TELSTRA GROUP LIMITED — M&A Activity 2014

Dec 22, 2014

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23 December 2014

The Manager

Company Announcements Office Australian Securities Exchange 4[th] Floor, 20 Bridge Street SYDNEY NSW 2000

Office of the Company Secretary

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA General Enquiries 08 8308 1721 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Telstra acquires Asian telecommunications and service provider Pacnet

In accordance with the Listing Rules, I attach a copy of a media release and an analyst briefing pack, for release to the market.

Telstra CFO and Group Executive International, Andrew Penn and Brendon Riley, Group Executive, Global Enterprise and Services will host a conference call regarding this acquisition at 2.30 pm AEDST today, 23 December 2014. Details will be available from Telstra's investor relations website www.Telstra.com/investor later this morning.

Yours faithfully

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Damien Coleman Company Secretary

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

MEDIA RELEASE

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Telstra acquires Asian telecommunications and service provider Pacnet

23 December, 2014 - Telstra today announced it would acquire Asian telecommunications and services provider Pacnet Limited, a provider of connectivity, managed services and data centre services to carriers, multinational corporations and governments in the Asia-Pacific region.

The acquisition of the Singapore and Hong Kong headquartered Pacnet includes interests in its China joint venture, PBS, which is licensed to operate a domestic Internet Protocol Virtual Private Network and provide data centre services in most major provinces in China.

Pacnet gives Telstra ownership of an extensive range of services including software defined networking, an expanded data centre network, more submarine cables and major customers across the region.

The US$697 million acquisition is subject to completion adjustments. The transaction is subject to regulatory and Pacnet financier approvals and is expected to complete by mid-2015.

Telstra Chief Executive Officer, David Thodey said the acquisition was aligned to Telstra’s growth strategy and was a significant step for Telstra as it continued to expand the business beyond Australia.

“Asia is an important part of our growth strategy. We believe this acquisition will help us become a leading provider of enterprise services to multinational companies and carriers in the region,” Mr Thodey said.

“The enterprise services market is evolving rapidly and Pacnet will strengthen our networks; data centres and submarine network as well as boosting our service offerings and people capabilities.

“For Australian businesses, businesses across Asia and importantly companies looking to expand and grow in Asia, the combined entity will provide powerful new options for networks and services.

“Pacnet increases the scale and scope of our assets which can be used as a platform for Telstra to scale and expand leading solutions such as unified cloud, unified communications, managed network services and security services.

“Our strategy is centred on serving enterprise and carrier customers doing business in Asia. We serve these customers by leveraging our strong connectivity foundation to offer a portfolio of integrated network applications and services solutions,” he said

Pacnet Chief Executive Officer Carl Grivner said: "The addition of Pacnet’s subsea fibre network, data centre assets, capability in China, and dedicated employee base to Telstra's world-class infrastructure and management will give it the ability to accelerate business growth in the region.

“There is a tremendous opportunity for this combination to address the growing demand for services throughout the Asia-Pacific region and provide superior solutions and service to customers,” he said.

In the year ended December 2013 Pacnet generated revenues of US$472m and earnings before interest, tax, depreciation and amortisation (EBITDA) of US$111m.

The combined entity would become a leader in the Asia service provider market. Telstra’s GES business in Asia would almost double in size and it is expected to drive operational and cost synergies.

About Pacnet: as at 30 November 2014

Pacnet is headquartered in both Singapore and Hong Kong with approximately 815 employees across 25 offices (including PBS China) located in 24 cities in 11 countries and regions, including Australia, China, Hong Kong, India, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand, the United Kingdom and the United States.

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Follow Telstra online: exchange.telstra.com | www.facebook.com/telstra | www.twitter.com/telstra_news |

www.youtube.com/telstracorp

MEDIA RELEASE

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Pacnet’s core assets comprise an integrated network of points-of-presence (PoPs), data centres and submarine cables across Asia-Pacific, operated out of delivery centres throughout the Asia-Pacific region. Pacnet operates 109 PoPs across 61 cities in the Asia-Pacific region and 8 cities outside of the region (US and Europe) aimed at both carrier and enterprise customers.

Pacnet operates a network of 29 interconnected data centres in 17 cities across the Asia-Pacific region, of which 7 have Tier III accreditation. Pacnet also has Asia’s largest privately-owned submarine cable network, which lands at 21 cable landing stations in China, Hong Kong, Japan, the Philippines, Singapore, South Korea and Taiwan. In addition, Pacnet controls two of the five fibre pairs on the Unity trans-Pacific submarine cable network connecting Japan to the United States.

