a comprehensive review of the sources of our workforce numbers and this resulted in a restatement of our workforce figure for the half-year ended 31 December 2005. For 31 December 2005, we previously reported domestic full time employees of 39,406, full time employees and employed equivalents of 45,876 and total workforce of 52,705. We have revised these numbers for the half-year reporting purposes after standardising our subsidiary entities' methodology for reporting workforce numbers and reviewing some of our data capture systems. We have also revised the way we count staff on long term leave to exclude them from our reported staff balances to enable us to better manage the business.

Labour expense

	Half-year ended 31 December
	2006 2005		Change	2006/2005
	sm.	\$m.		\$m (% change)
Labour expense to construct the contract of the construction of the construction of the construction of the construction of the construction of the construction of the construction of the construction of the construction o	1,996	2,053	(57)	(2.8%)

Domestic full time employees (whole numbers) (i).	36,184	39,115	(2, 931)	(7.5%)
Full-time employees and employed equivalents (whole numbers) (ii).	43,989	45,456	(1,467)	(3.2%)
Total workforce, including contractors and agency staff (whole numbers) (iii)	48,991	51,057	(2,066)	$(4.0\%)$
Reduction in total workforce in fiscal 2006 excluding impact of the New World merger	(3,859)
Reduction in total workforce since June 2006 excluding acquisition/divestment activity (iv) Total reduction in workforce . . . .	(737) (4,596)

Note: statistical data represents management's best estimates.

(i) Excludes offshore, casual and part time employees. 31 December 2005 balance has been restated, refer to details above.

(ii) Includes all domestic and offshore employees, including those of our subsidiary entities. 31 December 2005 balance has been restated, refer to details above.

(iii) Includes all domestic and offshore employees, including subsidiary entities as well as contractors and agency staff. 31 December 2005 balance has been restated, refer to details above.

(iv) The reduction in total workforce since June 2006 excludes the impact of our divestment in Australian Administration Services Pty Ltd and our acquisition of SouFun Holdings Ltd, both of which occurred in August 2006.

During the half-year ended 31 December 2006, our total workforce decreased by 0.9% or 453 full time equivalent staff, contractors and agency staff. This decrease is predominantly due to specific efforts across the business to rationalise the number of people working for the Telstra group as transformation initiatives take effect. During the half-year, we also acquired SouFun Holdings Limited which contributed 1,194 full time equivalent staff and we sold Australian Administration Services, which reduced staff numbers by 910. As highlighted in the above table, excluding the impact of these investment changes, total workforce numbers have declined 737 from 30 June 2006.

Our labour expense decreased by 2.8% to \$1,996 million mainly due to:

· increased levels of redundancy resulting in lower staff levels and therefore a reduction in salary costs;
· a reduction in redundancu costs:
. lower overtime payments partially offset by higher contractor and agency payments; and
· a reduction of worker's compensation costs based on a decrease due to a lower number of claims and claim payments and an increase in the bond rate.

We incurred redundancy expenses of \$51 million for the half-year ended 31 December 2006 compared with \$96 million for the comparable period last year. As part of the business restructure, we raised a provision for restructuring and redundancy at the end of fiscal 2006 which has been utilised in line with the level of transformational redundancy activity that has taken place in the current half-year.

The above decreases in labour expense were partially offset by an increase due to pay rises resulting from Enterprise Agreement increases for award staff and contract staff rate increases, together with higher pension costs (due to an adjustment for additional curtailment costs) and the impact of lower labour costs capitalised.

Goods and services purchased

Goods and services purchased includes core costs of our business that vary according to business activity. The largest component of this expense category is network payments, which are payments made to other carriers to terminate international and domestic outgoing calls and international transit traffic. Other significant items include the costs of mobile handsets and internet modems, costs of mobile sales (including subsidy costs, usage commissions and dealer incentives), managed services costs (including service contracts, sub-contractors and leases), service fees (predominantly in relation to our pay television services) and paper purchases and printing costs.

Goods and services purchased

		Half-year ended 31 December
	2006	2005		Change 2006/2005
		\$m		\$m (% change)

Cost of goods sold - handset subsidies	417	211	206	97.6%
Cost of goods sold - other,	69 I St	406	204	50.2%
Usage commissions	-159	130	29	22.3%
Network pournents	887	1,005	(118)	(11.7%)
Service fees	54 J C	154	17	11.0%
Managed services	-106-	91	15	16.5%
Dealer performance commissions	59.	35	24	68.6%
Paper purchases and printing.	64.	86	(22)	(25.6%)
Other, , , , , , , , , , , , , , , , , , ,	93.	77	16	20.8%
Total goods and services purchased	2.566	2.195	371	16.9%

Our goods and services purchased increased in the half-year mainly due to higher mobile handset subsidies and cost of goods sold, offset by lower network payments. This expense category increased by 16.9% to \$2,566 million due to the following factors:

an increase of \$49 million due to the inclusion of a full six months of expenses relating to New World PCS, which was merged with CSL in the second half of the prior fiscal year. The increase is mainly seen in cost of goods sold handset subsidies and network payments. Offsetting this increase is our divestment of Australian Administrative Services in August 2006, contributing to a decline of \$6 million;
· a rise in cost of goods sold mobile handset subsidies of \$206 million, attributable to an increase in the take up of handsets on subsidised plans as well as higher average subsidies offered. This is mainly due to the launch of the Next G™ network in October 2006 and a significant campaign extending into the first quarter of the fiscal year. As a result, we have seen a larger range of handsets being subsidised. Our average subscriber acquisition and retention cost is \$183 for the current half-uear, up from \$121 in the prior correspondina period, as we invest in our subscriber base to drive growth. In addition, the CSL New World Mobility Group has implemented a more aggressive handset subsidy policy in order to increase handset sales;
· a rise in other cost of goods sold is mainly due to higher sales volumes for mobile handsets and a higher average cost per handset. This is primarily driven by increased market campaign activity, especially following the launch of the Next G™ network. Strong BigPond broadband demand and sales growth in other product categories such as CPE for small business customers have also driven the increase. Additionally, payments made to Brightstar, which started in the second half of fiscal 2006, also contributed. These payments were made in accordance with our procurement agreement with them to centrally source wireless devices from global suppliers with a view to achieving cost savings. Significant costs have been avoided as a result of the Brightstar arrangement, inclusive of the above payments;
· usage commissions increased by 22.3% to \$159 million, largely driven by higher commissionable mobile revenue in the half-year, as well as increased uptake of non-mobile related products such as BigPond products;
growth in dealer performance commissions, mainly attributable to a higher number of new mobile activations and re-contracts through external dealer channels as a result of increased market campaign activity and the launch of the Next $G^{TM}$ network. These commission payments are contract payments based on specific performance targets;
service fees increased by 11.0% to \$171 million in the half-year led by a rise in bundling of pay television services due to growth in bundled FOXTEL subscribers, price increases and payments to vendors for content supplied on 3GSM mobile phones. Other drivers for the increase are variable costs related to Blackberry and Mobile Content; and
our managed services costs grew by 16.5% to \$106 million in the half-year ended 31 December 2006, mainly attributed to increased project management professional service costs by third party suppliers for the support of the major customer contracts growth.

The increases were partially offset by a decrease in other goods and services expenses such as network payments and paper purchases and printing costs.

Our network payments declined by \$118 million to \$887 million largely due to:

. a reduction in the mobile terminating access rate to 15 cents per minute, which was backdated to January 2006 based on an ACCC determination. Hence, \$61 million of the reduction in our domestic network outpayments relates to the second half of fiscal 2006; and
lower payments made to REACH for international capacity and termination costs due to lower net costs flowing through from REACH, which in turn reduces our share of expenses.

The decrease in network payments has been partly offset by volume increases of domestic mobile and SMS traffic terminating on other carriers' networks. Our offshore outpayments have also grown due to higher outbound roaming revenue, as well as growth in our UK, USA and Asian operations and the consolidation of expenses from New World PCS.

Paper purchase and printing costs decreased by 25.6% to \$64 million in the half-year ended 31 December 2006 largely due to the shift of production of the Melbourne Yellow™ print directory from December 2006 to January 2007 this fiscal year, due to the renegotiation of a printing contract. Our divestment of Australian Administrative Services in August 2006 has also contributed to the cost reduction.

Other goods and services purchased has increased by \$16 million mainly as a result of an increase in commercial project payments, which increased by \$10 million in the half-year ended 31 December. This is mainly due to an accounting adjustment related to previously deferred expenses in relation to several customer contracts.

Other expenses

		Half-year ended 31 December
	2006.	2005		Change 2006/2005
	Sm.	\$m		\$m (% change)

Property, motor vehicle and IT rental expense	307 SHIPPS	292	15	5.1%
Net foreign currency conversion losses/(gains)	(3)	(3)	$\overline{\phantom{a}}$	0.0%
Audit fees		4	$\mathbf{r}$	0.0%
Service contracts and other agreements	1,047	892	155	17.4%
Promotion and advertising with the contract of the contract of the contract of the contract of the contract of		154	58	37.7%
General and administration.	$212$ $452$	398	54	13.6%
Other operating expenses	50.	188	q	4.8%
Impairment and diminution expenses	- 102	86	16	18.6%
Total other expenses.	2,316	2,011	307	15.3%

Our other expenses were \$2,318 million in the half-year ended 31 December 2006, a 15.3% increase. Our other expenses in the current half-year include \$48 million relating to a full six months of expenses, attributable to the merger of CSL with New World PCS, the consolidation of expenses from SouFun, and Adstream which was acquired in the second half of the prior fiscal year. This increase is partially offset by the divestment of Australian Administrative Services in August 2006 of \$4 million.

The movement in the significant categories of other expenses is discussed below.

The largest component within this expense category is service contracts and other agreements. The expense increased by 17.4% to \$1,047 million in the half-year ended 31 December 2006, mainly driven by the following factors:

. costs associated with transformational initiatives largely associated with the IP enablement of our network and IT transformation of \$80 million;
payments to Brightstar for management of our Channel Logistics Operations centre, which did not exist in the prior corresponding period. A payment is made to Brightstar based on the volumes of handsets shipped out from the centre to the various sales channels:
volume based increases including increased activations, billing enquiries and content related payments for BigPond products due to product growth; and
a rise in consultancy costs associated with the company transformation activity.

Our promotion and advertising costs increased by 37.7% to \$212 million during the half-year mainly due to increased spend related to the launch of the Next GTM network, as well as more marketing activity to stimulate growth of Broadband and wireless products.

General and administration expenses increased by 13.6% to \$452 million in the half-year ended 31 December 2006. This is mainly driven by changes in booking practices following improved invoicing procedures, which has seen costs previously booked to Service Contracts and Agreements now reclassified as accommodation and information technology costs. Also contributing to the increase is higher building maintenance costs, as well as electricity costs associated with running the new Next $G^{TM}$ network. Our training costs have also increased due to our focus on training and equipping our field staff in order to better service and satisfy customer needs, which is an important part of the transformation. Legal costs have risen during the half-year due to increased litigation and other legal work, including

the Crazy John's Mobile World litigation, Optus Home Access litigation, Shareholder class action and the IT transformation. The increases have been partially offset by lower IT costs arising out of the re-negotiation of an IT vendor contract as part of the transformation strategy.

Our impairment and diminution expense has increased by 18.6% to \$102 million in the half-year ended 31 December 2006. This is mainly attributable to increased bad and doubtful debt expenses and higher inventory write down expenses. Our doubtful debt expense has risen due to increased aged debt associated with broadband customers, as well as a large decrease in the prior corresponding period, which related to a provision for doubtful debts no longer required. Our inventory write down expense has increased in our construction business due to the transformation, as well as the impact of extra mobile handsets, causing slow moving stock to be written off more quickly. Partially offsetting these increases was lower non-inventory impairment costs largely due to the retirement of several IT assets in the prior fiscal year. The prior corresponding period has also included costs associated with the cancellation of partially completed capital projects, which were not required in the current half-year.

Property, Motor Vehicle and IT rental expense increased by \$15 million to \$307 million, mainly due to the consolidation of expenses from New World PCS, which was merged with CSL in the second half of the prior fiscal year. This is partly offset by lower IT rental expense as a result of the purchase, instead of the lease, of a number of new servers.

Other operating expenses increased by \$9 million during the half-year primarily due to lower capitalised costs resulting in higher labour costs being expensed. The increases have been offset by reductions in miscellaneous purchases and material usage due to a lower level of activity compared to the prior corresponding period.

Share of net loss from jointly controlled and associated entities

		Half-year ended 31 December
	2006	2005		Change 2006/2005
	$\frac{1}{2}$	\$m		\$m (% change)
	120000000000000000000000000000000000000
Share of net loss from jointly controlled and associated entities	1999 - Johann Barnett, fransk forsk		$\overline{\phantom{0}}$	$0.0\%$

Our share of net loss from jointly controlled and associated entities includes our share of both profits and losses from equity accounted investments.

