22 July 2004

The Manager

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

Office of the Company Secretary

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

Telephone 03 9634 6400 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Telstra Technology, Innovation and Products - Operational Briefing

In accordance with the listing rules, please find attached Ted Pretty - Group Managing Directors' opening address for release to the market.

Yours sincerely

North Grahi

Douglas Gration Company Secretary

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

Telstra Technology, Innovation and Products

Operational Briefing

22 July 2004

Opening Address

Ted Pretty Group Managing Director Telstra Technology, Innovation and Products

Welcome to the Telstra Technology, Innovation and Products briefing to the market.

First some background to TTIP. The Telstra's Technology, Innovation and Products group was formed in October 2003 and comprises the technology network groups, Telstra Research Labs, the ITS functions and fixed, data and wireless product groups. We are the company's engine room.

Our role is to cost efficiently deliver the infrastructure and new product to support this revenue growth. Network and some IT operations (e.g. our Global Operations Centre and field service functions) are not in this group. They are in the Infrastructure Services Group led by my colleague Michael Rocca.

Products managed by TTIP represent about 70% of Telstra's domestic revenue. The revenue generated from products and services in this division is reported by segment in the customer business groups. Product streams that are not directly managed by TTIP include BigPond service; Sensis; Intercarrier services; NDC and Telstra Multimedia led by Bruce Akhurst; and Managed Services led by David Thodey.

The platform and systems which we build and support underpin more than 95% of Telstra's total domestic revenue as well as a component of its international revenue.

Our top 5 priorities are as follows:

Cost reduction
Service Improvement
Delivering Profitable Revenue Growth
Designing for the Future
Building a World Class Team

Our key financial performance indicators are cost reduction, revenue growth, capital expenditure and cashflow.

In this presentation today we want to cover the following:

market trends
our Vision
the customer experience we will provide to all metropolitan, regional and rural customers
how our network platform architecture will evolve to seamlessly deliver such services with our focus on next generation technology solutions with high quality of service
the rich range of innovative products and services which we will deliver and the benefit of such services to our customers
our plans to deliver innovation to underpin our existing revenues and new products to support growth whilst meeting the Company's capital management commitments.

Let me deal with these each in turn.

Market Trends

Today, about four out of five Australians own a mobile phone and the penetration of mobile and wireless devices will shortly exceed 100%; more than 450 million SMS messages are sent each month across all of Australia's networks and that number continues to grow quickly; internet penetration is at 53% of households and by year end, about 1 million Australian homes will have some form of broadband connection; virtually all major corporate and government customers use some form of Virtual Private Network, IP VPN service or network based voice and data service and some use our advanced digital video network services.

To put this into context Telstra's own broadband subscribers numbers now exceed 800,000 (retail and wholesale combined), our GSM Subscriber base is now approaching 6.7 million subscribers and our CDMA base will shortly exceed 1 million subscribers. These are impressive numbers and they demonstrate the growth we see in the market.

So, the trends are wireless, broadband, IP based solutions and multiple services per household and customer. These services allow customers from any device and anywhere to instantly keep in touch, create multiple virtual communities, enjoy access to information and entertainment, and transact their business.

We know that our environment is changing and customers want us to simply deliver the benefits that technology can bring namely choice, price competitiveness, convenience, flexibility and the opportunity to change the way in which they conduct their lives or run their businesses.

Our Vision

The cornerstone of this vision is that Telstra will become Australia's leading customer grade IP based multi-services provider.

In simple terms what this means for customers is an absolute commitment by Telstra to provide all existing and future customers across all of Australia best in class fixed, mobile and broadband services.

By meeting all of customers' voice, data, messaging, video and entertainment needs in this way we are Connecting Australians to the Future.

The strategies to achieve this Vision are based upon the company's assessment of the market growth opportunities and also customer feedback. They draw heavily upon the recently completed Telstra Technology and Product Blueprints initiated by my predecessor Doug Campbell. It embraces our brand values of Clever, Caring and Trustworthy. These values are no less significant within a core technology and product group like TTIP as customers depend on us to provide solutions in a way that delivers the best customer experience.

We are specifically addressing the needs of regional and rural customers and it is our intention, subject only to any practical constraints, to deliver equivalent services at all times.

Customer Experience

To provide the best customer experience we can we need to be focus on certain basic tenets of customer service (internally we call these our Customer Experience Principles).

We need to have strong momentum in terms of our product and service innovation and in architecting our networks and platforms to be able to provide a rich range of voice, data, messaging and video services delivered in a seamless manner over our core IP, broadband and wireless networks. However it is how the customer will enjoy the benefits of these services which remains key. We want to deliver best in class customer experience.

TTIP has adopted a set of Customer Experience Principles (developed by my former Telstra Retail Team and now in place across the company) to drive the TTIP business. They are:

Keep it simple
Know who I am/recognise me
Be easy to deal with
Communicate with me effectively
Deliver real value to me
Don't ever put my business/interests at risk
Let me see only one Telstra
Keep your promise

