TELSTRA GROUP LIMITED — Management Reports 2008

Nov 6, 2008

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7 November 2008

The Manager

Company Announcements Office Australian Stock Exchange 4[th] Floor, 20 Bridge 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 Corporation Limited Shareholder Letter Telstra’s transformation: Three year anniversary,moving to the cost savings phase

In accordance with the listing rules, attached is a copy of an announcement for release to the market.

Regards

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Carmel Mulhern Company Secretary

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

Office of the CEO 242 Exhibition Street MELBOURNE VIC 3000 Mail to: Locked Bag 5639 MELBOURNE VIC 3001

Telstra Corporation Limited ABN 33 051 775 556

7 November 2008

Dear Shareholder

Telstra’s transformation: Three year anniversary,moving to the cost savings phase

Yesterday, we held our annual Investor Day and I am writing to share with you the progress we are making in transforming Telstra into a world-leading media communications company.I am pleased to report that we remain on track in implementing the strategy we outlined back in November 2005. The key financial and operational indicators continue to point in the right direction across the business and despite the current economic conditions we have maintained our guidance for both top and bottom line growth.

As part of the five year end-to-end transformation we needed to invest billions of dollars upfront to build new networks,new IT systems,change processes,better understand our customers,innovate for long term sustainable growth and develop a new range of applications and services that will benefit all Australians. We have already completed much of the network investment,but there is still more to go as we focus on the IT transformation and continued product development. The benefits are being reflected in the turnaround in our financial and operational performance.

Three years down the transformation road, we have not taken our foot off the accelerator. We have not deviated from our end goal - creating value for our customers and shareholders. I have included our transformation achievements for the last year in the attached report titled Progress Report: Telstra’s transformation three year anniversary so you can see what we have achieved over the past year.Some of the highlights include:

1. The IT transformation is redefining how we interact with customers.It is an important part of our commitment to provide better services to our customers and deliver them more efficiently – saving everyone time by simplifying the processes.We have largely put the first phase of the IT transformation “to bed”with more than 6 million of our consumer customers and more than 11 million services migrated to the new billing system.

2. Building momentum across our media-communications business with the creation of Telstra Media, a new business unit focussed on expanding the opportunities for leveraging Telstra’s media content assets, both in Australia and internationally.This recognises the growing importance of content to the future growth of Telstra as a leading media-communications company.

3. Next G™ network peak network speeds will increase to 21 megabits per second (Mbps). This confirms Telstra’s Next G™ network as the largest and fastest national mobile broadband network in the world. This gives our customers an unrivalled mobile broadband experience and even better access to a new world of internet-hosted mobile applications.

4. Today we launched Unified Messaging, a business and consumer offering which brings communications together in the one place – email, voicemail, pictures, videos and even video mail. Unified Messaging allows customers to access emails and other communications from their address book from either their PC or mobile.

5. Telstra’s leadership in Australia has also been highlighted in new relationships announced this week with three globally respected partners:

6. a. We announced a strategic alliance with Microsoft to use their software together with our networks to deliver globally competitive solutions for businesses;

7. b. A new strategic alliance with Cisco to bring advanced communication solutions and services delivered with stronger support arrangements to our customers in Australia and New Zealand,leveraging the power of our integrated IP networks;

8. c. A new agreement with Google that will provide Australians with access to Yellow™ business listings on Google Maps™ - combining Sensis’ strong capabilities in advertising sales and local business content and Google’s strong capabilities in online search and mapping technology.

9. Since I last wrote to you back in August after our full year results,many of our key performance indicators have remained strong through the September quarter. In mobiles, the number of 3G customers exceeded 2G customers for the first time. Data revenue continued to grow, accounting for more than one third of our mobile services revenue. In wireless broadband, we added another 90,000 customers in the quarter and we now have 660,000 customers using our superior wireless broadband product. We have also been one of the best performing shares on the share market.

Financial Outlook

We remain focused on achieving our 2009 and 2010 financial year targets despite the current global financial crisis. But we will not be totally immune from the macro economic environment and should the Australian economy slip into recession, it may be necessary to review our growth targets. Our ability to pay future dividends is not under threat, and we will continue to see improving growth at the bottom-line as the cost-reduction program gets into full swing.

The second half of the 2009 financial year will see the level of cost savings accelerate as we continue to reduce the number of systems and drive productivity improvements across the business.We expect to reduce operating costs by $500 to $800 million over the next 2 years. Coupled with continued top-line growth, shareholders will see the benefits of the transformation with these savings flowing through to our financial performance.

We have achieved a lot over the past three years of the transformation and our free cash flow target of $6 to $7 billion in 2010 has not changed. This level of free cash flow could allow the Board the opportunity to increase shareholder returns,whilst retaining the balance sheet flexibility for value-creating investment,both organic and via acquisition if opportunities should arise.

Looking ahead….

We have turned the business around, but there remains plenty of work ahead of us as we continue to execute the transformation.We have momentum and believe that our shareholders will be well protected from any slowdown. The fundamentals of our business are strong, we have the financial flexibility and management to navigate our way through the current global economic uncertainty.

We are getting on with the job of removing the complexity, duplication in infrastructure, products and platforms. We have built next generation networks and we are a truly integrated operator delivering a full array of world-class services to our consumer and business customers. We have architected the business for a high-speed broadband world.