Prior year results included the net position of payments made to REACH and FOXTEL, offset by equity profits in Xantic. We have since sold the Xantic business and no equivalent payments have been made to REACH or FOXTEL in the current year. Our net loss from jointly controlled and associated entities is minimal.

There were no significant unrecognised profits/losses in either FOXTEL or REACH. As the carrying value of our investment in both REACH and Foxtel has been written down to nil, any share of profits/losses from these entities will not be recognised. These entities will resume equity accounting once the accumulated losses have been fully offset by our share of profits derived from these entities.

Depreciation and amortisation

Our depreciation and amortisation expense remains a major component of our cost structure, reflecting our expenditure on capital items.

Depreciation and amortisation

		Half-year ended 31 December
	2006	2005		Change 2006/2005
	5m ,,,,,,,,,,,,,,,,,,,,	\$m		\$m (% change)

Depreciation	1.592	1.437	155	10.8%
Amortisation		363		6.3%
Total depreciation and amortisation	1,973	1.800	178	9.9%

Our depreciation and amortisation expense has risen by 9.9% to \$1,978 million for the half-year ended 31 December 2006.

During the second half of last fiscal year, as part of the transformation strategy we undertook a strategic review of the service lives of our assets. The result of this was an acceleration of depreciation and amortisation of certain CDMA network, switching and software assets, which has contributed \$148 million to the year on year increase. We have not accelerated the depreciation and amortisation of CDMA assets where those assets are deemed to have alternative future uses (i.e. the CDMA spectrum will continue to be used with the Next $G^{TM}$ network).

Excluding this impact, depreciation grew by 1.7% to \$1,830 million. Contributing to this increase were:

further growth in our communications plant; and
the acquisitions of Adstream (February 2006), the merging of New World PCS with Hong Kong CSL (March 2006) and SouFun (August 2006) (contributing a total of \$33 million).

Net finance costs

			Half-year ended 31 December
	2006	2005		Change 2006/2005
	3500	\$m.		\$m (% change)

Borrowing costs	Side 14	481	30	6.2%
Finance leases				500.0%
$(Gain)$ /loss in fair value hedge instruments $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	$-12$	(21)	33	(157.1%)
Unwinding of discount on liabilities recognised at present value		20		0.0%
Finance costs.	- 49	481	68	14.1%
Finance income	129)	(41)	12	(29.3%)
Net finance costs	S20	440	80	18.2%

Our finance costs are influenced by:

our debt level;
interest rates;
our debt maturity profile;
movements in our borrowing cost margins;
our interest payment profile; and
· our level of cash assets (affects net debt).

Our net debt levels increased from \$12,776 million as at 31 December 2005 to \$14,473 million as at 31 December 2006. This increase was driven by lower net cash produced from the ongoing operations of the business and higher capital cash demands from our transformation investment.

Total finance costs have increased by 14.1% to \$549 million due to increased borrowing costs and a movement in gains/losses on fair value hedge instruments. The increase in borrowing costs of 6.2% is primarily as a result of increased net debt levels combined with the impact of increased interest rates in the half-year. The gain/loss on fair value of hedge instruments moved from a gain of \$21 million for the half-year ending 31 December 2005 to a loss of \$12 million in the current half due to a decrease in our borrowing credit margins.

Income tax expense

		Half-year ended 31 December
	2006	2005		Change 2006/2005
	$\mathfrak{sm}$	\$m		\$m (% change)
Income tax expense.	706	902	(196)	(21.7%)
Effective tax rate.	29.2%	29.6%		(0.4% )

Income tax expense decreased by \$196 million in the half-year ended 31 December 2006, mainly as a result of the decrease in operating profit before income tax expense.

The effective tax rate in the current half-year is 29.2% compared with the prior half-year of 29.6%. The effective tax rate is consistent with the commonwealth statutory income tax rate of 30.0%. Our effective tax rate was affected by the non taxable profit on sale of the Australian Administration Services Group as it was offset by carried forward capital losses.

Major subsidiaries - financial summaries

Below is a summary of the major reporting lines for our three largest subsidiaries: Sensis, TelstraClear and CSL New World Mobility. This information is in addition to the product analysis previously provided in the document and is intended to show these businesses as stand alone entities.

Sensis financial summary

We are a leading provider of advertising and search services through our advertising business Sensis and its controlled entities. Sensis provides innovative advertising and search solutions through a print, online, voice, wireless and satellite navigation network.

Sensis financial summary

			Half-year ended 31 December
	2006	2005	Change	Change
	$\pm m$	\$m.	.sm	%

Sales revenue.	-8841	1,002	(117)	(11.7%)
Total income	-889	1,002	(113)	(11.3%)
Total expenses (including depreciation and amortisation)	$496 -$	477	19	4.0%
EBITDA.	448	562	(114)	(20.3%)
EBIT.	-921	525	(132)	(25.1%)
CAPEX	68.	45	23	51.1%
EBITDA margin , , , , , , , , , , , , , , , , , , ,		56.1%		(5.5%)

Amounts included for Sensis represent the contribution included in Telstra's consolidated result.

The half-year result was impacted by the deferral of the Melbourne Yellow™ print directory production from December 2006 to January 2007. Excluding the impact of this result of \$174 million in revenue and \$15 million in expenses from the prior year, total income grew by 7.4% and EBITDA 11.2%, whilst EBIT grew 7.4%. On this basis, EBITDA margin was 48.7% in the prior year and has grown to 50.6% in the current year.

Sensis total income is split into the following categories:

Sensis total income

			Half-year ended 31 December
	2006	2005	Change	Change
	$3111$	\$m.	\$m

- Yellow ^{y M} revenue.	IS 26.	692	(166)	(24.0%)
- WhitePages revenue.	-146	135	11	8.1%
- Classified revenue	65	71	(6)	(8.5%)
- Emerging business.	63	46	17	37.0%
- SouFun revenue	M.		24	n/m
Total advertising and directories.	RPA	944	(120)	(12.7%)
Voice	馬馬	52		5.8%
Other.		6		0.0%
Total Sensis sales revenue		1,002	(117)	(11.7%)
Other income.				n/m
Total Sensis external income entrance and and an article of the sensitivity of the Sensis external income and an article of the sensitivity of the Sensitivity of the Sensitivity of the Sensitivity of Total Sensitivity of T	889	1.002	(113)	(11.3%)

Excluding \$174 million of revenue earned relating to Melbourne Yellow³⁴ print in the prior fiscal year, Yellow³⁴ revenue grew by 1.5% to \$526 million, driven by strong online usage and new initiatives such as Home@Yellow™. Home@Yellow^® is a new website that offers people thinking of renovating their home all the information, advice and online tools they need to make an informed choice before contacting a supplier.

White Pages® revenue grew by 8.1% to \$146 million. This was driven by continued strong advertiser support and new advertiser products such as In-Column Screen Highlighter, a new option for advertisers seeking to stand out in the White Pages® print directories.

Classifieds revenue declined largely as a result of competitive factors in print, although online growth continues to be strona.

Emerging businesses delivered 37.0% growth to \$63 million. Location & Navigation experienced strong double digit growth driven by accelerating satellite navigation demand, while demand for MediaSmart online solutions also grew strongly.

In August 2006, we acquired 55% (on an undiluted basis) of the issued capital of SouFun, a leading real estate and home improvement website in China, for a total cash consideration of US\$254 million. SouFun provides an entry point into China, allowing Sensis to leverage core capabilities into a larger, faster growing and less mature market than Australia. SouFun has contributed \$24 million in revenue for the half-year ended 31 December 2006.

Total expenses increased by 4.0% due mainly to the following:

· labour expenses grew by \$11 million due to organic growth of the workforce and through the acquisition of Adstream in February 2006 and SouFun:
. excluding the \$15 million impact of the production shift of Melbourne Yellow™ print from December 2006 to January 2007, cost of goods sold decreased by \$1m as a result of lower negotiated printing costs;
other costs increased by \$5 million due to increased promotion and advertising spend and acquisitions; and
depreciation and amortisation expense grew by \$18m due to a change in software amortisation policy and investment in emerging business.

CSL New World Mobility Group financial summary

The CSL New World Mobility Group (CSLNW) is our Hong Kong based mobile group. It was formed in March 2006 when we merged the CSL entity with New World PCS to form CSLNW. This transaction involved us exchanging a 23.6% share in CSL and receiving a controlling interest in the merged group of 76.4%.

CSLNW operates in the highly competitive Hong Kong mobile market, with the CSL part of entity being one of Hong Kong's premium providers of mobile voice and data services and New World PCS targeting value conscious customers with a low cost business model. The merged entity provides a broad customer base for growth.

CSL New World Mobility Group financial summary

	Half-year ended 31 December			Half-year ended 31 December
	2006	2005	Change	2006	2005	Change
	Asm	A\$m		888888888 HKSm	HK\$m	$-96$

Total income	219.	375	38.4%	3.085	2.189	40.9%
Total expense (including depreciation & amortisation)	484	338	43.2%	2,752	1,847	49.0%
EBITDA.	-169	108	29.6%	835.	628	33.0%
EBIT.	-354	37	(5.4%)	322.	342	(2.6%)
CAPEX	35 ¹	51	(31.4%)	256 CH	296	(28.7%)
EBITDA margin	27.0%	28.9%	(1.9%)	$27.1\%$	28.9%	(1.8%)

Note: Amounts presented in HK\$ have been prepared in accordance with A-IFRS.

Amounts presented in A\$ represent amounts included in Telstra's consolidated result including additional depreciation and amortisation arising from consolidation fair value adjustments.

Operating expenses in the current year include depreciation and amortisation. The previously reported operating expense exclusive of depreciation and amortisation for the half-year ended 31 December 2005 was AUD\$267 million/ HK\$1,561 million.

Total income increased by 40.9% to HK\$3,085 million in the half-year to 31 December 2006, largely due to the additional revenue generated as a result of the inclusion of the New World PCS business from March 2006. New World PCS contributed 80% or HK\$719 million to the revenue growth of HK\$896 million. Revenue growth was also driven by rising data, international voice, mobile virtual network operator (MVNO) and prepaid revenues, offset by a decline in local voice revenues after sustained pressure on prices. Mobile handset revenue also increased after recent handset promotions.

Total expenses increased by 49.0% to HK\$2,752 million mainly due to the following:

inclusion of operating expenses of HK\$722 million relating to New World PCS;
· increased subsidies mainly due to aggressive marketing offers; and
depreciation and amortisation expense increased mainly due to the inclusion of the New World PCS business and carrying higher network assets due to the roll out of their 3GSM network.

EBITDA increased by 33.0% to HK\$835 million whilst EBIT decreased by 2.6% to HK\$333 million due to the impact of higher depreciation, which resulted mainly from the inclusion of the New World PCS business.

TelstraClear financial summary

TelstraClear is the second largest full service carrier in New Zealand and has been operating in its current form since December 2001. TelstraClear is a voice and data company, providing innovative market leading products, services and customer focus to the business, government, wholesale and residential sectors.

TelstraClear financial summary

	Half-year ended 31 December			Half-year ended 31 December
	2006 30000000000000000000000000000000000000	2005	Change	2006	2005	Change
	ASTE	A\$m	%	NZSm	NZ\$m

Total income	286	321	(10.9%)	-334	349	$(4.0\%)$
Total expense (including depreciation & amortisation)	306	339	(9.7%)	350.	365	(3.0%)
EBITDA.	$\Delta\mathbf{y}$	51	(15.7%)	-50	56	(10.7%)
EBIT.	(20)	(18)	11.1%	(19)	(16)	18.8%
CAPEX	36233	58	8.6%	-74	63	17.5%
EBITDA margin	15.0%	15.9%	(0.9%		16.0%	(1.1%)

Note: Amounts presented in NZ\$ represent the New Zealand business excluding intercompany transactions and have been prepared in accordance with A-IFRS.

Amounts presented in A\$ represent amounts included in Telstra's consolidated result and include the Australian dollar value of adjustments to consolidate TelstraClear into the Groun result.

For the half year ended 31 December 2006, revenue declined by 4.0% to NZ\$335 million as a result of:

· a decline in calling revenues due to lower usage and competitor-led price erosion;
internet product competition resulting in price erosion, specifically in the small business and consumer segments; and
mobile revenues declining due to fewer customers in the business segment.

This reduction was offset by:

· an increase in access revenue due to increased gateway revenues; and
an increase in data revenue in the wholesale segment.

Total operating expense including depreciation and amortisation decreased by 3.0% to NZ\$354 million as a result of:

. a decrease in labour expenses due to a restructure of the business as a result of a 'Strategy & Structure' review; and
a decrease in outpayments due to lower revenues and leased data tail savings.