	For our technology and product group this means
Keep it simple	We will design/architect our networks based on simplicity and with ۰ multi-service capability to enable ease of interface and access
	Our products/services will be intuitive and easy to use ۰
Know who I am/recognise me	We will know what services each customer receives and our customers' network architecture
	We will understand that our network is an extension of our ٠ customers' infrastructure
Be easy to deal with	Where feasible we will enable our customers to self-provision ٠ services
Communicate with me effectively	We will explain the feature, function and benefits of our products ٠ clearly to our customers and partners
	We will explain the nature of the services we offer, the networks ٠ that support them to our customers and partners and the business risks if any arising from deployment choices
Deliver real value to me	We will always deliver on our promise of integrated products, ٠ solutions and billing
	Our products and services will always add value to our customers' lives and businesses
	We will always provide 'best of breed' products and services ۰
Don't ever put my business/interests at risk	Reliability to the agreed service level is everything ۰
	We must ensure best-in-class redundancy and restoration ۰
	We must know of any service or network interruptions before our ۰ business customers and advise them
	Our networks and systems must be alarmed and accurately monitor ۰ and deliver to the customer experience
	We will understand the impact of a service disruption ۰
Let me see only one Telstra	We must operate as one team - one focus - shared objective - to ۰ deliver great service
	We must be accountable for delivery - TTIP and IS always work as ٠ one
Keep your promise	Our products and services must meet the promised SLAs
	As individuals we must do our own job and be accountable

Telstra's Evolution

To meet these market trends and to deliver the required customer experience as we have done successfully year on year, we must leverage technology to provide reliable, innovative and unique voice, data messaging and video services over a converged IP network architecture.

To support the very latest products and services our networks and platforms must continue to evolve, just as they evolved from analogue to digital (FMO) and from circuit switch to packet environments (DMO) in an efficient and timely way.

If there was one phrase by which I could define the network and platform technology backdrop against which we must deliver these services to our customers it would be that "we are accelerating our move to a converged network and platform environment with IP as the common method of transport across advanced broadband and wireless networks".

A critical point to make here is that this is about an evolution. Even in an emerging IP world, all carriers will continue to manage a mix of both traditional circuit switched and packet switched IP technologies. We will do this in an efficient way and in a manner that does not compromise our service standards.

Future Network Evolution

In realising our Vision, Telstra is building our Future Network Evolution infrastructure that will deliver converged communication service to customers over broadband access and via any device. The key components of our Future Network Evolution infrastructure comprise:

An intelligent optical transport network optimised for IP traffic
A common multi-service IP/MPLS based core
High-speed multi-service Broadband and wideband access DSL, HFC, FTTP
A rich set of advanced communication capabilities provided by softswitch and application servers
Complementary 2.5 (GSM/gprs and CDMA/1xRTT and 3G (EVDO and WCDMA) integrated over time to provide operating and cost efficiencies
An integrated OSS/BSS capability to deliver better customer service (e.g. Self service, autoprovisioning, self diagnosis and advanced customer network management)

The Future Network Evolution infrastructure will enable key changes as follows:

from "multiple technologies & multiple networks" to "a common IP/MPLS based network with multiple forms broadband access"

from "service functions tightly coupled with each network/access" to "seamless service over any access"
from "customers choose/buy technology (e.g. DDS, FR, ATM, IP)" to "customers buy solutions and applications"
from "customers have separate networks for voice and data" to "a converged IP network for voice and data"

Our Future Network Evolution infrastructure will bring the following benefits.

We expect to see significant cost reduction both in capex and opex over time by first capping and subsequently exiting legacy networks and diverting growth to IP networks.
We can ensure our investment is future proof
We expect to grow new revenue enabled by new services over our future network
We will be able to deliver a converged Customer Experience

Lets look at what is happening at each major layer of our network and platforms.

Core and Transmission

Recently we announced selection of a supplier to support the transformation of our current Transport network into an advanced, 'Next Generation Core Transport Network'. This transformation, which has already commenced, will see Telstra realise significant capex and opex savings in our network.

We will have a market-leading network platform from which we can cost effectively, and flexibly launch new services (including high speed/high bandwidth IP and Data-related services, eg. 10Mb, 100Mb, GigE, ATM and SAN services) to all of our customers from residential, SMEs through to Corporate.

Telstra already has an efficient current generation transport network, and the challenge was to select the right approach to evolve this network. These plans are now being executed and will see the following benefits being realised for Telstra and its customers:

New Next Generation SDH and possibly photonics platforms from which Telstra can provide a vastly enhanced range of services, improved 'time-to-market', as well as cost effectively meeting future capacity needs
Seamless enablement of Telstra's existing deployed base of transmission equipment (as well as its future platforms) with low cost plug-in and add-on solutions
Total end to end management of all solutions which will ensure the highest levels of service quality for its customers
Clear opportunities for Telstra to reduce its costs through capex savings as the new network is significantly cheaper on a unit cost basis, and will over time reduce the number of layers in the

network and opex savings through the reduction of 'stovepipes' (e.g. overlay networks for each service type) and through improved processes

The evolution path that Telstra has chosen will see a low-risk, low-cost approach to IP/packet enabling our existing network, whilst at the same time implementing state-of-the-art transmission technologies which will improve our competitiveness and the quality and services we can offer our customers.

For example we have deployed ATM based, voice over packet core (VoPC), to lower our operating costs. ATM technology has made high quality, packet voice carriage possible before IP has become mainstream. We are migrating ISDN primary rate services, for example, to VoPC to take the load off local switches, removing the need to upgrade processors in those switches. This is good capex management.

Switching

At the switching level we have three technology shifts to deal with: PSTN to VoIP; Mobiles 2G to 3G; and data to IP.

Let me start with the data view, because the future IP data network will be the "carriage layer" assumed by the others.

Our existing network elements will merge courtesy of the IP evolution. Our Switched Data Network (SDN) supports our current Frame Relay and ATM products. These product interfaces can be supported on IP networks. Our initial focus is to cap investment diverting growth to IP networks and subsequently retiring SDN. A key part of that will be ensuring new DSLAMS are deployed with Ethernet interfaces, which can be backhauled using the SDH Ethernet interface described above. Once new traffic growth is covered this way, we can follow an economically driven path to some network and platform retirement. Expenditure on our DDN and SDN is to be capped by 2006. So the basic plot is for an evolved IP network taking our growth in volume from 2006.