For further information on today’s market briefing,please visit our Investor Relations website at www.telstra.com.au/abouttelstra/investor ,or send us any questions or comments to investor.relations@team.telstra.com .

Yours sincerely

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Solomon D.Trujillo Chief Executive Officer

Progress Report: Telstra’s transformation three year anniversary

Telstra has completed three years of its five year end-to-end transformation. We are not only reshaping and redefining the company but also the way people live, work and play. The transformation is driving real and sustainable change across the business as we continue to win in the marketplace and create long-term value for our shareholders.

Financial turnaround continues – on target for 2010 management objectives

The investment we have made in transforming the business is flowing through to our improving financial performance, as we continue to grow revenue and remove costs. We remain focused on achieving our 2009 and 2010 financial year guidance. But we will not be totally immune from the macro environment. The September quarter results highlight some of the important parts of the business that continue to exceed our expectations:

• In mobiles,we achieved double-digit mobile service revenue growth;

• Our planned cost reduction program is on schedule;

• We are continuing to increase our market share in the enterprise market;

• Yellow™ print revenue trends remain strong, with year-on-year declines matching last year’s levels following the closure of the major Yellow™ books - this is an important forward indicator of business confidence;

• Broadband average revenue per user (ARPU) is continuing its positive trajectory.

It should be remembered that in the second half of the 2009 financial year there are factors that are beyond our control, such as the rate of the economic slowdown, currency movement and the flow on implications for long-term capital expenditure, the form of any further intervention in the markets by the Government and the interest rate policy of the Reserve Bank to name just a few. As a result we may see some deterioration in certain areas of the business not anticipated previously.For example,fixed-line (PSTN) volumes have declined a little more than expected in the first quarter of the year.

Next G™ mobile broadband network – speed increase and coverage expansion

Since launching our national 3G 850MHz mobile broadband network - the Next G™ network - in October 2006, we have continued to invest in improving and expanding the network.Telstra offers its customers the world’s largest and fastest national mobile broadband network.

• Today, we announced the next evolution of our 3G network with the peak network download speeds on the Next G™ network to increase to 21Mbps from 3.6Mbps two years ago, providing extra speed, flexibility and productivity for customers;

• We also unveiled another world first for the Next G™ network - a device capable of reaching peak download speeds of 21Mbps and 5.4Mbps upload*;

• We continued to extend the Next G™ network breadth and depth of coverage, and now the network footprint covers 99% of the Australian population or more than two million square kilometres;

• At the end of the September quarter more than half of our mobile customers were using the enhanced features and services of our 3G networks.

Telstra Media – leveraging Telstra’s integrated content assets for future growth

As Telstra continues to evolve into an integrated media communications company, and to further prioritise our media assets including Sensis, BigPond and Foxtel we have created a new business unit called Telstra Media. This new unit is focused on leveraging Telstra’s unique online and mobile content assets to drive future growth both in Australia and internationally.

We continued to grow our content portfolio with the acquisition of a majority stake in two leading online advertising businesses in China, Norstar Media and Autohome / PCPop in June. Combined with our majority stake in China’s number-one real estate website, SouFun.com, these acquisitions provide further high-growth opportunities for our buy,find and sell business,Sensis.

Fixed broadband – building for future traffic demand

Last month, we completed the roll-out of a 9,120 kilometre submarine cable from Sydney to Hawaii to meet the growing internet traffic between Australia and the United States. The cable has been named “Telstra Endeavour” and is part of Telstra’s investment in building networks capable of handling the traffic demands of the digital economy both now and into the future.

Market-based management – better understanding our customers

We have interviewed more than one million customers and our needs based segmentation approach continues to deliver results. Sales through our call centres have increased in the past three years as a percentage of our total sales by 38%. We have more than doubled our campaign strike rates, halved our consumer fixed line churn, and increased our percentage of higher-spending, multi-product holding customers. In the 2008 financial year we cut our mobile subscriber acquisition and recontracting costs (SARCs) by 19% through the use of both our market-based management knowledge and handset economies of scale.

– Customer service and productivity improvements across the board

Since starting the transformation three years ago,our customer service and productivity levels have continued to improve as we invest in redefining our customer service experience.

• The number of network trouble reports per 100 services in operation has fallen by one-third since 2005,and this is in spite of some of the worst flooding in Australia for many years;

• Since 2005,the backlog of ADSL (broadband) held orders has fallen 99% to less than 100 today even though our broadband sales have increased;

• Our field workforce productivity is up 50% since we started the transformation.

The “Factory”– delivering early savings

• Procurement and supply chain – reduced the number of suppliers by 20% to around 8,000 and increased the number of electronic purchase orders.This translated into a saving of $226 million in the 2008 financial year.

• Brightstar – our device sourcing arrangement with Brightstar helped us save $246 million in the 2008 financial year.

• Property – we exited a further 30 site leases during the 2008 financial year which equates to around $33 million in operating cost savings.

Our media-communications strategy already sets us apart from our global telecommunications peers, and the additional emphasis we are placing on content will consolidate that advantage.We will continue to differentiate, innovate and stay ahead of the game for consumers - for business - and for enterprise and government customers. That is how we’ve outperformed our competitors and our global peers.But we are not finished yet.We will continue to execute on our transformation and deliver for customers and shareholders.

• Speeds represented are peak network speeds.Actual customer download and upload speeds will be less and will vary due to network configuration, congestion,distance from the cell,local conditions,hardware,software and other factors.