This reduction in expenses was offset by an increase in promotion and advertising due to increased activity to improve brand awareness.

The NZ\$ exchange rate had an unfavourable impact on revenues by AUD\$20 million and expenses by AUD\$22 million.

Capex has increased by 17.5% to NZ\$74 million due to:

core network expansion; and
preparing to take advantage of local loop unbundling.

Cash flow

Cash flow data

		Half-year ended 31 December
	26061	2005		Change 2006/2005
	STD.	\$m		\$m (% change)

Receipts from customers (inclusive of GST)	12,736	12,417	319	2.6%
Payments to suppliers/employees (inclusive of GST) All Allen All All All All All All All All All Al	(8,339)	(7,466)	(873)	11.7%
Net cash generated from operations	4.397	4,951	(554)	(11.2%)
Income taxes paid.	(966)	(1,003)	37	(3.7%)
Net cash provided by operating activities with an array and array and array and array and array array and array	3.431	3,948	(517)	(13.1%)

Net cash used in investing activities.	(2,559)	(1,992)	(577)	29.0%
Operating cash flows less investing cash flows	2152.	1,956	(1,094)	(55.9%)

Movements in borrowings/finance leases	1,179	229	950	414.8%
Staff payments of share loans	666	11	$\pm$	0.0%
Dividends paid	(1, 49)	(2,485)	746	$(30.0\%)$
Finance costs paid.	(540)	(470)	(70)	14.9%
Purchase of shares for employee share plans		(6)	6.
Net cash used in financing activities.	(1,089)	(2, 721)	1,632	$(60.0\%)$

Net decrease in cash	(227)	(765)	538	(70.3%)

Net cash provided by operating activities

Our primary source of liquidity is cash generated from our operations. Net cash provided by operating activities includes receipts from trade and other receivables, payments to suppliers and employees, income tax paid, and GST received, paid and remitted to the Australian Taxation Office.

During the half-year ended 31 December 2006, net cash provided by operating activities decreased by 13.1% to \$3,431 million. Higher revenue and lower working capital items were offset by higher expense payments. The key drivers of our increased revenue were our mobiles and broadband products, as well as increased revenue from our acquisition activities. Our higher expense payments were mainly due to higher cost of mobile sales as we continue to invest in our subscriber base to drive future growth, as well as an increase in expenditure relating to the transformation.

In addition, our cash paid to the Australian Taxation Office was \$37 million lower in the current half-year mainly due to a higher final tax payment in the prior year arising from a low instalment rate in fiscal 2005. Offsetting this position were tax refunds in fiscal 2005 relating to amendments of previous tax returns, together with a higher fourth instalment payment in the current half-year arising from a higher instalment rate in fiscal 2006.

Net cash used in investing activities

Net cash used in investing activities represents amounts paid for capital assets and investments, offset by cash receipts from the sale of capital assets and investments, and other cash receipts from our investing activities.

Net cash used in investing activities

		Half-year ended 31 December
	2006.	2005		Change 2006/2005
	Sm	\$m.		\$m (% change)

Switching	340	187	153	81.8%
Transmission	299	186	113	60.8%
Customer access	297	423	(126)	(29.8%)
Mobile telecommunications networks	566	486	80	16.5%
International assets.	221	179	42	23.5%
Capitalised software the contract of the contract of the contract of the contract of the contract of the contr	395	212	183	86.3%
Specialised network functions	-88	86	2	2.3%
Other.	303	226	77	34.1%
Operating capital expenditure experience is a series of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the	2,509	1,985	524	26.4%
Other intengibles		58	(58)	n/m
Capital expenditure before investments	2,509	2,043	466	22.8%
Add: investment expenditure	-337	19	318	n/m
Capitalised expenditure and investments with an array and array and array and array to the set of the Capitali	2.846	2,062	784	38.0%
Sale of property, plant and equipment	(25)	(20)	(5)	25.0%
Sale of shares in controlled entities (net of cash disposed).	(222)	(16)	(206)	n/m
Interest received	(30)	(34)	4	(11.8%)
Net cash used in investing activities.	2,569	1,992	577	29.0%

During the half-year, our expenditure on operating capital, intangibles and investments amounted to \$2,846 million, an increase of 38.0% on the previous half-year, largely driven by our transformation program.

The increases in our operating capital expenditure were across most capital expenditure categories, with the exception of a decrease in customer access. The drivers of our operating capital expenditure for the half-year were as follows:

· higher domestic switching as a result of our wireline transformation program, which involves transforming our existing voice, data, IP and DSL networks into a single internet (IP) based network. Most of the expenditure relates to IP enablement of our network. Further expenditure was also incurred to cater for increased demand for broadband multi-media services and replacement of redundant technology;
· higher transmission expenditure due to increased transmission installation to cater for increased IP traffic, as well as additional capacity to support the roll out of the new Next G™ network. Another driver is the increased demand for broadband and other high speed products, which necessitates higher transmission capacity;
lower expenditure on customer access due to the achievement of operational and technology efficiencies in the access network through the deployment of a new generation of Digital Subscriber Line (DSL) equipment, increased utilisation of available network capacity, and other alternative technology solutions. This is partly offset by increased expenditure to provide increased broadband capacity and higher speed internet services;
higher expenditure on our mobile networks primarily due to the Next $G^{TM}$ network which was deployed ahead of schedule. At the half-year, the Next G^TM network comprised over 5,100 base stations. Offsetting the increase is a reduction in spend related to our 2GSM and CDMA networks, as well as higher payments to Hutchison in the prior period related to the purchase of a 50% share of their 3GSM 2100 MHZ network;
higher expenditure on international assets, predominantly related to the purchase of additional international transmission capacity to facilitate increased internet traffic with the United States and Japan;
· significantly higher expenditure on capitalised software as we embark on a 5 year program to transform our IT environment through deployment of new capabilities and reduction in the number of systems. We have exited over 140 systems, and finalised all planned product and systems integrator contracts;
consistent expenditure on specialised network functions. Expenditure increased to improve the reliability and robustness of the network and BigPond rebuild program. This was offset by the completion of significant work undertaken in fiscal 2006 in relation to the deployment of the ADSL core network infrastructure; and
higher other expenditure predominantly driven by the Next $G^{M}$ network related expenditure, including various programs such as land and buildings and other network related expenditure.

Our expenditure on investments amounted to \$337 million during the half-year, compared with \$19 million in the prior corresponding period. Investment expenditure is significantly higher in the half-year predominantly due to our acquisitions of SouFun, together with a cash price adjustment relating to the merger of CSL and New World Mobility. Our other intangibles expenditure has reduced by \$58 million to nil during the half-year, as the expenditure in the prior half-year related to the acquisition of customer bases from Keycorp relating to their payment transaction network carriage services business.

During the half year, our cash payments for investments and intangibles largely resulted from the following items:

\$314 million for the acquisition of 55% (on an undiluted basis) of the issued capital of SouFun (net of cash acquired);
. \$21 million for a price adjustment to New World Mobility, representing an adjustment to the \$44 million cash received in fiscal 2006: and
other minor investments totalling \$2 million.

Our cash proceeds from asset sales in the half-year ended 31 December 2006 included the following:

the sale of our investment in the Australian Administrative Services group for consideration of \$212 million net of cash disposed;
. the sale of our investment in Platefood for a total consideration of \$10 million; and
· sale of property, plant and equipment for cash receipts of \$25 million.

Net cash used in financing activities

Our net cash used in financing activities decreased by 60.0% to \$1,089 million for the half-year ended 31 December 2006.

During the half-year to December 2006 we received \$3,183 million in borrowed funds and repaid \$2,004 million. This resulted in net proceeds from repayments of borrowings and finance leases of \$1,179, and an increase of \$950 million compared with December 2005. This increase was driven by lower net cash produced from the ongoing operations of the business combined with higher capital cash demands from transformation investment, partly offset by a reduction in liquidity.

The final dividend for fiscal 2006 was paid in September 2006. Dividends paid in the half-year to December 2005 were higher than the current half-year due to shareholders receiving a special dividend of 6c each per share in September 2005.

The increase in finance costs paid was mainly the result of higher average debt levels in comparison to the previous half-year, in conjunction with marginally higher interest rates.

Balance sheet

Balance Sheet

	AS OT
	31-Dec-06	30-Jun-06	Change	2006
	5m	\$m.		\$m (% change)

Current assets
Cash and cash equivalents	457	689	(232)	(33.7%)
Other current assets. $\ldots$ . $\ldots$ . $\ldots$ . $\ldots$ . $\ldots$ . $\ldots$ . $\ldots$ . $\ldots$ . $\ldots$ . $\ldots$	4,570	4,241	329	7.8%
Total current assets	5,027	4,930	97.	2.0%
Non current assets
Property, plant and equipment	23,413	23,503	(90)	(0.4%)
Intangibles-goodwill	6,265	6,122	143	2.3%
Other non current assets	1,947	1,636	211	12.9%
Total non current assets $\ldots$ ,	31,525	31,261	264	0.8%
Total assets.	36,552	36,191	361	1.0%
Current liabilities
Borrowings	3,033	1.982	1,051	53.0%
Other current liabilities.	5,108	5,908	(800)	(13.5%)
Total current liabilities	8.141	7,890	251	3.2%
Non current liabilities
Borrowings	11,280	11,434	(154)	(1.3%)
Other non current liabilities	4,015	4,044	(29)	(0.7%)
Total non current liabilities	15,295	15,478	(183)	(1.2%)
Total liabilities	23,436	23,368	68	0.3%
Net assets.	13,116	12,823	293	2.3%
Equity
Equity available to Telstra entity shareholders	12,862	12,577	285	2.3%
Minority interests	254	246	8	3.3%
Total equity,	13,116	12,823	293	2.3%

$\overline{A}$ and $\overline{A}$

We continue to maintain a strong financial position with net assets of \$13,116 million as at 31 December 2006, compared with \$12,823 million at 30 June 2006. The increase in net assets of \$293 million comprised an increase in total assets of \$361 million offset by an increase in total liabilities of \$68 million.

The movement in total assets of \$361 million was primarily due to:

Cash and cash equivalents decreasing by \$232 million to \$457 million, due mainly to a reduction in bank deposits and bills of exchange < 90 days to meet a long-term loan repayment in December 2006;
Other current assets increased by \$329 million to \$4,570 million, driven by trade debtors increasing consistent with revenue activity, increases in accrued interest revenue on our interest rate swaps and increases in inventory primarily driven by increased stock on hand to support the NextG^3M network launch. This was offset by a decline in receivables associated with the timing of collections in our Sensis business;
Property, plant and equipment decreased \$90 million mainly due to depreciation exceeding any additions as we accelerated depreciation as part of the transformation program;
· Intangibles increased due to goodwill acquired on acquisition of 55% (on an undiluted basis) of the issued capital of SouFun Holdings Ltd in August 2006, partially offset by intangibles removed from the balance sheet on divestment of Australian Administration Services Pty Ltd, which also occurred in August 2006;

• Other non-current assets increased by \$211 million to \$1,847 million, due mainly to an increase in the actuarially determined value of our defined benefit pension asset and an increase in finance lease debtors arising from our solutions management business offset by a decrease in our cross currency swap receivables in line with currency movements and our hedging requirements;

The movement in total liabilities of \$68 million was primarily due to:

Total current and non-current borrowings increasing by \$897 million to \$14,313 million, mainly as a result of an increase in unsecured promissory notes and increases in Telstra Bonds due to two new issues taking place in August and December 2006 arising from payment of the final dividend;
Other current liabilities decreased \$800 million, mainly after lower accruals and payables due to lower levels of construction activity undertaken in the half-year, compared to the levels that occurred towards the end of the 2006 fiscal year. The decrease was also attributable to lower tax payable, offset by higher derivative liabilities; and
Other non-current liabilities declined mainly due to a deferred tax liability decrease, partially offset by changes in our cross currency swap position.

Glossary

1xRTT (One Time Radio Transmission Technology): a 3G development of CDMA technology for high speed packet switched data.

2G GSM: Second Generation Global System for mobile communications - refers to the initial group of wireless technology standards that were digital instead of analogue.

3GSM: Third Generation Global System for mobile communications - is the evolution of the current GSM and CDMA 2G and 2.5G technology to support voice and high speed data and multimedia services.

3GSM 850: Third generation mobile technology operating on 850Mhz spectrum.

3GSM 2100: Third generation mobile technology operating on 2100Mhz spectrum.

ACCC: Australian Competition and Consumer Commission.

A-IFRS: Australian equivalents of International Financial Reporting Standards.

ADSL: Asymmetric Digital Subscriber Line-is a high-speed broadband technology that provides access to the internet. It allows high speed data to be carried over copper network phone lines.

ADSL 2+: Our upgraded national high speed broadband network offering improved fixed line ADSL speeds.