For fixed voice, we have a solution deployed for the Enterprise customer base for our TIPT services. By Q3 we will have available advanced soft switch technology to support the provision of the latest Voice over Internet Protocol (VOIP) services for all segments including the Consumer and SME markets and not just for the Enterprise market. We will have different servers within that environment to support different segments and different products for those segments. So today we have commenced building our next generation network for voice.

For mobiles we will either acquire (and enhance) some WCDMA (3G) switches as an overlay from 2005. From the outset our 2G/3G networks will share many elements and around 2006 to 2007 we will start to integrate our 2G and 3G mobiles networks. In the period to 2008 we will likely use some of the same components identified through the softswitch tender to support the mobiles environment.

Around 2008 we should begin to see integration of our fixed and mobile networks into a common switching fabric carried on the common IP core.

Through the course of this transition over the longer term we see a reduction from 130 key switching sites to approximately 20 Switching and Routing Sites (SRS). From later this year we will have identified these sites and be able to focus our investment on them.

The softswitch itself replaces the core processors and call feature software in our PSTN local access switches. Other VoIP components replace other parts of the PSTN.

The main benefits of this IP based softswitch technology are integration with desktop and computing world which opens the way to match existing 'call control' features and add new features associated with presence, contacts, conferencing and collaboration, access to information, entertainment and security.

The cost story here is compelling. The equipment unit costs are between 10 and 50 percent less than the equivalent circuit switch platform. Note this is important to start ups but less so to Telstra as we have already made the PSTN investment. Over time, and we monitor this closely life cycle opex will drive us to retire the existing PSTN circuit switch architecture.

Customer Access Networks

The key features of our next generation access strategy and those areas which will be the focus for Telstra's forward capital expenditure programs will include the:

Continued improvement and augmentation of the copper Customer Access Network (CAN) to meet Quality of Service requirements. Approximately \$320 million will be spent over the next 2-3 years on overall CAN upgrade
Further enhancement of the broadband DSL network to support higher speeds and extended ranges. There are still advances to be seen from DSL technology that will see additional investment justified in this area. DSL has at least another 10 years as a network and access bearer
Enhancing the HFC network to support higher speeds
Greenfield (new estates) deployment of FTTP. We are undertaking two trials in Brisbane. \$34 million will be spent on this deployment
Very limited brownfields deployment of Fibre to the Premises (FTTP) to replace (where efficient to do so) the existing copper Customer Access Network (CAN)
The deployment of Wireless Local Loop for rural and regional customers requiring full PSTN equivalent service where traditional fixed infrastructure is not practical
The trial deployment of somewhat misnamed '4G' fixed wireless broadband coverage afforded by companies such as Flarion which I will address further

By 2020, aggressive industry forecasts for Australia suggest we will have about 6 million lines households served by FTTP and still around 2 million copper access line.

Let me drill down on ADSL, HFC and FTTP specifically.

With today's DSL technology we can deliver 1.5Mps up to 4 kms in practical terms to 80% of households. We will increase this to 90%. This DSL technology can be used to deliver up to 6.5 Mps up to 1 km.

We do not offer service beyond 4.0 km from the starting point of the DSL service but note that this is not necessarily the exchange, ie., we can extend from the exchange on fibre and install a mini DSLAM in the street and then the above numbers apply radiating out from that start point. Thus, coverage is more an economic decision than a technical one. We are also running trials which will potentially provide services, albeit at a higher cost, at distances over 10km from the exchange.

For HFC today we dimension for 1.5 Mbps downlink and 256kbps uplink.

On our FTTP trial, customers can get an ADSL equivalent service. FTTP technology has proved to be a commercially viable alternative to the copper network in new estates. Within the next 18-24 months, the total FTTP capex for network equipment (including cable) per home passed is expected to equal the cost of provision via the traditional copper based network. Today it is around 1.5 times the cost of copper. The cost to support FTTP will be less than the cost to support traditional copper based network. In addition to savings on the initial activation, we estimate there will be annual savings from a more resilient and flexible FTTP network. Currently, customers use a variety of access infrastructures to receive Telephony (copper), broadband data (Copper/ADSL, HFC, Satellite) and payTV (HFC/Satellite) services. FTTP will offer an equivalent to these existing products and services via one dual-fibre access technology with on-going cost savings in operations and maintenance. Also longer term, FTTP technology will provide a growth path to higher bandwidth internet and entertainment services.

This trend is consistent with our peers in Europe such as BT and also the US such as Verizon although they may pursue this more aggressively than we may. The US carriers face far greater pressure in this area from the cable companies who are aggressively targeting their fixed access customers and voice revenues. The regulatory rules are also different in those markets.

The takeout is that fibre is becoming cost competitive with copper, and we should be seeing much more of it beginning in the months ahead – but the transition to all fibre will occur over next 15-20 vears not in the short term.

We have briefed ACCC and ACA of the FTTP initiative.

These moves complement and extend the work undertaken by Teistra and completed in the latter part of 2003 to digitise its cable network to support an incredible range video and entertainment services for both its and Foxtel's customers.

IP and Data Core

Our key initiative in this domain is the deployment by Telstra of the most advanced IP MPLS based, data and IP network. This will be a central platform to support high availability, high performance, enterprise and business products including IP VPNs. A key focus is providing best of breed Quality of Service (QOS) and enhanced features.

Approximately \$140 million will be spent over the next 3 years on our MPLS data and IP voice and video networks including customer network management elements.

We address below the extensive work undertaken in evolving our IP architecture, significantly improving the area of IP data and IPT reliability. Our market share and growth will demonstrate how successful we have been in this critical business area.