Pacnet has a broad customer base. It focuses on two key customer segments: enterprise and carrier customers. In the enterprise segment, Pacnet has about 2,400 customers with strong penetration of financial services, internet, social networking players, e-commerce, technology and professional services. In the carrier segment, Pacnet has about 220 customers comprising both retail and wholesale telecommunications players. Pacnet has also developed a strong franchise with the over-the-top segment, in line with Telstra’s strategy.

ENDS

Telstra Media contact: Nicole McKechnie, + 61 429 004 617, media@team.telstra.com

Pacnet Media contact: Annie Ho, +852 2121 2728, annie.ho@pacnet.com

Ref number: 246/2014

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Follow Telstra online: exchange.telstra.com | www.facebook.com/telstra | www.twitter.com/telstra_news |

www.youtube.com/telstracorp

23/12/2014

ACQUISITION OF PACNET

ACCELERATING TELSTRA’S ASIAN GROWTH STRATEGY

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23 DECEMBER, 2014
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ASIA IS AN INTEGRAL PART OF TELSTRA’S STATEGY

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TO CREATE A BRILLIANT CONNECTED FUTURE FOR EVERYONE
OUR PURPOSE
OUR STRATEGY
IMPROVE CUSTOMER DRIVE VALUE BUILD NEW GROWTH
ADVOCACY FROM THE CORE BUSINESSES
LONGER TERM
INVESTMENTS
GLOBAL SERVICES ASIA Health, Telstra Software Group v
(TSG), Telstra Ventures,
Digital Media
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23/12/2014

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OUR STRATEGY FOR ASIA HAS
THREE PILLARS
GLOBAL ENTERPRISE CONNECTIVITY LONGER
SERVICES / MOBILITY TERM
BECOME A LEADING LEVERAGE TELSTRA’S LEVERAGE OUR
PROVIDER OF ENTERPRISE CORE CAPABILITIES IN LONGER TERM
SERVICES TO MNCS AND NETWORK EXCELLENCE INVESTMENTS SUCH
LARGE ENTERPRISES TO DRIVE VALUE FROM AS SOFTWARE INTO
IN ASIA CONNECTIVITY ASIA AND INVEST IN
OPPORTUNITIES IN SIMILAR OPPORTUNITIES
THE REGION IN THE REGION
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CURRENT ASIAN ASSETS AND CAPABILITIES

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LEADING ACCESS TO GLOBAL MORE THAN
PROVIDER OF
INTERNATIONAL DELIVERY
CONNECTIVITY 230 1400
CENTRE
IN ASIA COUNTRIES & INTERNATIONAL STAFF
TERRITORIES
MORE THAN INTEREST IN MORE THAN
TBPS
CABLE 2.5 CAPACITY
2000 LICENCES 20 SYSTEMS
TO BE ADDED IN THE
POPS WORLDWIDE [19] WORLDWIDE NEXT 12 MONTHS
MORE SQFT OF COLO OFFSHORE
READY DATA DATA
THAN150000 CENTRE SPACE 18 CENTRES
A LEADING REGIONAL PLATFORM FOR GROWTH
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PACNET’S CORE ASSETS

ASIA’S LARGEST PRIVATELY-OWNED SUBMARINE CABLE NETWORK, • WHICH LANDS AT 21 CABLE LANDING STATIONS ACROSS ASIA POINTS OF CITIES IN THE CITIES OUTSIDE OFTHE • PRESENCE ASIA – PACIFIC ASIA-PACIFIC REGION 109 ACROSS 61REGION AND 8 (US & EUROPE) • NA&S CAPABILITIES IN MANAGED NETWORK AND SECURITY SERVICES AND THE LARGEST INTEGRATED DATA CENTRE FOOTPRINT IN THE ASIA PACIFIC CITIES ACROSS • INTERCONNECTED THE ASIA-PACIFIC TIER III 29 DATA CENTRES IN 17 REGION INCLUDING 7 DATA CENTRES • STRONG IN-REGION PRESENCE ACROSS ASIA • ENTERPRISE STAFF IN CUSTOMERS 11 COUNTRIES 2400+ 800+ 5

PACNET TRANSACTION DETAILS

ACQUISITION OF - USD PACNET FY13 REVENUES OF USD $697M $472M INCLUDING GROSS DEBT OF AND EBITDA OF US$111M APPROXIMATELY US$400M

TARGETING RUN RATE SYNERGIES OF USD $65M

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MEETS ALL OF TELSTRA’S INVESTMENT GUIDELINES
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EPS ROIC > WACC BY YEAR 2 BY YEAR 3

MORE ACCRETIVE THAN A SHARE BUYBACK (OF SAME SIZE)

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NEXT STEPS

• Customary closing conditions apply

• Completion anticipated in Q4FY15

• Expect to fully integrate all aspects of Pacnet (except China JV holding) to capture operating and capital synergies

• Run rate synergies are expected to be realised within the first two years after completion

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