ARPU: Average Revenue Per User

CDMA: Code Division Multiple Access - a mobile standard that provides voice, data, fax and short messaging services.

Churn: The net number of subscribers switching between telecommunication providers.

EBIT: Earnings Before Interest and Tax. This is a measure of company profitability.

EBITDA: Earnings Before Interest, Tax, Depreciation and Amortisation. This is a measure of company profitability.

EVDO: Evolution Data Only or Evolution Data Optimised - This is an addition to the existing CDMA network that supports high speed packet data transmission.

HDSL: High bit rate Digital Subscriber Line.

HSDPA: High speed downlink packet access.

HFC: A shared access architecture using optical fibre between exchanges and hubs in suburban streets, and coaxial cables between the hubs and customers to carry FOXTEL pay TV and BigPond Cable services.

HiBIS: Higher Bandwidth Incentive Scheme - a government subsidy scheme.

IP: Internet Protocol - a standard set of rules for the carriage of digital information such as voice, video, data and images, across a global network.

IP Core: The core element of a network that carries and logically splits voice, data and video using IP technology.

IPWAN: Telstra IP Solution product, providing Corporate Virtual Private Networks to customers. IP WAN uses Telstra's private network infrastructure to combine all of a company's communications between sites and mobiles.

ISDN: Integrated Services Digital Network - an international communications standard for sending voice, video and data over digital telephone lines or normal telephone wires. An early form of digital technology, its use has been largely surpassed by ADSL.

MMS: Multimedia Messaqing Service.

PSTN: Public Switched Telephone Network - referred to as the 'fixed line' network, it is the standard home telephone service delivered over copper wires.

SIO: Services in operation

SMS: Short Messaging Service - the text based message service on mobile phones.

ULL: Unconditioned or Unbundled Local Loop - the local loop is the copper wire that connects the Telstra exchange in your area to your house. Telstra is required to provide access to this wire to other operators. Other telecommunications providers can provide customers with their own services, like broadband or a telephone service, by installing their own equipment in Telstra exchanges and connecting to the 'loop'.

WAN: Wide Area Network

Restatement of previously reported results

The following tables show the impact on the Telstra Group of adopting UIG 4 and of amending the impact of adopting A-IFRS to our previously reported income statement and balance sheet.

	Previously reported		Defined	Restated
Income Statement	31 Dec 2005	UIG 4	benefit tax	31 Dec 2005
	\$m	\$m	\$m	\$m
fnoome.
Revenue (excluding finance income)	11,449	(34)		11,415
Other income.	129		÷	129
	11,578	(34)		11,544
Expenses
Labour	2,053	$\overline{\phantom{a}}$		2,053
Goods and services purchased	2,214	(19)		2,195
Other expenses.	2,011		$\sim$	2,011
	6,278 1	(19)		6,259
Share of net loss from jointly controlled and associated entities. $\dots\dots\dots$	6,279	(19)		1 6,260

Earnings before interest, income tax expense, depreciation and amortisation
(EBITDA).	5,299	(15)		5,284
Depreciation and amortisation.	1,810	(10)		1,800
Earnings before interest and income tax expense (EBIT)	3,489	(5)		3,484
Finance income	36	5		41
Finance costs	479	$\overline{z}$		481
Net finance costs	443	(3)		440
Profit before income tax expense.	3,046	(2)		3,044
Income tax expense.	907	(1)	(4)	902
Profit for the period (	2,139	(1)	4	2,142
Minority interests in net loss experience in a consequence of the consequence of the consequence of the consequence of the consequence of the consequence of the consequence of the consequence of the consequence of the cons	1			1.
Profit for the period available to Telstra Enthus shareholders	2,140	(1)	4	2,143

reported Restated Balance Sheet 30 June 2006 UIG 4 30 June 2006 \$m \$m \$m Current assets Cash and cash equivalents will be contained as a series of the contained and cash and cash and contained a ser 689 689 ÷ Trade and other receivables. 3,701 51 3,752 Inventories 224 224 ٠ Derivative financial assets. 21 21 de la caractería de la caractería de la caractería $\overline{a}$ Prepayments. 244 244 $\overline{a}$ Total current assets 4,879 51 4,930 Non current assets Trade and other receivables 87 85 172 Inventories 20 20 Investments - accounted for using the equity method $\ldots$ , , , , , 23 23 Property, plant and equipment. $\dots \dots \dots \dots \dots \dots \dots \dots \dots$ (119) 23,622 23,503 Intangibles (1) 6,123 6,122 Deferred tax asset 1 1 Derivative financial assets. 391 391 ÷ Defined benefit assets 1,029 1,029 ÷ Total non current assets (35) 31,296 31,261 Total assets. 36,175 16 36,191 . Corrent Habilities Trade and other payables , , , , , , , , , , , , , , , , , , , 3,570 3,570 Borrowings 13 1,969 1,982 Current tax liabilities 428 428 $\overline{\phantom{a}}$ Provisions 737 737 ÷ and the service of the service Derivative financial liabilities. 12 12 Revenue received in advance (9) 1,170 1,161 Total current liabilities 7,886 4 7,890 Non current liabilities Trade and other payables , 197 197 Borrowings 25 11,434 11,409 Deferred tax liabilities ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1,704 (4) 1,700 Provisions 974 974 $\overline{a}$ Derivative financial liabilities. 768 768 Revenue received in advance 405 405 $\overline{a}$ Total non current liabilities 15,457 21 15,478 $\mathbf{u}=\mathbf{u}+\mathbf{v}$ Total liabilities 23,343 25 23,368 and the company of the company of the company of the company of the company of the Net assets. 12,832 (9) 12,823 Equity Share capital 5,569 5,569 Reserves (160) . (160) $\sim$ Retained profits (9) 7,177 7,168 Equity available to Telstra Entity Shareholders. (9) 12,577 12,586 Minority interest. 246 246 (9) Total equity 12,832 12,823	Previously

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Media Release

15 February 2007

023/2007

Telstra reaches pivot point: Delivers earnings ahead of guidance Wins where it matters in broadband and mobiles and slows PSTN decline

Telstra today announced earnings before interest and tax (EBIT) ahead of guidance for the half year ended 31 December 2006 – a decline of 15.7% or \$546 million to \$2.9 billion, better than the expected 17 to 20% fall detailed in the T3 prospectus and previous guidance. Profit after tax was \$1.7 billion, down \$430 million or 20.1% on the prior corresponding half year. As expected, these results were affected by transformation costs and other one-off factors that will be more than made up in the second half.

Telstra Chief Executive Officer, Mr Sol Trujillo, said: "We are only 13 months into our five year transformation. However, with 47 months to go, we have reached the pivot point, with positive earnings growth to recommence in the second half. We are on or ahead of our transformation plan on all fronts. Our financial performance is ahead of guidance. We are winning where it matters – in 3G, broadband and digital online offerings. We have slowed the PSTN decline. We are improving service and operational performance. We are creating new opportunities by investing for competitive advantage.

"The first half has seen us break new ground and deliver a string of firsts, including:

in mobiles, we have topped one million 3G subscribers in a record 16 months and total Next GTM subscribers reached 415,000 this week - while keeping average revenue per user (ARPU) \$20 per month higher than for 2G customers;
in broadband, we have held ARPU from the second half of fiscal 2006 while continuing to win $\bullet$ broadband market share:
in service, we have reduced ADSL broadband held orders by more than 80% from 19,300 in $\bullet$ September 2005, despite increasing order volumes; and
in fixed lines, we have been gaining residential market share since October 2006, the first time since the advent of competition we have had positive residential churn from competitors."

As expected, transformation expenses this half year affected comparisons with the fiscal 2006 first half, which had no transformation spend. In addition, the booking of Melbourne Yellow™ directories revenue has been delayed to the second half of fiscal 2007, unlike previous years.

"In line with guidance, the one-off factors influencing the first half result will be more than outweighed in the second half. We expect that second half EBIT will grow by between 37 and 40%," Mr Trujillo said.

Mr Trujillo said that following the company's strong first half revenue growth, Telstra had lifted full year reported revenue guidance to growth of 2.5 to $3\%$ (up from previous guidance of a 1.5 to $2\%$ rise) and reported EBIT guidance to growth of 3 to 5% (up from a previously expected rise of 2 to 4%).

Total income grew by 2.2% or \$253 million to \$11.8 billion mainly due to increases in mobiles and retail broadband, with Sensis new media revenues also growing strongly. This was partly offset by lower PSTN revenues. Sales revenue grew 3.6%, normalised for Melbourne Yellow^TM directories revenue.

Total expenses increased by 9.9% or \$799 million to \$8.9 billion, driven by transformation related costs and higher cost of goods sold and handset subsidies due to increased market campaign activity, as Telstra focuses on winning in the key 3G and broadband markets.

Depreciation and amortisation also increased due to a reduction in the service lives of certain networks, platforms and applications as a result of the transformation. Network termination payments and labour expenses declined.

Mr Trujillo said: "Top line growth was strong. While costs increased, this expenditure is an investment in the future revenue and margin growth of the company, reflecting our focus on key growth markets, including mobiles and broadband."

Total mobile revenue grew 11.8% or \$296 million to \$2.8 billion, reflecting our strong competitive advantage with Next G^TM driving continued subscriber growth. Telstra added 12 and 13 times as many postpaid SIOs in the second quarter as Vodafone and Singtel Optus respectively, helping mobile services revenues to grow at 6.5%. Telstra added 707,000 3G SIOs in the half, including 280,000 Next G^TM customers despite the network only being launched in October 2006. Total mobile SIOs stand at 8.89 million, up 363,000 in the half. Driven by significant use of applications and content since the Next G^TM launch, mobile data revenues strengthened with non-SMS data ARPU rising 74%.

Mr Trujillo said that Telstra was using the Next G™ network to drive for 3G leadership.

"With the launch of our Next G^TM network we have the best offer in the market. Customers are flocking to Telstra's new Next G^TM network and we are on track to lead the market in 3G SIOs by May 2007. Attracting 3G customers who are high-value, special-feature consumers is vital given the ARPU premiums we are achieving compared to 2G customers," he said.

Retail broadband revenue grew \$166 million to \$497 million, for market-leading growth of 50.2%. The number of retail broadband customers grew to 1.84 million, with 331,000 added in the half.

"Our broadband market share has increased again, up one percentage point to 45%, and we have continued to add retail customers at three times the rate of our nearest competitor. We are growing market share while holding ARPUs," Mr Trujillo said.

Sensis grew sales revenue by 6.9% or \$57 million to \$885 million on a normalised basis, driven by a 68% increase in new media revenue, with a 21% increase in online usage helping to expand margins. Sensis is on track for double digit revenue and double digit EBIT growth in the full year.

"Yellow^TM online revenue grew 32%. But Sensis is now much more than Yellow^TM, and its emerging business revenue grew 37%. Its Chinese online business SouFun maintained triple digit revenue and EBIT growth. Together with BigPond and Foxtel, Sensis' stable of new media assets is core to our evolution into a media communications company," Mr Trujillo said.

PSTN products revenue fell \$216 million to \$3.6 billion, a decline of 5.6% for the half compared with a 7.6% drop in the first half of fiscal 2006. Telstra has held residential fixed line SIOs steady since June 2006, and total fixed line SIOs fell just 80,000 or 0.8% in the half to 9.86 million, a best-in-class performance.

"There has been a change in momentum in the fixed line business. We have contained line losses and continued to slow the decline of PSTN revenues using market based management initiatives such as subscription pricing and integrated offerings tailored for customer segments. Telstra's PSTN decline is lower than for many of our global peers," Mr Trujillo said.

Total offshore controlled entities revenue increased by 17.4% or \$145 million to \$978 million for the half. In local currency terms, CSL New World income increased 40.9% assisted by the merger between Hong Kong CSL and New World PCS in March 2006, while in New Zealand TelstraClear income fell 4% due to declining call revenues. Revenue from other offshore controlled entities grew by 24.5%.

Other key financial outcomes included:

Compared with the half vear ended 31 December 2005, EBITDA margin decreased 4.0 percentage points to 42.3%. However, on an underlying basis (normalised for Melbourne Yellow™ directories revenue and transformation costs), EBITDA margins improved 1.7 percentage points sequentially from the second half of fiscal 2006 (from 42.5% at 30 June 2006 to 44.2% at 31 December) as the transformation gains momentum.
Operating cash capital expenditure tracked to full year guidance, increasing 22.8% to \$2.5 billion driven primarily by the IP enablement of our network. IT transformation and the rollout of the Next $G^TM$ network. Total transformation capex was \$1.75 billion in the half, while "business as usual" capex is steadily declining. Fiscal 2007 is the peak transformation spend year.
Free cash flow declined 55.9% to \$862 million, from \$1.96 billion in the prior half. This position and our borrowings program will support our ongoing activities within our capital management parameters.