The MPLS core we are deploying also enables us to provide enhanced features which include:

IP Services Portal: giving all customers online visibility and control to effect adds, moves and changes to their networks
CPE router provisioning and management for Frame Relay, ADSL and Business DSL access to IP WAN
an IP Commissioning cell, ensuring faultless deployment of IP services.

Wireless and Mobility

We will aggressively extend the coverage of our existing 2G and 2.5 G networks. Let me add some detail. You are aware our GSM network has 96% population coverage and we will add nearly a base station a day over the next 12 months. The payback on most of these sites is around twelve months

and this represents a very efficient use of capital. Our CDMA network now extends to cover in excess of 98% of the population and we have almost completed our national 1xRTT data enhancement to the CDMA network which sees corporate and business customers enjoying average speeds for wireless data at around 70kbs bursting up to 144kbs.

In addition we will:

Roll out EVDO in Telstra's existing CDMA network to provide 3G wireless coverage for very fast wireless data services with services to be operational in major capitals by October. This complements the national rollout of 1xRTT on Telstra's CDMA network during FY04 which provides high speed data access.
Deploy and launch (on owned or shared infrastructure) during 2005, 3G WCDMA voice and data services to support a wider and more exciting range of rich voice, messaging, data and video services targeted at early adopters

Let us look at some of these in more detail.

$2.5G$

The GPRS network overlay to the GSM network current supports data speeds up to 40 kbps and is extensively used by business for Blackberry mail access as well as POS and other mobile data terminal access to corporate VPNs for many transport and logistics companies. We expect this growth trend to aggressively continue. In addition Telstra leads the world in being the first carrier to deploy Push-to-Talk services over GSM cellular and customer trials have been an outstanding success. It is expected that Push-to-Talk over cellular will gradually replace two-way radio.

A brief comment on GSM 'Edge' technology. Most of our new GSM base stations come equipped with Edge capability but there is not sufficient device penetration and the technology window is too short to launch it on its own prior to WCDMA. Hence we will likely look to use it further down the track to boost performance outside WCDMA areas but not offer Edge as a service on its own.

3G - EVDO and WCDMA

What is most exciting is our rollout out of 3G on CDMA which is known as our EVDO network. We have been methodically but aggressively rolling out EVDO (Evolution Data Optimised) in major cities. For FY 05 we will see a combined deployment total of 1xRTT and EVDO base stations of about one a business day. EVDO offers data speeds of between 300-500 kbs and is true Wireless Broadband. This network, like that deployed by Verizon in the US, offers complementary coverage to our CBD wireless hotspots. Our long term objective is to be able to offer customers seamless roaming from WiFi to EVDO to 1xRTT in continuous session.

Broadband Wireless Development

We are pushing for viable wireless broadband access in situations where fixed access is not available. EV-DO may be possible for this, though other emerging wireless broadband technologies, referred to as WiMax, may be superior. We are trialing Flarion as the most promising of these. It is fast with high capacity and, working at 800MHz, has long range. Products built to WiMax as per IEEE 802.16 standard are also promising. However, available spectrum bands is likely to be an issue. Flarion has developed a broadband wireless technology that will allow us to add a card or "blade" to our CDMA/EVDO network that will provide data rates equivalent to our current DSL service. We are deploying the Flarion technology at Silverwater and North Ryde in Sydney, and Ballarat in Victoria, and subject to commercial viability we will proceed to deployment. Our investment in this trial is modest at around \$1 million.

The compelling feature of these investments is that they are incremental and leverage our existing architecture.

Service Delivery Platforms

To leverage these new network capabilities state of the art service delivery platforms from which to launch new products and features accessed by any type of device and carried over our fixed or wireless networks.

In 2003 we launched a common online platform for fixed and wireless applications, on which we provide innovative new services for telstra.com, BigPond Broadband, IP WAN and Wireless Data. This was a first step in creating a common platform supporting both Java and .NET applications with reusable, scalable infrastructure independent of the delivery network.

Web Services are central to our integration approach allowing us rapid application development and service creation, without replicating complex core systems such as billing, provisioning and CRM. Our platform has significant flexibility and is based on well defined standards.

IT Platforms

Our CIO, Jeff Smith has led significant work in redefining our development environment for key applications that support our customer service systems including billing, front of house support and customer relationship management. The outsourcing of specific support for such systems is helping us move quickly to best practice CMM levels.

In addition the ITS group has substantially re-architected our IT infrastructure and associated standards to ensure that we maintain an open environment to easily enable the deployment and integration of new applications and systems. Skills have also been a key focus in this domain and the recent ITS transformation program has ensured we have the right skill mix within the company to deliver future IT support.

The ITS group delivered on its key metrics for FY 04. The FY 05 year will see us focus on systems reliability both in terms of availability and performance and business continuity and disaster recovery plans.

Innovative Products and Services

Fixed line access and calling

Now what are the benefits to consumers from this next generation network and platform strategy?

This is about Telstra's commitment to provide the richest range of voice, data, messaging, personal and entertainment services to customers.

Last year we launched a number of compelling fixed line services and features, Telstra 101, 1#, and Fixed sms enabling us to drive up our call completion rates within the network, thereby adding valuable incremental revenue over our established infrastructure. Telstra now achieves an average take up of 5.7 features per fixed line which is best practice globally.

In FY 05 you will see the Telstra Personal Assistant which will enable our customers to leverage a network based personal address book. Voice is now not simply a product, it is an application and also a tool and, as such, is undergoing a major transformation. Voice recognition will be the key to making accessible to all customers, a richer range of products and customer service solutions.