Mr Trujillo said key transformation achievements in the half included:

$\bullet$ Next G^TM network built and launched in a record 10 months, offering 100 times the coverage of competitor 3G networks and world's best peak network speed of 14.4 Mbps.
Launch of ADSL 2+, with 25% of new broadband sales in December and January for plans faster than 1.5Mbps.
Telstra's IT transformation is on track, with important capabilities already delivered and the first $\bullet$ major release expected late in calendar 2007.
Total workforce is down 2,066 versus first half fiscal 2006 and by 4,596 since 1 July 2005 (pre acquisitions and investments), placing Telstra on track to meet target workforce reductions by fiscal 2008 and fiscal 2010.
Improved service, with 97% of PSTN service calls completed right the first time.
Market based management driving a 13% rise in customers using three or more Telstra products. $\bullet$
Investment in improved service in the field, on the phone and online, with more than 6,400 staff participating in the Telstra Learning Academy.

Mr Trujillo said regulation remained a significant risk, but that Telstra would continue to defend the interests of its shareholders and the nation by seeking appropriate regulation reform and through the constitutional challenge initiated in the High Court.

Mr Trujillo said that, apart from lifting full year revenue and EBIT guidance, previous guidance on the company's fiscal 2007 outlook and long-term management objectives remained unchanged.

The Telstra Board of Directors declared a fully franked interim ordinary dividend of 14 cents per share. representing a total payment of \$1.74 billion. The record date for the dividend will be 2 March 2007 with payment to be made on 30 March 2007. Telstra shares will commence trading excluding entitlement to the dividend on 26 February 2007.

Telstra Media Contact:

Andrew Maiden

Tel: 0428 310 700.

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

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

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 2006

Page number

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Balance Sheet.
Statement of Recognised Income and Expense entertainment containment and the containment of Recognised Income and Expense entertainment and the containment of the state of the state of the state of the state of the state o
Statement of Cash Flows , , , , , , , , , , , , , , , , , , ,

Notes to the Half-Year Financial Statements

Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8	- Basis of preparation (1990) (1990) (1990) (1990) (1990) (1990) (1990) (1990) (1990) (1990) (1990) (1990) (19 - Summary of accounting policies - Items requiring specific disclosure entertainment and the control of the control of the control of the control of the control of the control of the control of the control of the control of the control of the control of t - Dividends - Segment information $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ld$ - Notes to the statement of cash flows experiences in the contract of the contract of the statement of cash flows experiences in the contract of the statement of cash flows. - Contingent liabilities, contingent assets and expenditure commitments - Events after balance date $\ldots$
	Directors' Declaration

							Independent Review Report.
--	--	--	--	--	--	--	----------------------------	--

Income Statement

for the half-year ended 31 December 2006

	Telstra Group
	Half-year ended
	31 December
	2006	2005
Note	\$m	$\mathfrak{sm}$

kazome
Revenue (excluding finance income)	11,645	11,415
Other income.	152	129
	11,797	11,544
Enpenses
Labour.	1,996	2,053
Goods and services purchased the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of t	2,566	2,195
Other expenses.	2,318	2,011
	6,880	6,259
Share of net loss from jointly controlled and associated entities.	1	1
	6,881	6,260
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA)	4,916	5,284
Depreciation and amortisation.	1,978	1,800
Earnings before interest and income tax expense (EBIT) $\,\dots\, \dots\, \dots\, \dots\, \dots\, \dots\, \dots\, \dots\, \dots\, \dots\,$	2,938	3,484

Finance income	29	41
Finance costs	549	481
Net finance costs responses to the contract of the contract of the contract of the contract of the contract of	520	440
Profit before income tox expense.	2,418	3,044
Income tax expense.	706	902
Profit for the period (Indian Indian Indian Indian Indian Indian Indian Indian Indian Indian Indian Indian Indian	1,712	2,142
Minority interests in net (profit)/loss ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	(8)	1
Profit for the period available to Telstra Entity shareholders $\dots\dots\dots\dots\dots\dots\dots\dots$	1,704	2,143
ficantings per shore (cents per shore)	cents	cents
Basic	13.8	17.3
Diluted.	13.7	17.3
Total interim dividends declared (cents per share)	14.0	20.0

Balance Sheet

as at 31 December 2006

	Telstra Group
	as at
	31 Dec	30 June
	2006	2006
	\$m	\$m.

Cument coseto
Cash and cash equivalents will be contained as a series of the contained and cash and contained a contact the	457	689
Trade and other receivables	3,952	3,752
Inventories	371	224
Derivative financial assets.	26	21
Prepayments.	221	244
Total current assets , , , , , , , , , , , , , , , , , , ,	5,027	4,930
Non current casets
Trade and other receivables	221	172
Inventories	17	20
Investments - accounted for using the equity method	23	23
Property, plant and equipment.	23,413	23,503
Intangibles	6,265	6,122
Deferred tax assets	2	1
Derivative financial assets.	286	391
Defined benefit assets , , , , , , , , , , , , , , , , , , ,	1,298	1,029
Total non current assets , , , , , , , , , , , , , , , , , , ,	31,525	31,261
Total assats.	36,552	36,191
Current Babilities
Trade and other payables	2,781	3,570
Borrowings	3,033	1,982
Current tax liabilities	324	428
Provisions	694	737
Derivative financial liabilities.	97	12
Revenue received in advance	1,212	1,161
Total current liabilities , , , , , , , , , , , , , , , , , , ,	8,141	7,890
Non current liabilities
Trade and other payables	201	197
Borrowings	11,280	11,434
Deferred tax liabilities	1,679	1,700
Provisions	901	974
Derivative financial liabilities.	832	768
Revenue received in advance	402	405
Total non current liabilities , 、 , , , 、、、、、、、、、、、、、、	15,295	15,478
Toto! Habilities ,.	23,436	23,368
修密《徐家公》《《》》《》》《》》《】》《】》《】】【】】【】】【】】【】】【】】【】【】】【】【】】【】	13,116	12,823
Hquity
Share capital	5,590	5,569
Reserves ,	(142)	(160)
Retained profits	7,414	7,168
Equity available to Telstra Entity shareholders	12,862	12,577
Minority interests	254	246
Totol equity ( ) , , , , , , , , , , , , , , , , , ,	13,116	12,823

Statement of Recognised Income and Expense

for the half-year ended 31 December 2006

	Telstra Group
	Half-year ended
	31 December
	2006	2005
	\$m	\$m
Porsign currency translation reserve
Equity accounting our interest in jointly controlled and associated entities		1
Translation of financial statements of non-Australian controlled entities $\ldots \ldots \ldots \ldots \ldots$	(12)	81
Transfer to profit for the period on sale of jointly controlled and associated entities. $\dots \dots \dots$	(1)
Cash flow hedging reserve
Net hedging gains/(losses) recognised directly in equity	(60)	75
Net hedging gains/(losses) removed from equity and included in profit for the period.	107	(129)
Retained profits
Actuarial gain on our defined benefit plans	399	298
	433	326
Income tax on equity items	(133)	(71)
Net income recognised directive in equity	300	255
Profit for the period of and an array array array and array array array array array array array array array ar	1,712	2,142
Total recognized income for the period $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ld$	2,012	2,397
Attributable to:
Telstra Entity	2,004	2,398
Minority interest.	8	(1)
	2,012	2,397
fffects of chonges in occounting policy attributeble to Telstre Entity , , , , , , , , , , , , , , , , , , ,	÷	76

Statement of Cash Flows

for the half-year ended 31 December 2006

	Telstra Group
	Half-year ended
	31 December
	2006	2005
Note	\$m	\$m

Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax (GST))	12,736	12,417
Payments to suppliers and to employees (inclusive of GST) $\ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots$	(8,339)	(7, 466)
Net cash generated from operations ……………………………………………………………	4,397	4,951
ncome taxes paid	(966)	(1,003)
Næt cash provided by operating activities	3,431	3,948
Cash flows from investing activities
Payments for:
- property, plant and equipment.	(2, 114)	(1,761)
- intangibles	(395)	(282)
Capital expenditure (before investments)	(2,509)	(2,043)
- shares in controlled entities (net of cash acquired)	(314)	(7)
- adjustment to net proceeds from CSL New World Mobility Group merger 6	(21)
- payments for other investments	$(2)$	(12)
Total capital expenditure www.communicationshipsers.communicationshipsers.com Proceeds from:	(2,846)	(2,062)
- sale of property, plant and equipment with which is a construction of the construction of	25	20
6	222
Proceeds from share buy-back by jointly controlled and associated entities		16
Interest received	30	34
N&\$ COST US&d (7) (719@Stiff& OCt(9)((2), 3)	(2,569)	(1,992)
Operating cash flows less investing cash flows	862	1,956
Cash fiows from financing activities
Proceeds from borrowings.	2,810	3,869
Proceeds from Telstra bonds.	373
Repayment of borrowings by contract of the contract of the contract of the contract of the contract of the contr	(1,987)	(3,623)
Repayment of Telstra bonds		(13)
Repayment of finance lease principal amounts www.www.www.www.www.www.www.w	(17)	(4)
Staff repayments of share loans , , , , , , , , , , , , , , , , , , ,	11	11
Purchase of shares for employee share plans		(6)
Finance costs paid.	(540)	(470)
Dividends paid	(1,739)	(2,485)
Net cash used in financing activities.	(1,089)	(2,721)
N&t decrease in cash	(227)	(765)
Foreign currency translation on opening balances.	(S)	4
Cash at the beginning of the period	689	1,534
Cash at the end of the pedod	457	773

Notes to the Half-Year Financial Statements

1. Basis of preparation

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 2006. 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 the financial report

This half-year financial report has been prepared in accordance with the requirements of the Australian Corporations Act 2001 and Accounting Standards applicable in Australia, including AASB 134: "Interim Financial Reporting".

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 income statement, balance sheet and cash flows of the Telstra Group as the 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 and some financial assets and liabilities (including derivative instruments) which are recorded at fair value. Cost is the fair value of the consideration given in exchange for net assets acquired.

In preparing this half-year financial report, we are required to make judgments and estimates that impact:

income and expenses for the half-year;
the reported amounts of assets and liabilities; and
the disclosure of off balance sheet arrangements, including contingent assets and contingent liabilities.

We continually evaluate our judgements and estimates. We base our judgements and estimates on historical experience, various other assumptions we believe to be reasonable under the circumstances and, where appropriate, practices adopted by international telecommunications companies. Actual results may differ from our estimates.

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

1.2 Further clarification of terminology used in our income statement

Under the regulrements of AASB 101: "Presentation of Financial Statements", we must classify all of our expenses (apart from any finance costs and our share of net (gain)/loss from jointly controlled and associated entities) according to either the nature (tupe) 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 type of operations we undertake.

Earnings before interest, income tax expense, depreciation and amortisation (EBITDA) reflects our profit for the year prior to including the effect of net finance 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.

Our management uses EBITDA, in combination with other financial measures, primarily to evaluate the company's operating performance before financing costs, income tax and non-cash capital related expenses. 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 payment of 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.

When a specific item from ordinary activities is of such a size, nature or incidence that its disclosure is relevant in explaining our operating performance for the reporting period, its nature and amount is disclosed separately in note 3.

1.3 Roundina

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.

2. Summary of accounting policies

2.1 Accounting policies

Our accounting policies are consistent with those disclosed in the Annual Financial Report as at 30 June 2006, with the exception of those detailed below.

2.2 Change in accounting policies

The following accounting policy changes occurred during the halfyear ended 31 December 2006.

(i) Financial guarantees

AASB 2005-9: "Amendments to Australian Accounting Standards" became applicable to annual reporting periods beginning on or after 1 January 2006. We have applied this interpretation in our financial report for the half-year ended 31 December 2006.

These amendments require that liabilities arising from the issue of financial quarantee contracts be recognised on the balance sheet. The amendments have resulted in no impact on our balance sheet, income statement or statement of cash flows.

(ii) Leose arrangements

UIG 4: "Determining Whether an Arrangement Contains a Lease" (UIG 4) became applicable to annual reporting periods beginning on or after 1 January 2006. We have applied this interpretation in our financial report for the half-year ended 31 December 2006 including the restatement of our comparative information.

UIG 4 requires entities to assess whether arrangements they enter into contain leases. An arrangement contains a lease if fulfilment of the arrangement is dependent on the use of specific assets and conveys a right to use those assets to the customer. The lease component of the arrangement is then separated and accounted for as either a finance or operating lease depending on the nature of the arrangement.

Some of our solutions management and outsourcing arrangements that we enter into as a service provider meet the requirements of UIG 4 as we provide the customer with the right to use dedicated equipment. We have applied this new accounting policy to these arrangements in existence at the start of our comparative period (1 July 2005). We have assessed that all embedded leases in existence at 1 July 2005 were finance leases in accordance with our current accounting policy for leases and AASB 117: "Leases" as substantially all of the risks and benefits incidental to ownership of this equipment are transferred to the customer. This required property, plant and equipment identified as part of an UIG 4 arrangement to be transferred to finance lease receivable and for lease accounting to be applied post this date.

The following impacts were recorded on the transition to UIG 4:

	Telstra Group Adjustments as at 1 July 2005 \$m
Assets
Trade and other receivables (current) $\ldots \ldots \ldots$	25
Trade and other receivables (non current) $\dots$	93
Property, plant and equipment $\ldots \ldots \ldots \ldots$	(102)
Intangibles	(1)
	15
Liabilities
Borrowings (current)	8
Revenue received in advance (current)	(15)
Borrowings (non current)	25
Deferred tax liability $\,\ldots\, \ldots\, \ldots\, \ldots\, \ldots\, \ldots\, \ldots\, \ldots\,$	(1)
	17
Earsttra

------
Retained profits

Before UIG 4 applied, we did not separately account for embedded leases within our service agreements. Fixed and leased assets were previously recognised in our balance sheet and these assets were depreciated or amortised over their economic lives. Revenue associated with the entire service agreement was accounted for in accordance with our accounting policy on service revenue.

Details of the UIG 4 adjustments required to our comparative information is shown in 2.4 below.

2.3 Amendments to A-IFRS transition adjustments disclosed at 31 December 2005

During the second half of fiscal 2006, we made certain amendments to the impacts of adopting A-IFRS on the Telstra Group. These amendments impacted our comparatives for the half-year ended 31 December 2005 as set out below:

(i) Determination of tax bases

The tax base of our defined benefit asset changed as a result of an interpretation on the treatment of the contribution tax adjustment made to the carrying value of the asset. As a result there was a decrease in income tax expense of \$4 million and a decrease in net income recognised directly in equity of \$13 million associated with the defined benefit asset for the six months ended 31 December 2005.

$2.$ Summary of accounting policies (continued)

The following tables show the impact of our changes in accounting policies and amendments to A-IFRS transition adjustments to our previously reported income statements and balance sheet.

		Telstra Group
	Previously reported 31 Dec 2005	UIG 4	Defined benefit tax	Restated 31 Dec 2005
Income Statement	\$m	\$m	\$m	\$m
haceme.
Revenue (excluding finance income)	11,449	(34)		11,415
Other income.	129			129
	11,578	(34)		11,544
Humenzer
Labour.	2,053			2,053
Goods and services purchased	2,214	(19)		2,195
Other expenses.	2,011	÷.		2,011
	6,278	(19)		6,259
Share of net loss from jointly controlled and associated entities. $\dots\dots\dots$	1	$\overline{\phantom{a}}$	-	1
	6,279	(19)	$\sim$	6,260
Earnings before interest, income tax expense, depreciation and amortisation
(EBITDA).	5,299	(15)		5,284
Depreciation and amortisation.	1,810	(10)		1,800
Earnings before interest and income tax expense (EBIT) with a continuing to the control of	3,489	(5)		3,484
Finance income	36	5		41
Finance costs	479	2		481
Net finance costs	443	(3)		440
Profit before income tox expense.	3,046	(2)		3,044
Income tax expense.	907	(1)	(4)	902
Profit for the period of the common contract of the common contract of the form of the product of the form of the common contract of the form of the form of the form of the form of the form of the form of the form of the f	2,139	(1)	4	2,142
Minority interests in net loss	$\mathbf{1}$	$\sim$		1
Profit for the period available to Talstra Entity shareholders $\dots\dots\dots\dots$	2,140	(1)	4	2,143

There has been no impact on basic and diluted earnings per share for the half-year ended 31 December 2005 as a result of the adoption of UIG 4.

^2.4 Impact of our changes in accounting policies and amendments to A-IFRS transition adjustments

2. Summary of accounting policies (continued)

^2.4 Impact of our changes in accounting policies and amendments to A-IFRS transition adjustments (continued)

		Telstra Group
	Previouslu
	reported		Restated
	30 June 2006	UIG 4	30 June 2006
Income Statement	\$m	\$m	\$m
haceme
Revenue (excluding finance income)	22,772	(68)	22,704
Other income.	328		328
	23,100	(68)	23,032
fixpenses
Labour.	4,364		4,364
Goods and services purchased	4,730	(33)	4,697
Other expenses.	4,427		4,427
	13,521	(33)	13,488
$S$ hare of net gain from jointly controlled and associated entities $\ldots \ldots \ldots \ldots \ldots$	(5)		(5)
	13,516	(33)	13,483
Earnings before interest, income tax expense, depreciation and amortisation (EBITDA)	9,584	(35)	9,549
Depreciation and amortisation.	4,087	(20)	4,067
Earnings before interest and income tax expense (EBIT) with a contract of the contract of the control of	5,497	(15)	5,482
Finance income	66	9	75
Finance costs.	1,002	4	1,006
Net finance costs	936	(5)	931
Profit before income tox expense	4,561	(10)	4,551
Income tax expense.	1,380	(3)	1,377
Profit for the year.	3,181	(7)	3,174

There has been no impact on basic earnings per share for the year ended 30 June 2006 as a result of the adoption of UIG 4. Diluted earnings per share for the year ended 30 June 2006 has decreased by $0.1$ cents.

2. Summary of accounting policies (continued)

2.4 Impact of our changes in accounting policies and amendments to A-IFRS transition adjustments (continued)

		Telstra Group
	Previously
	reported		Restated
	30 June 2006	UIG 4	30 June 2006
Balance Sheet	sm	\$m	\$m
Current assets
Cash and cash equivalents with an interview contract of the contract of the cash and cash equivalents	689		689
Trade and other receivables	3,701	51	3,752
Inventories	224		224
Derivative financial assets, $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$ , $\ldots$	21		21
Prepayments.	244		244
Total current assets	4,879	51	4,930
Non current assets
Trade and other receivables.	87	85	172
Inventories	20		20
Investments - accounted for using the equity method in the subset of the second section of the	23		23
Property, plant and equipment.	23,622	(119)	23,503
Intangibles	6,123	(1)	6,122
Deferred tax asset	1		1
Derivative financial assets, , , , , , , , , , , , , , , , , , ,	391		391
Defined benefit assets will will will be contacted to contact the contact of the contact of the contact of the	1,029		1.029
Total non current assets	31,296	(35)	31,261
Total dissets.	36,175	16	36,191
Current Nabilities
Trade and other payables	3,570		3,570
Borrowings	1,969	13	1,982
Current tax liabilities	428		428
Provisions	737		737
Derivative financial liabilities.	12		12
Revenue received in advance	1,170	(9)	1,161
Total current liabilities	7,886	4	7,890
Non Current Hobilities
Trade and other payables , , , , , , , , , , , , , , , , , , ,	197		197
Borrowings	11,409	25	11,434
Deferred tax liabilities responses to the contract of the contract of the contract of the contract of the contr	1,704	(4)	1,700
Provisions	974		974
Derivative financial liabilities. $\ldots$ , , , , , , , , , , , , , , , , , , ,	768		768
Revenue received in advance	405		405
Total non current liabilities	15,457	21	15,478
"微线路就能数据就能。	23,343	25	23,368
秘密第658後第1	12,832	(9)	12,823
Hasitu
Share capital	5,569		5,569
Reserves .	(160)		(160)
Retained profits	7,177	(9)	7,168
Equity available to Telstra Entity Shareholders.	12,586	(9)	12,577
Minority interest.	246	$\overline{\phantom{a}}$	246
Total caultu .	12.832	(9)	12.823

$\mathbb{B}_+$ items requiring specific disclosure

Our profit for the period has been calculated after charging specific expense items from our continuing operations as detailed below:

	Telstra Group
	Half-year ended 31 December

	2006	2005
	\$m	5m
Depreciation and amortisation
- accelerated amortisation of intangibles	14
- accelerated depreciation of property, plant and equipment $\ldots$	134
	148
Income tax benefit	(44)
Net items after income tax benefit (ed. to the context of the context of the set in the set of the set of the s	104

4. Dividends

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

	Telstra Group
	Half-year ended 31 December
	2006 \$m	2005 \$m.
Divîdends paid
Final dividends for the financial year ended 30 June provided for and paid during the interim period
Final dividend	1,739	1,739
Special dividend paid with the final dividend		746
	1,739	2,485
Dividends per ordinan; share paid	¢	€
Final dividends for the financial year ended 30 June provided for and paid during the interim period
Final dividend the contract of the contract of the contract of the contract of the contract of the contract of	14.0	14.0
Special dividend paid with the final dividend		6.0
	14.0	20.0

Our dividends provided for and paid during the interim period are fully franked at a tax rate of 30%.

Dividends per ordinary share declared

Our dividends declared per share in respect of the half-year as disclosed on the face of our income statement is detailed below:

	Telstra Group
	Half-year ended 31 December
	2006	2005
	¢
Dividends declared per ordinary share
Interim dividend (a), , , , , , , , , , , , , , , , , , ,	14.0	14.0
Special dividend paid with the interim dividend	$\ddot{}$	6.0
	14.0	20.0

(a) As the interim dividend for the half-year ended 31 December 2006 was not declared, determined or publicly recommended by the Board as at 31 December 2006, no provision for dividend was raised prior to, or as at, that date in the balance sheet. The declaration of the interim dividend is reported as an event after balance date (refer to note 8 for further information).

5. Seament information

Business segments

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.

During the half-year ended 31 December 2006 there were no adjustments to our business segments.

In our segment financial results, the "Other" segment consists of various business units that do not qualify as reportable segments in their own right. These include:

Telstra Country Wide;
· Telstra BigPond;
· Telstra Media;
Strategic Marketing; and
$\bullet$ our corporate areas.

Segment financial results

For segment reporting purposes, we have reallocated certain items between the respective business segments pursuant to the definitions of segment revenues and segment expenses contained in the applicable accounting standard, where a reasonable allocation basis exists.

Where no reasonable allocation basis exists, we have not reallocated individual items to alternative segments. For segment reporting purposes, these items are reported within the same business segment as for internal management reporting. As a result, our segment revenues and segment expenses do not reflect actual operating results achieved for our business segments in certain circumstances.

The following narrative explains our segment results for those individual items where no reasonable allocation basis exists:

· Sales revenue associated with mobile handsets for Telstra Consumer Marketing and Channels (TC&C), Telstra Business (TB) and Telstra Enterprise and Government (TE&G) are allocated totally to the TC&C segment, with the exception of some products sold which are allocated to TB and TE&G. Ongoing prepaid and postpaid mobile revenues derived from our mobile usage is recorded in TC&C, TB and TE&G depending on the type of customer serviced. In addition, the majority of goods and services purchased associated with our mobile revenues are allocated to the TC&C segment.

These allocations reflect management's accountability framework and internal reporting system and accordingly no reasonable basis for reallocation to the respective business segments exists.

In addition, revenue derived from our BigPond Internet products are recorded in the customer facing business segments of TC&C, TB and TE&G. Certain distribution costs in relation to these products are recognised in these three business segments. Telstra Operations recognise certain expenses in relation to the installation and running of the broadband cable network. In accordance with our application of the business segment definition in relation to customer type, we have not reallocated these items to the Telstra BigPond business segment.

htter-segment transfers

We account for all transactions of entities within the Telstra Group, including international transactions between Australian and non-Australian businesses, at market value. For segment reporting purposes, transfer pricing is not used within the Company. As such the inter-segment revenue line purely relates to intercompany revenue.

The Asset Accounting Group does not allocate depreciation expense related to the use of assets owned at the corporate level to other business segments.