Our strategy is not simply approached on a single product by product basis. Our Consumer Convergence Framework provides a structure to coordinate all our initiatives across fixed, mobile, BigPond and Media.

Broadband as a product category is now growing rapidly and with satellite, cable and DSL is available to all Australian households.

In relation to internet services, one of our key focuses is on broadband and we are on track to our goal of providing broadband services through our retail and wholesale channels to 1 million broadband SIOs by June 2005 and to achieve \$1 billion in broadband revenue by December 2006. As at 30th June 2004 there were in excess of 800,000 SIOs.

Mobile and Wireless Services

For our mobile and wireless customers these services include SMS, fixed SMS, MMS, video and music download. P2P video conferencing, games, presence services and business applications. This will be done in the context of a broad based Consumer Wireless Strategy.

This strategy covers how we will provide further enhanced data and multimedia services to our existing base of 2G, 2.5G customers as well as to start to embrace future 3G services.

We will implement late in the second quarter of FY 05, the i-mode platform on the GSM/GPRS network. With i-mode, Telstra will be able to offer a premium wireless experience to its customers, delivered over a wide range of innovative multifunctional handsets.

The i-mode service, based on the successful DoCoMo experience in Japan, is based on de facto Internet standards and, in other markets, has proved itself to be attractive to content and application providers, stimulating a vibrant content market with thousands of content sites for customers to choose from. The agreement allows Telstra to draw on this international experience to bring a world leading service to Australian consumers. i-mode is a mobile internet service that provides subscribers with access to rich content, e-mail, games and other applications and services through their mobile handsets. i-mode is leading the world in mobile internet innovation with over 43 million subscribers and 80,000 content sites (already 4,500 outside Japan) in nine different countries.

The agreement with Telstra in Australia marks DoCoMo's ninth partnership for the i-mode service. Telstra joins an international i-mode alliance that includes E-Plus Mobilfunk GmbH & Co. KG (Germany), KPN Mobile N.V. (Netherlands), Far EasTone Telecommunications (Taiwan), BASE N.V./S.A (Belgium), Bouygues Telecom S.A. (France), Telefonica Moviles Espana (Spain), Wind Telecomunicazioni SpA (Italy) and COSMOTE Mobile Telecommunications S.A (Greece).

In addition, Telstra will continue to enhance and develop the wealth of content currently available to its existing customers. As you know, we already have almost 8 million mobiles subscribers. In addition to our previously announced initiative on i-mode, Telstra is undertaking the deployment of a state of the art service delivery environment during the 1st half of 2005 to more effectively serve our customers with "open standards" based data capable devices. We will ensure that established customers can enjoy the benefits of these new services, on the device of their choice.

The new environment will enable us to deliver a more personal and targeted user experience to our customers offering compelling services that match their specific interests, whilst making full use of their own devices capabilities - with content efficiently adapted, for example, for screen size and number of colours.

The service experience will be smooth, avoiding the need for repeated password entry and with the addition of navigational aids to prevent customers getting lost when browsing between services. New and existing services will be easy to discover, through both their mobile device and also via the web.

Our objective is to double our mobile data ARPUs and increase data use penetration across our entire mobiles base.

Data and IP services.

As previously stated, the MPLS core we have deployed also enables us to provide enhanced customer offerings and important product events are planned for FY 05.

We will deploy a new suite of remote working solutions ("Office of the Future") and deployment of an integrated Internet VPN solution for small and medium business. The remote working solutions portfolio integrates office hotspot, remote office, home office, mobile office and secure internet roaming services for a fixed price per user, with a single client interface and identity across all access options. The Internet VPN solution provides an entry point VPN for small and medium business. The solution integrates access (ADSL), internet services, pre-configured IP Sec enabled routers and support.

Telstra continues to lead the domestic Managed Private IP VPN market with IP WAN. Between IP WAN and IP MAN solution we have more than 45% share and have grown our revenues 55% YOY (\$67 million in FY 03 to \$104 million in FY04). This market leadership has been attributable to our flexibility in addressing particular market needs. The Government IP campaign generated success for us in many states. By "lightening" the feature set of IP MAN we were able to reduce our costs and compete effectively with tier 2 suppliers and raw offerings such as dark fibre.

In our view Telstra IP based services clearly out-feature and out-perform those of Powertel / Request DSL, Primus and Optus. We have the competitive advantage. Telstra's IP VPN Solutions are by far the most successful in the market with $\sim$ 50% market share compared with Optus' 10%.

A study by IDC in 2003 identified Telstra's strengths in the IP networking market are quality of network, financial strength, network footprint and breadth of offering for both products and services.

Telstra's IP networks have a greater breadth of offering in terms of access type, geographic coverage and value added services. Currently more than half of our 1200 IP VPN customers use our value added services including mail and security services. Today in the business market we are a clear market leader in a very competitive space with over 15 players. We are currently growing faster than the market, and expect to gain further market share over time.

We have deployed MPLS based IP VPN networks for the Department of Education and Training, and the Catholic Education Office in Western Australia. In the case of the Department of Education and Training there are 740 sites across the state of Western Australia connected to an IP VPN at speeds ranging from 2 Mbps to 10 Mbps. The Catholic Education Office has a 150 site network. These networks play a critical role in removing the "digital divide" between rural and metropolitan

requirements. The networks enable improvements in learning of every child in a government or Catholic school in WA. The networks enable on-line course definition for teachers, collaborative online learning for students and enable access to media rich resources.

It is worthy to note that whilst this migration to IP networks has taken place within various government departments in WA, the Telstra Government Sales team has grown its overall total data revenues by 16% in FY 2004.

Business voice solutions

Telstra launched Telstra IP Telephony in August 2003. This solution offers all the benefits of voice/data convergence to business. Telstra IP Telephony is fully (SIP) standards based and allows customers self-paced migration from their TDM / PABX solutions to full IP telephony. It offers customers integrated desktop control of office telephony.

It is appropriate to comment on Optus' recent announcement in the voice solutions market. This is not a first for an Australian carrier as claimed. In our view, the Optus' offering does not have the full range of telephony features or platform management capabilities required by customers. We are not so sure about Optus' qualifications to offer convergent solutions given their relative position in the IP market.

Now, coming soon from Telstra and as an adjunct to Telstra IP Telephony, Telstra will shortly be announcing a multimedia solution set in conjunction with a major partner. Multimedia capabilities such as group collaboration and presence, will support operation of virtual businesses, personnel mobility and telecommuting. It will operate not only across an IP Telephony environment, but also across a customers legacy telephone environment and including their mobile / wireless environments.

Customers will not have to have converted to full IP telephony to benefit from these capabilities.

Telstra also provides intelligent routing integrated with assisted and self-service tools (IVR and Speech Recognition) that enable our enterprise customers' to develop effective customer service strategies whilst lowering the cost of ownership in respect of investment into these technologies and provide effective return on investment. Telstra is extending its investment into these platforms and will be able to provide more open, scalable and enhanced features (voice recording, outbound dialling). work with their key customers in developing migration strategies to IP based Contact Centres, and provide multi media channel capability for effective interaction management.

In 2004 Telstra will deploy its Enterprise Speech Solutions (ESS) platform in the intelligent network. This Open Standards, VoiceXML-based platform gives Telstra the capability to offer speech recognition delivered though our network to our enterprise customers. Deploying this platform in our network, leverages Telstra's investment in network CTI (Computer Telephony Integration) enabling more intelligent routing and self service solutions to be developed.

Telstra will launch an initial suite of speech applications (Corporate Dialler, Departmental Dialler and Store Locator).

Telstra has demonstrated the value of speech recognition internally and will take this experience to its customers. One recent deployment of speech technologies for customers calling Telstra is OneNumber OneVoice (1N1V), a speech application that allows callers to Teistra's main inbound numbers (132200, 132000, 125111) to be able to search, navigate and interact more easily for customer service within Telstra. 1N1V simply asks callers to say in a few words, give the reason for their call. 1N1V then directs the caller to the correct part of Telstra for service, thus avoiding going through long menus of choices, reducing the time it takes to get the service you want and significantly reducing the number of misdirected callers. This deployment of world-leading speech technology is now an offering Telstra is bringing to market.

Managed Services

IP network traffic growth in the business sector is being fuelled by the increasing convergence of ICT, IP based applications and their increased interoperability. This leads to growth in our managed services revenues. Managed Services includes outsourcing of WAN, LAN and desktop support as well as network delivered applications and web services.

With telecommunications typically around 25% of ICT spend, this convergence represents a significant growth opportunity for Telcos around the world. Growth comes from two main areas, namely, management of customer network and IT infrastructure and delivery of network based applications; and transaction services, typically targeting supply chain integration, company productivity, and sales channel effectiveness.

Small and large businesses alike continue to look to selectively outsource the management of IT and network infrastructure, preferring a partner that can do both. Telstra's IP, Data and Voice platforms are tightly linked to our Services Solutions strategy led out of Telstra Business and Government. As stated earlier integrating our IP networks and managed services into business solutions we have achieved growth rates faster than the market.

Data Centre services in hosting have grown 63% over the last 12 months compared to 40% last financial year and against market growth rates of around 30%. Similarly our network based Telstra Information Storage Service (TISS) has grown from 10 Terabytes to almost 60 terabytes in the same 12 months.

We are progressively IP enabling our transaction and applications services. We successfully developed and deployed a new IP exchange for our insurance industry customers, migrating them from a legacy EDI platform. FY04 saw the first full year, and benefits, of the IP service delivering a 23% increase in revenue and carrying almost 4 million transactions, reinforcing that migration to IP typically means increase in usage and in the range of services.

Our focus is now on IP enabling all of our Financial services products and remaining EDI transaction networks. Our Mobile EFTPOS network is now IP enabled and trials on IP enabling the wired network are beginning this quarter for the EFTPOS network which has grown to over 2 million transactions a day in FY04.

Our web based services portfolio continues to grow with our Microsoft partnership with the launch of Managed Exchange 2003 last quarter with one of our first major customers, having all their email, scheduling and calendaring delivered from a network based service accessible on their smart phones in the office or from any internet connection.

Our conferencing business is also well on the path to web services with an estimated 60% market share of the small but fast growing web conferencing market. The audio and web conferencing products are being integrated into a single solution and we are introducing a range of audio and video IP conferencing solutions throughout FY05.

All of the platforms are being enabled for both public and private IP networks increasing the range, security and flexibility of services that can be delivered. Our strategies in managed services, transactions and applications will continue to support our IP network growth as well as provide a significant market differentiator.

The completion of the KAZ acquisition will further enhance our market position and range of Integrated ICT services in the corporate and SME segments. This customer base will be further leveraged and enhanced with our Managed IT, IP applications and transaction services.

Leveraging in New Zealand

Telstra and TelstraClear have now over a number of years actively leveraged innovation, technology, and capability to provide seamless and similar look and feel products to customers operating across Australia and New Zealand. In addition, we have leveraged and long lined technology, to bring additional enhanced products into the New Zealand domestic customer base.

This offering has included ATM and Frame services using meshed Nortel Passport switches in Australia and New Zealand, and has also included Computer Telephony Integration (CTI) to provide sophisticated call centre capability using Genesys technology operating off Australian and NZ DMS switches. These solutions enable Australian and NZ companies to efficiently use Telstra / TelstraClear's information solutions to add significant value to their businesses.