5. Segment information (continued)

The following tables detail the results of our business segments, based on the reporting structure as at 31 December 2006:

Telstra Group

	Telstra Consumer Marketina 8. Channels \$m.	Telstra Business \$m	Telstra Enterprise & Govern- ment \$m	Telstra Inter- national \$m	Telstra Opera- tions \$m	Telstra Wholesale \$m	Sensis \$m	Other (a) \$m	Elimina- tions \$m	Total of all segments \$m

Half-year ended 31
December 2006
Revenue from external
customers	4,679	1,608	2,185	807	93	1,337	885	51		11,645
Inter-segment revenue .			29	13	22	150	÷	1	(215)
Total segment revenue :	4,679	1,608	2,214	820	115	1,487	885	52	(215)	11,645
Segmentresult Share of equity	2,763	1,299	1,247	26	(1, 912)	1,451	362	(2, 343)	(2)	2,891
accounted net losses Net gain on sale of							(1)			(1)
investment		m	44	m	٠	w	4	$\bullet!\star$		48
Earnings before interest and income tax expense
$(EBIT).$	2,763	1,299	1,291	26	(1, 912)	1,451	365	(2, 343)	(2)	2,938

Telstra Group

	Telstra Consumer Marketing £. Channels \$m	Telstra Business	Telstra Enterprise & Govern- ment \$m	Telstra inter- national \$m	Telstra Opera- tions \$m	Telstra Wholesale \$m	Sensis \$m	Other (a) \$m	Elimina- tions \$m	Total of all segments \$m
		\$m
Half-year ended 31 December 2005
Revenue from external
customers	4,481	1,597	2,219	694	92	1,281	1,002	49		11,415
Inter-seqment revenue.			29	15	31	146	10	1	(232)
Total segment revenue	4,481	1,597	2,248	709	123	1,427	1,012	50	(232)	11,415
Segment result Share of equity accounted net profits/	3,041	1,302	1,302	27	(1,785)	1,318	509	(2, 260)	31	3,485
$(\text{losses})$ .			$\overline{\phantom{a}}$	5	$\overline{\phantom{a}}$			(6)		(1)
Earnings before interest and income tax expense
$(EBIT)$	3,041	1,302	1,302	32	(1,785)	1,318	509	(2, 266)	31	3,484

(a) The Asset Accounting Group is the main contributor to the segment result for this segment, which is primarily depreciation and amortisation charges.

6. Notes to the statement of cash flows

Reconciliation of cash balances

	Telstra Group
	Half-year ended 31 December
	2006	2005
	\$m	\$m
Cash and cash equivalents	457	817
Bank overdraft	₩	(44)
	ムミツ	773

Acquisitions and disposals

During the half-year ended 31 December 2006 we made the following significant acquisitions and disposals of investments:

Acquisitions

Soufon Holdings Limited (Soufon)

On 31 August 2006, we acquired 55% (on an undiluted basis) of the issued capital of SouFun for a total consideration of \$337 million including acquisition costs.

SouFun is China's largest online real estate, home furnishings and home improvements portal.

Our accounting for the acquisition and the assignment of fair values to SouFun's identifiable assets, liabilities and contingent liabilities has not been finalised and has been determined on a provisional basis as the completion balance sheet has not been finalised.

	SouFun
	2006	2006
	\$m	\$m
Cansideration for acquisition
Cash consideration for acquisition. $\dots$	333
Costs of acquisition	4
Total purchase consideration	337
Cash balances acquired	(23)
Outflow of cash on acquisition	314
		Carrying
	Fair vatue	value
Assets/(liabilities) at acquisition date
Cash and cash equivalents	23	23
Trade and other receivables.	G	g
Property, plant and equipment $\dots$ .	1	1
Intangible assets	38
Other assets in the context of the context of	t.	1
Deferred tax assets	1	1
Trade and other payables $\ldots \ldots \ldots$	(9)	(9)
Current tax liabilities	(2)	(2)
Deferred tax liabilities	(9)
Revenue received in advance	(6)	(6)
Net assets	47	18
Adjustment to reflect minority interests
acquired.	(21)
Goodwill on acquisition.	311
	337

Profit from acquisition date until 31
December 2006. $\ldots$	2

We have recognised goodwill of \$311 million on acquisition of SouFun. The following factors contributed to the recognition of goodwill:

forecast revenues and profitability of SouFun; and
$\bullet$ strategic benefits to the operations of the Telstra Group.

We have identified and measured any significant intangible assets separately from goodwill on acquisition of SouFun.

If the SouFun acquisition had occurred on 1 July 2006, our adjusted consolidated income and consolidated profit after minority interests for the half-year ended 31 December 2006 for the Telstra Group would have been \$11,807 million and \$1,706 million respectively.

6. Notes to the statement of cash flows (continued)

CSL New World Mability Group

During fiscal 2006, we merged our 100% owned Hong Kong mobile operations (Telstra CSL Group) with the Hong Kong mobile operations of New World PCS Holdings Limited and its controlled entities (New World Mobility Group) to form the CSL New World Mobility Group.

Under the merger agreement, Telstra CSL Limited (Telstra CSL) issued new shares to New World Mobility Holdings Limited (NWMHL) in return for 100% of the issued capital of the New World Mobility Group and \$44 million in cash. The share issue diluted Telstra's ownership in the merged group to 76.4%.

Following finalisation of the subscription amount, we were required to make a cash payment of \$21 million to NWMHL during fiscal 2007, which represented an adjustment to the \$44 million cash received in fiscal 2006. In accordance with the terms of the merger, this adjustment was primarily based on the final working capital position of the New World Mobility Group at the completion date.

Disposals

Australian Administration Services Group Pty Ltd (AAS)

On 31 August 2006, our controlled entity Kaz Group Pty Limited sold its 100% shareholdings in controlled entities Australian Administration Services Pty Ltd and Atune Financial Solutions Pty Ltd for a total consideration of \$235 million.

The sale of AAS included the following controlled entities:

- Australian Administration Services Pty Ltd;
* AAS Superannuation Services Pty Ltd; and
- Atune Financial Solutions Pty Ltd.

It also included AAS's 50% shareholding in a jointly controlled entity Money Solutions Pty Ltd.

	AAS
	2006
	\$m
Consideration on disposal
Cash consideration for disposal to access the consideration	235
Cash and cash equivalents disposed of $\dots \dots$	(23)
Inflow of cash on disposal with a state of the state of the	212

Platefood Limited (Platefood)

On 28 November 2006, our controlled entity Sensis Pty Ltd sold its 61% shareholdings in controlled entity Platefood for a total consideration of \$10 million.

7. Contingent ligbilities, contingent gssets and expenditure commitments

Contingent liabilities

There have been no significant changes from 30 June 2006 to guarantees, indemnities and support provided by us, or to legal actions we are involved in, apart from:

FOXTE!

On 31 July 2006, our 50% owned pay television joint venture FOXTEL entered into a new \$600 million syndicated secured term loan facility to fund the refinancing of previous loan facilities (including the \$550 million syndicated facility), and to enable it to meet future cash flow and expenditure requirements.

The equity contribution deed (ECD) entered into by us and FOXTEL's other ultimate shareholders, News Corporation Limited and Publishing and Broadcasting Limited has been terminated. As a result of the refinancing, we no longer have a contingent liability under the ECD, which amounted to \$100 million as at 30 June 2006.

Uncarditioned Local Loop Service (ULLS) and Line Sharing Service $(LSS)$

ULLS is a declared service by which competitors effectively rent the copper pairs or "loops" connecting Telstra exchanges to almost all residential and business premises in Australia. The ULLS is connected to Telstra's competitors' equipment in Telstra's exchanges allowing them to provide voice and broadband services to retail customers. Once connected, no Telstra services can be provided over the ULLS. The ACCC has indicated that Telstra should charge different prices in different areas for ULLS, despite the fact that it is required to charge the same residential and business retail prices for a basic line rental service throughout Australia.

In December 2005, Telstra submitted an ULLS access undertaking with a single (or averaged) price of \$30 per month for all areas. In August 2006 the ACCC issued a final decision, rejecting the undertaking on the basis that it was not satisfied that Telstra's estimate of its costs and the averaging of those costs were reasonable. Telstra appealed that rejection to the Australian Competition Tribunal.

A number of Telstra's competitors have notified access disputes in relation to ULLS. In August 2006, the ACCC made binding interim decisions in several of these arbitrations that prices remain deaveraged and that the price in band 2 (the metropolitan area where the greatest number of ULLS services will be provided) be reduced from \$22 to \$17.70 per month.

On 14 September 2006, Telstra lodged an appeal to the Australian Competition Tribunal. The Tribunal is required to make its decision by 14 March 2007, or if it extends the decision making period, by 14 June 2007. There is also a risk of the ACCC making final determinations in the access disputes at a lower price.

LSS is a service whereby the copper wire connecting our exchanges to almost all residential and business premises in Australia is shared with a Telstra competitor. Telstra will typically provide voice services to the customer while the competitor will provide broadband services over the same copper wire.

In December 2004, Telstra submitted a LSS access undertaking at \$9 per month. This was rejected by the ACCC in December 2005, with the Australian Competition Tribunal upholding the ACCC's rejection in June 2006.

A number of Telstra competitors have notified access disputes in relation to LSS. On 21 December 2006, the ACCC made an interim decision in these disputes that the access charge for LSS be set at \$3.20 per month.

When the ACCC make their final determination on these ULLS and LSS access disputes, they may find that it is reasonable for Telstra to reimburse the access seekers for the difference in the access price charged from the date in which the various access seekers lodged their access dispute or from a point prior to that time when negotiations between Telstra and the access seeker commenced.

Telstra made submissions to the ACCC on the appropriate course of action going forward with the ULLS and LSS access disputes having regard to the Constitutional Challenge which Telstra has recently commenced. The ACCC has subsequently advised that it will be proceeding with the access disputes notwithstanding this challenge. Refer to note 8 for further details regarding the Constitutional Challenge.

Competition Notice

In December 2005, we increased our prices for line access provided to our competitors to prices closer to our average costs of providing that access. The ACCC appears to allege that these increases left insufficient margin for our competitors in respect of a "lower spend" segment of the retail market. The ACCC somehow considers that our conduct has or is likely to have the effect of substantially lessening competition across the retail market and therefore that we are in breach of the competition rule. On 12 April 2006, the ACCC issued a competition notice against us to this effect.

7. Contingent liabilities, contingent assets and expenditure commitments (continued)

Contingent liabilities (continued)

Competition Notice (continued)

The ACCC has yet to commence enforcement proceedings against us but, should the ACCC elect to commence such proceedings and should they be successful, the maximum potential penalties which had accrued as at 31 December 2006 exceed \$760 million (30 June 2006: exceeded \$200 million) and continue to accrue at \$3 million per day. Optus has issued proceedings against Telstra in the Federal Court which, in part, rely on the competition notice and seek damages, a refund and an injunction preventing us from charging the increased prices and recovering our costs. Telstra will vigorously defend the Optus proceedings and any future enforcement proceedings should they, be commenced by the ACCC.

Telstra has challenged the validity of the ACCC's decision to issue the competition notice (and the preceding consultation notice) in the Federal Court on administrative law grounds. Amongst other things, we allege that the competition notice (and the preceding consultation notice) should be set aside for uncertainty and that the ACCC did not accord us procedural fairness by failing to properly consult with us prior to the issue of the competition notice. The ACCC argues that it does not owe us any duty of procedural fairness or natural justice when issuing competition notices. This challenge was heard by the Federal Court in August 2006. Judgement was reserved.

Expenditure commitments

There have been no significant changes from 30 June 2006 to our expenditure commitments, apart from:

FOXTEL no longer has commitments relating to digital set top box units, which reduced our share of the commitments by \$141 million:
we entered into a contract with IBM Australia Ltd for procurement, operational and accounts payable functions for \$370 million expiring in August 2013. The commitment remaining at 31 December 2006 was \$366 million;
Sensis entered into a contract for IT services for \$165 million with AMDOCS USA Inc. This commitment expires in June 2011. The amount of the commitment outstanding at 31 December 2006 was \$138 million; and
we have entered into a contract for fixed line transformation with Alcatel Australia Ltd for \$461 million. This commitment expires in June 2007. The amount of this commitment remaining at 31 December 2006 was \$265 million.

8. Events after balance date

The directors are not aware of any matter or circumstance that has occurred since 31 December 2006 that, in their opinion, has significantly affected or may significantly affect in future years:

$\bullet$ our operations;
the results of those operations; or $\ddot{\phantom{0}}$
the state of our affairs; $\bullet$

other than:

Olvidends declaration

On 15 February 2007, the directors of Telstra Corporation Limited declared a fully franked interim dividend of 14 cents per ordinary share. The record date for the interim dividend is 2 March 2007 with payment to be made on 30 March 2007. Shares will trade excluding entitlement to the dividends on 26 February 2007.

A provision for dividend payable has been raised as at the date of declaration, amounting to \$1,740 million. The interim dividend will be fully franked at a tax rate of 30%. The financial effect of the dividend declaration was not brought to account as at 31 December 2006.

Constitutional Challenge

On 24 January 2007, Telstra commenced proceedings in the High Court against the Commonwealth, the ACCC and eleven access seekers who had, prior to 24 January 2007, notified access disputes in respect of ULLS and/or LSS. Telstra is seeking declarations from the High Court that Part XIC of the Trade Practices Act is invalid as it applies to ULLS and LSS, together with administrative relief directed at each of the specific access disputes. The matter was heard (for first directions only) on 8 February 2007 and orders were made for the filing of pleadings and particulars. The matter has been relisted on 20 March 2007.

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 19, of the Telstra Group:

(i) comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001;

(ii) give a true and fair view of the financial position as at 31 December 2006 and performance, as represented by the results of the operations and cash flows, for the half-year ended 31 December 2006; 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.

This declaration is made in accordance with a resolution of the Directors.