Efficiency, Service and Skills

Telstra remains committed, as part of its technology and service strategy, to developing, training and acquiring the necessary best in class network, systems and products architecture, development and operations skills.

Our focus must and should be on end to end delivery systems and best of breed QOS. We have a renewed focus on standards and processes. In addition, we have recently competed a skills review and will be aggressively seeking to upgrade our capabilities in the key areas of data/IP networking, VoPC, VoIP, 3G voice and data, and 4G wireless broadband technologies and services. However, we do not foresee any material impact on labour costs as these will be more than covered by other operational savings.

Now let me turn to service performance. How will TTIP address recent service issues in a cost effective manner?

TTIP has, as one of its priorities for 04/05, "a focus on the basics". The TTIP plan includes aggressively managing service failures by investing in improved fault detection through alarming our networks and systems and improving fault resolution, restoration and customer management.

TTIP is aiming also to reduce risks from customer network design and usage by continue to build to best practice design standards, further simplifying Operational Support Systems and remedying potential areas of major customer impact. TTIP is balancing process improvement with targeted capital investment to ensure improved service delivery.

Our Customer Access Project has just completed the first year of a three year journey to transform the end-to-end customer access experience. The first major infrastructure building block was to deploy the open dialogue natural language voice portal - 1N1V mentioned previously.

Customer self-service rates have sky-rocketed by over 200% with the application of 1N1V as a result of a simplified customer experience and our ability to more accurately understand the reason for the customer's call. We are expecting to have around \$5 million in additional self-service savings due to 1N1V this year alone

These initiatives will be achieved in conjunction with those key strategic partners that in the company's view, are best placed to support Telstra's next generation technology and services evolution.

The company has reviewed its multi vendor sourcing strategy. Whilst we acknowledge and will further leverage the value achieved from aggressive sourcing, at a component level we will be selecting as strategic partners those vendors who have the ability to: positively and materially affect or change Telstra's business model; are prepared to extensively share their intellectual property and

training and development programs; can provide most favoured business terms; and who have a commitment to best in class quality of service.

TTIP and Corporate Services have also worked together to develop a set of rules of engagement covering RFIs, tenders and Strategic Partners. These rules have three purposes: improved speed to market for products and services; reduced cost to both Telstra and the vendors; and clarification of accountabilities and the sponsorship required from TTIP. The rules will assist TTIP, supported by Corporate Services, to achieve commercial outcomes with its vendors more quickly and at reduced cost.

Key Questions and Issues

Now let me tackle some of the burning questions you may have or at least anticipate some you may wish to ask as we take you through our strategies and initiatives over the next few hours. However, I should make the point that given we are yet to announce our full year results and we have limitations on forward looking statements, I do not intend to make additional comments during the day on these sensitive issues.

1. Revenue Growth

As previously stated, we expect the major revenue growth contributions to come from broadband internet and IP solutions, wireless, advertising and directory services.

Our CEO Ziggy Switkowski has previously indicated that based on current economic and market growth trends he expects our growth rates to gradually ramp up over the next 2 years to approaching 4% during the FY 06 year.

TTIP is supporting Telstra's revenue growth target on a number of fronts. Firstly, TTIP will deliver just over 1 percentage point domestic revenue growth in FY05 from product development initiatives launched from FY03 to FY05. Call completion products like Telstra 101 continue to contribute strongly to the revenue uplift.

Secondly we expect to generate an additional half a percentage point revenue growth simply by improving mobile depth of coverage for both GSM and CDMA networks in priority areas. The direct benefit includes increasing both inbound and outbound usage revenue. As I previously stated our GSM Subscriber base is now approaching 6.7m subscribers and our CDMA base will shortly exceed 1 million subscribers. These are impressive numbers.

2. Costs and Expenses

At the group level Telstra is committed to its \$800 million cost reduction program over the three years to FY06. You will receive further updates as to the current progress of this program announcement on 12 August 2004.

At our business unit level the TTIP merger has brought together a number of strategies that sought to improve the operational effectiveness of Telstra's platforms and networks to better align with our customers through our products and services. TTIP has achieved a very solid cost management outcome for FY04 with our total expenses being \$56 million below budget which is about 4% below our total budget.

Cost management will continue to be a key priority for TTIP. We have targeted total expense savings of \$130 million in FY05 through a series of initiatives relating to NGCR, Six Sigma and other IT cost reduction programmes offset by business volume increases.

A number of these initiatives will continue to produce savings beyond FY05. A specific example includes the network and platform rationalisation program which will deliver further expense savings of about \$110m during the next two fiscal years, FY06 and FY07.

Let me deal specifically with IT costs. As indicated in previous briefings we also have a specific program to reduce IT costs within the company. We are on track to achieving the 50% reduction target off our FY03 base ITS budget of \$960 million which itself represents over 60% of the total Telstra IT capex and opex spend of \$1.5 billion.

Throughout this total period some of these benefits will be reinvested in revenue growth programs including new mobile service delivery platforms, next generation IP services, broadband expansion, Big Pond mail initiatives, CRM, data warehousing and hosting support.

But our approach to costs across TTIP is not solely in IT. And does not end there. Continued improvement in operational efficiency is a core competency for TTIP and we are committed to deliver on cost reduction targets through network and platform rationalisation, by using best practice tools such as Six Sigma and adopting relevant standards for specific process areas within the group.

We've recently introduced management measures within TTIP that address product unit cost control. We expect to have future targets measuring product unit cost.

3. Capital Management

Our CEO and CFO provided quite a deal of detail on this topic in their market briefing on 21 June 2004 and I do not propose to add to those comments and any further questions you may have should be directed to Investor Relations. However I can confirm that from a technology, product and IT point of view there is nothing on the horizon in terms of cash spend which would adversely affect the ability to meet the announced capital management program. You should expect that we have headroom to adequately cover any major unplanned spend in each of the next three years including any acquisitions or investments domestically.

Based on previous performance TTIP is very confident of delivering on its part of Telstra's capital management commitments for both FY05 and FY06 and through FY07.

TTIP will help to deliver on Telstra's capital management commitments by overseeing about 75% of the capital program (Network and Discretionary programs of \$2.2 billion). The governance processes we have around capital involves:

adherence to our Corporate Investment Management Process
our Investment Management and Financial Governance processes including "Funds Release"
prioritisation / Reprioritisation of the investment to maximise benefit $\bullet$
monthly / quarterly reviews
ongoing analysis of the Capex requirements and spend; and
post Implementation Reviews (PIR's)

Our processes are robust and sensible.

4. Capex

As per previous guidance, the domestic capex spend will remain reasonably static in FY05 at about \$3.0 billion. This affords us adequate development headroom. You may recall within last years plan we have already deployed a national 1xRTT footprint part of our national major city and regional center EVDO network, started the FTTP trials and deployed enterprise IP telephony. We have demonstrated we can invest in growth within the \$3.0 billion target.

Also as previously identified, this \$3.0 billion capex figure excludes the deployment of WCDMA specifically.

Our expectation capex spending levels will remain roughly the same each year on year thereafter even assuming more aggressive greenfields fiber deployment.

$5.3G$

We already have 3G for the business segment now. We already have a national 1xRTT footprint and we will shortly completed national major city and regional centre 3G EVDO rollout. This gives us a very strong set of offerings in the business mobile data space.

Turning to 3G WCDMA consumer services Telstra's view has not changed about likely demands for 3G specific services ie. we do not see any immediate demand in the market for video streaming or P2P video conferencing. That does not means we are complacent, far from it, it is simply that timing is the key here and any investment and deployment must be synchronised to demand and competitive offerings. That said Telstra will launch 3G services sometime during 05 and you should not expect me to signal to our competitors the exact timing. Telstra expects that take up of services and roll-out will be gradual extending to the metropolitan areas of all capital cities over next 3-4 years.

Telstra will either pursue these opportunities through a paced 3G roll out or an infrastructure sharing arrangement. Under either scenario we will be able to leverage our existing cellular base station sites and structures as well as reuse much of the billing and operations systems already in place for 2G and 2.5G services.

6. VOIP

The carriage of voice via packet technologies including over IP offers two benefits. The first is in the core for transit traffic cost savings and efficiency and Telstra has already deployed VoPC technology in its core primarily to limit the need for additional circuit switched equipment. We expect the volume of voice traffic carried over VoPC to increase gradually over the next 3-5 years based as we need to add additional capacity and seek to lower our operating costs.

The second benefit form VoIP is for our customers. By Q3 of FY 05 will have the capability to offer not only 'best efforts" VOBB services but also mainstream quality VoIP services using soft switch technology.

It is true that VOIP is also seen as a competitive threat and we will respond appropriately but cautiously in terms of maintaining our yields. This will mean a different approach by segment. At this stage we believe the maximum net revenue effect on Telstra over the next 18-24 months is unlikely to be material in the context of our traditional voice revenues.

7. Product Substitution

For voice Telstra has been successfully managing the F2M and narrowband to broadband substitution to date defending core PSTN revenues. Initiatives to address this include defending PSTN access line subscriptions and revenues by focussing on value added services (101, Talking Text); offering attractive product bundles (*1/2 price 2^nd line, bundles) and competitive pricing packages for whole of business customers. We are also capturing customers migrating to wireless through creating distinctive value added services and targeting market segments with higher PSTN abandonment rates.

Lets talk about data. Within the Enterprise segment extensive private networks have been in place for some time. Traffic is not so much moving from the public network, as between technologies. As you know we launched IP Telephony for this segment a year ago.

Much has been made of VoDSL recently, and much of what is discussed is not VoDSL, but really VolP over broadband. True VoDSL is little more than a form of pair gain system, along the lines of an ISDN primary rate service. We consider it something of a tactical diversion and have focussed our efforts on VoIP instead.

In the SME market, VoIP penetration is still quite low. At present we are seeing some reluctance around take up of pure IP PBXs. The key barrier is cost to replace existing PBXs, KTS and handsets. Our key competitive advantages in the SME market are our existing packaging options we are leveraging into the IP-CPE marketplace; an unbeatable business grade DSL footprint; and 12 months experience with our IP Telephony service.

Voice pricing will continue to be under pressure in any event and we cannot accurately determine to what extent price pressure will accelerate specifically as a result of VoDSL / VoIP. However we will not be leading the market down. Based on our approach of utilising IP platforms to offer other applications in addition to voice, we aim to replace the eroding voice revenue in the all sectors with those from value added or enhanced services. Voice is only one application amongst a suite of services in an IP environment.

Conclusion

The key points I would like you to take away to day are:

We have the right team, right focus and we are aggressively asking and addressing the right $\bullet$ questions
Our Future Network Evolution architecture and customer service strategy is well formulated, has rigorous businesses processes around it and ensures we effectively use technology to innovate
Whilst there are some key market differences in Australia we will ensure that we will deploy best of $\bullet$ breed technology but the pace of deployment will be based on sound economics and customer demand.
We continue to lead and go to market with innovative products and services; and
We are firmly aligned with the key financial and capital objectives of the Company as outlined to the market as evidenced by our strong recent FY performance and our current and future year plans.