All family Del D. Dild

Donald G McGauchie AO Chairman

Solomon D Trujillo

Chief Executive Officer

15 February 2007 Melbourne, Australia

Independent Review Report

To the members of Telstra Corporation Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of the Telstra Group (Telstra Corporation Limited and the entities it controlled during the period), which comprises the balance sheet as at 31 December 2006, and the income statement, statement of recognised income and expense and cash flow statement for the halfyear ended on that date, a summary of accounting policies, other selected explanatory notes and the directors' declaration.

Directors' Responsibility for the Half-Year Financial Report

The directors of the Telstra Group are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Telstra Group's financial position as at 31 December 2006 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and other mandatory financial reporting requirements in Australia. As the auditor of the Telstra Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor's Independence Declaration, a copy of which is included in the Directors' Report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim 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 2006 and of its performance for the halfyear ended on that date; and

(ii) complying with Accounting Standard AASB 134 "Interim Financial Reporting" and the Corporations Requlations 2001; and

(b) other mandatory financial reporting requirements in Australia.

Sernst & young

Ernst & Young

Ausich

Mirco Bardella Partner

15 February 2007 Melbourne, Australia

Telstra Corporation Limited and controlled entities

Directors' Report

For the half-year ended 31 December 2006

Directors' report

In accordance with a resolution of the Board, 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-uegr ended 31 December 2006. Financial comparisons used in this report are of results for the half-year ended 31 December 2006 compared with the half-year ended 31 December 2005.

Results of operations

As previously indicated to shareholders, the fiscal 2007 year is the high spend year of our major transformation on the business. Our earnings for the first half of fiscal 2007 have been impacted by these one-off costs but are slightly better than our quidance. We are thirteen months into our five year transformation and have reached a turning point, with positive earnings growth to recommence in the second half.

Telstra's net profit after minoritu interests for the half-uear was \$1,704 million (2005: \$2,143 million). This result was after deducting:

net finance costs of \$520 million (2005: \$440 million); and $\bullet$
income tax expense of \$706 million (2005: \$902 million).

Earnings before interest and income tax expense was \$2.938 million, representing a 15.7% or \$546 million decrease on the prior corresponding period result of \$3.484 million.

Basic earnings per share decreased by 20.2% from 17.3 cents per share in the half-year ended 31 December 2005 to 13.8 cents per share in the current half-year. The lower earnings per share were due to the decrease in net profit.

Review of operations

Our achievements in the past half-uear, as we execute our five uear transformation strateau. are:

built our national Next G^** network in ten months;
launched 3GSM 850 nationwide wireless broadband network; $\bullet$
uparaded the network's speeds to 14.4 meaabits per second (Mbps) nationwide world's fastest wireless broadband network:
extended Next G™ network range up to 200 kilometres (at selected sites); $\bullet$
reached one million 3GSM customers in sixteen months, nearly 40% 3G market share;
launched national high-speed ADSL with network speeds up to 20Mbps:
maintained retail broadband average revenue per user (ARPU) while arowing market share to 45% (increase of 1% from June 2006); and
achieved increase in residential fixed line market share for the first time since 1992.

Other highlights over the last six months include the following:

improved service ratings and increased revenues were achieved while reducing the $\bullet$ total workforce by 4.596 (pre acquisitions and investments) since 1 July 2005. We are on track to achieve our target reduction of 6,000 to 8,000 by 30 June 2008;
increased scheduling flexibility for our customers, meeting more than 90% of our appointments and completing 97% of PSTN service calls on the first attempt; and
6,400-plus staff participating in the Telstra Learning Academy to advance their product knowledge, customer service and technical skills.

Our total income for the half-year (excluding finance income) increased by 2.2% or \$253 million to \$11,797 million (2005: \$11,544 million).

The growth in total income was mainly attributable to:

mobiles revenue \$296 million or 11.8%; and
broadband revenue \$236 million or 43.7%.

Mobile goods and services revenue increased largely due to the continued growth in the number of mobile telephone subscribers, as well as growth in mobile data revenue and international roaming revenue. We also experienced increased revenue from mobile handset sales.

Retail and wholesale broadband subscribers increased by 47.1% in the half-year to 3.5 million subscribers.

Offsettina the sales arowth was a decline in PSTN product revenues of \$216 million or 5.6% as the market continues to move towards mobile and broadband products. This decline has slowed when compared with the 7.6% decline in the first half of fiscal 2006. The rate of loss of retail basic access lines has slowed to 1.7% this half due to competitive offers in the market. In particular, we have experienced a slight increase in the number of retail lines since October 2006.

Our advertising and directories revenue decreased 12.7% compared with the prior corresponding period due to the deferred Melbourne Yellow™ print directory production causing a one month delay in distribution into the second half of fiscal 2007. Excluding the impact of the revenue deferral, advertising and directories revenue increased by 7.0%.

Total operating expenses (before depreciation and amortisation, finance costs and income tax expense) increased by 9.9% or \$621 million to \$6,881 million for the half-year (2005; \$6,260 million). This growth was mainly attributable to:

goods and services purchased increased by \$371 million or 16.9%; and
other expenses grew by \$307 million or 15.3%.

Goods and services purchased increased due to:

higher handset subsidies from a rise in the take up of handsets on subsidised plans as well as higher subsidies offered associated with our marketing and campaign for Next G mobile:
cost of goods sold other, increased mainly due to higher sales volumes for mobile handsets and a higher average cost per handset gagin associated with strong Next G take up:
partially offset by lower network payments as a result of a reduced mobile $\ddot{\phantom{0}}$ terminating access rate, and lower payments for international capacity and termination costs due to lower net costs from Reach Ltd, our jointly controlled entity.

Other expenses increased largely due to higher service contracts and other agreements as a result of costs associated with transformational initiatives.

This was offset by a decrease in labour expenses of \$57 million or 2.8%. Labour costs decreased mainly due to lower staff levels, a lower charge in redundancy costs, and lower overtime payments partially offset by higher contractor and agency payments.

Depreciation and amortisation costs increased by 9.9% to \$1,978 million, primarily due to accelerated depreciation and amortisation associated with our transformation strategy and planned closure of the CDMA network, upgrade of switching systems and software, and growth in communications plant.

Net finance costs increased by 18.2% to \$520 million, primarily due to higher borrowings to fund capital expenditure and the dividend payments, combined with the impact of increased interest rates in the half-year.

Income tax expense decreased by \$196 million to \$706 million as a result of the lower net profit. The effective tax rate of 29.2% was marginally lower than the rate in the prior corresponding period of 29.6% mainly due to the non taxable profit on sale of the Australian Administration Services Group which was offset by carried forward CGT losses.

Cash flow

Our cash flow before financing activities (free cash flow) position remains strong despite declining to \$862 million in the half-year from \$1,956 million in the prior corresponding period. This position combined with our borrowing program will continue to support our ongoing operating and investing activities within our target debt ratios.

Our cash flow from operating activities decreased to \$3,431 million for the current half-year compared with \$3,948 million in the half-year ended 31 December 2005. The decrease primarilu due to:

the 7.0% decline in earnings before interest, income tax expense, depreciation and amortisation; and
lower tax payments.

Cash used in investing activities was \$2,569 million, representing an increase of \$577 million over the prior corresponding period. The increase was mainly attributable to:

our payments for property, plant and equipment as we continue to improve and invest in our core infrastructure;
the payment for SouFun Holdings Limited:
offset by the proceeds received from the sale of Australian Administration Services Group.

Our cash used in financing activities was \$1.089 million for the half-uegr, which represents a decrease of \$1.632 million over the prior correspondina period. The decrease was mainlu due to the reduced payment of dividends as the half-year ended 31 December 2005 included a special dividend of 6 cents per share and an increase in borrowings.

Dividends

The directors have declared an interim ordinary dividend of 14 cents per share (\$1,740 million). The dividends will be fully franked at a tax rate of 30%. The record date for the interim dividend will be 2 March 2007 with paument to be made on 30 March 2007. Shares will trade excluding entitlement to the dividends on 26 February 2007.

Our final ordinary dividend for the financial year ended 30 June 2006 of 14 cents per share (\$1,739 million) was provided for and paid during the half-year ending 31 December 2006. These dividends were fully franked at a tax rate of 30%. The final dividend paid had a record date of 25 August 2006 and payment was made on 22 September 2006.

It is the current intention of the Board to declare fully franked ordinary dividends of 28 cents per share for fiscal 2007. This assumes that we continue to be successful in implementing our transformation strategy and there are no further material adverse regulatory outcomes during the course of fiscal 2007. The amount of dividends (including the level of franking) is a decision for the Board to make twice a year in its normal cycle having regard to our earnings, cash flows and the position as well as future regulatory impacts and all other factors that affect our operations.

Sale of the Commonwealth's remaining interest in Telstra

The Commonwealth proceeded with the sale of its 51.8% ownership interest in Telstra in the half-year ended 31 December 2006 where it sold 34.2% of its ownership interest through a public sale. The Commonwealth's remaining 17.6% interest in Telstra is expected to be transferred to the Commonwealth Future Fund bu 24 February 2007.

The final public sale of Telstra shares was a success with the level of interest from investors, both retail and institutional, much higher than expected resulting in 4.25 billion shares sold, Retail investors were sold 2.5 billion shares at a price of \$3.60 and institutional investors were sold 1.7 billion shares at a price of \$3.70. The total offer size was \$15.5 billion making it the second biggest share offering in Australian history.

Directors

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

Donald G McGauchie	- chairman, non-executive director
Solomon D Trujillo	- chief executive officer
Geoffrey Cousins	- non-executive director (elected 14 November 2006)
Belinda J Hutchinson	- non-executive director
Catherine B Livingstone	- non-executive director
Charles Macek	- non-executive director
John W Stocker	- non-executive director
Peter Willcox	- non-executive director
John Zealis	- non-executive director

Auditor's independence declaration

The independence declaration of our auditors is on page 6 and forms part of this report.

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.

Donald G McGauchie AO Chairman

Solomon D Trujillo Chief Executive Officer

15 February 2007 Melbourne, Australia

Independence Declaration

Auditor's Independence Declaration to the Directors of Telstra Corporation Limited

In relation to our review of the financial report of the Telstra Group (the Telstra Entity and the entities it controlled during the period) for the half-year ended 31 December 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & young

Ernst & Young

Justin

Mirco Bardella Partner

15 February 2007 Melbourne, Australia

AI assistant

TELSTRA GROUP LIMITED — Interim / Quarterly Report 2007

65927_rns_2007-02-14_a42f9ab4-e0af-467c-99e6-d82389a17e49.pdf

ELECTRONIC LODGEMENT

Telstra Corporation Limited Financial Results for the Half Year ended 31 December 2006

Telstra Corporation Limited and controlled entities

Appendix 4D

Half-year report

For the half-year ended 31 December 2006

Appendix 4D Half-year report 31 December 2006 Telstra Corporation Limited ABN 33 051 775 556

Results for announcement to the market

Appendix 4D Half-year report 31 December 2006 Telstra Corporation Limited

Results for announcement to the market (continued)

Dividends declared per ordinary share

Appendix 4D

Half-year ended 31 December 2006

Telstra Corporation Limited and controlled entities

Contents and reference page

Appendix 4D

Half-year ended 31 December 2006

Appendix 4D

Half-year ended 31 December 2006

This includes both the FOXTEL partnership and the FOXTEL television partnership.

Telstra Corporation Limited and controlled entities Results and operations review Half-year ended 31 December 2006

Results

Financial Highlights Half-year ended 31 December 2006

Results ahead of quidance, company transformation continues

Income

Expenses

Business transformation

Changes to accounting treatments

Cash flow

Capital expenditure

Treasury operations

Dividend

Outlook

Half-year results and operations review - December 2006

Table of contents

Summary financial information

Results of operations

Cash flow summary

Balance sheet summary

Seament information

Seament information

Statistical data summary

Operating revenues

Operating revenues

Fixed telephony

Fixed telephony

PSTN products

PSTN products

Basic access

Local calls

PSTN value added services

National long distance calls

Fixed to mobile calls

International direct calls

Fixed interconnection

ISDN products

ISDN products

Inbound calling products

Inbound calling products

Pauphones

Payphones

Customer premises equipment

Customer premises equipment Half-year ended 31 December 2006 2005 Change 2006/2005 \$m $\mathsf{sm}$ \$m (% change)

Intercarrier access services

Intercarrier access services

Other fixed telephony

Other fixed telephony

Mobiles

Mobiles

Internet

Internet

IP & data access

Business services and applications

Business services and applications

Advertising and directories

Advertising and directories

Offshore controlled entities

TELSTRA GROUP LIMITED Interim / Quarterly Report 2007

Telstra Corporation Limited and controlled entities
Australian Business Number (ABN): 33 051 775 556