SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

Date: For the period ending 31 August 2005

TELSTRA CORPORATION LIMITED

ACN 051 775 556

242 Exhibition Street
Melbourne Victoria 3000
Australia

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F þ Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934

Yes o No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

INDEX

Telstra Corporation Limited Financial Results for the Year ended 30 June 2005

Full Year 2005 Results — Analyst briefing

Telstra Chief Operations Officer Appointed

Appendix 3Z — Final Director’s Interest Notice

Appendix 3Y — Change in Directors’ Interest Notices

11 August 2005


		Office of the Company Secretary

		Level 41
Company Announcements Office		242 Exhibition Street
Australian Stock Exchange		MELBOURNE VIC 3000
4^th Floor, 20 Bridge Street		AUSTRALIA
SYDNEY NSW 2000		Telephone 03 9634 6400
		Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Telstra Corporation Limited Financial Results for the Year ended 30 June 2005

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

	1.		Appendix 4E — full year report

	2.		Year end results and operations review — financial highlights and normalisation schedule

	3.		Media release

	4.		Full year financial report for the year ended 30 June 2005

	5.		Directors’ report.

Yours sincerely

Douglas Gration
Company Secretary


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


Telstra Corporation Limited and controlled entities		Preliminary final report

Telstra Corporation Limited and controlled entities

Appendix 4E
Preliminary final report
for the year ended 30 June 2005


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E
Preliminary final report
30 June 2005
Telstra Corporation Limited ABN 33 051 775 556

Results for announcement to the market


		Telstra Group
	As at 30 June
	2005		2004		Movement		Movement
	$m		$m		$m		%

Extract from the statement of financial performance
Sales revenue		22,161		20,737		1,424		6.9
Revenue from ordinary activities (including interest revenue)		22,760		21,335		1,425		6.7
Net profit available to Telstra Entity shareholders		4,447		4,118		329		8.0

For fiscal 2005 and fiscal 2004, all items included in our statement of financial performance are considered to be from ordinary activities. As a result, our profit from ordinary activities after tax available to Telstra Entity shareholders is the same as our net profit available to Telstra Entity shareholders.

During fiscal 2005, there were no individual transactions that had a sufficiently significant impact on revenues or expenses that they require specific disclosure. Our results from operating activities have been impacted by the acquisition of a number of controlled entities, as outlined in note 3: ‘Details of entities which control has been gained or lost during the period’.

During fiscal 2004, the following significant items impacted on the results recorded in our statement of financial performance:

•

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

•

During fiscal 2004, Telstra and PCCW Limited bought out a loan facility previously owed to a banking syndicate by our 50% owned joint venture Reach Ltd (Reach). Our share of the payment in relation to this acquisition amounted to US$155.5 million. At 30 June 2004, we provided for the non recoverability of the debt, amounting to $226 million, as we considered that Reach was not in a position to repay the amount in the medium term.

Capital management program

During fiscal 2004, we announced our capital management program, whereby the Company intends to return approximately $1,500 million to shareholders through special dividends and/or share buy-backs each year through to fiscal 2007.

In fiscal 2005, as part of this program, we paid an interim special dividend of $747 million (6 cents per share) with the interim. In addition, we completed an off market share buy-back of 185,284,669 ordinary shares. In total, 1.47% of our total issued ordinary shares, or 2.87% of our non-Commonwealth owned ordinary shares were bought back. The cost of the share buy-back comprised purchase consideration of $750 million and associated transaction costs of $6 million. The Commonwealth Government did not participate in the share buy-back. The ordinary shares were bought back at $4.05 per share, comprising a fully franked dividend of $2.55 per share and a capital component of $1.50 per share.

On 11 August 2005, we declared a fully franked special dividend of 6 cents per share ($747 million), payable to our ordinary shareholders with a final fully franked dividend of 14 cents per share. The record date for the final and special dividends will be 30 September 2005 with payment being made on 31 October 2005.

On 11 August 2005, we also disclosed the intention to pay a fully franked special dividend of 6 cents per ordinary share with the interim dividend in respect of fiscal 2006. The proposed special dividend is part of the execution of our capital management program. The financial effect of the special dividend will be reflected in the fiscal 2006 financial statements.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E
Preliminary final report
30 June 2005
Telstra Corporation Limited ABN 33 051 775 556

Results for announcement to market (continued)

Dividends paid or declared


	Year ended 30 June
	2005		2004
	¢		¢

Dividends per share
Interim dividend		14		13
Special dividend paid with the interim dividend		6		—
Final dividend		14		13
Special dividend to be paid with the final dividend		6		—

Total		40		26

Our dividends for fiscal 2005 and fiscal 2004 are fully franked at a tax rate of 30%.

The interim dividend (including the special dividend paid with the interim dividend) for fiscal 2005 had a record date of 1 April 2005 with payment being made on 29 April 2005.

The final dividend (including the special dividend paid with the final dividend) is declared subsequent to balance date and paid in the following financial year. Our final dividend (including the special dividend paid with the final dividend) in respect of fiscal 2005 has been disclosed as an event after balance date. These dividends will have a record date of 30 September 2005 with payment to be made on 31 October 2005. Shares will trade excluding entitlement to the dividend on 26 September 2005.

In addition, our final dividend of 13 cents in respect of fiscal 2004 was provided for and paid during fiscal 2005. The final dividend had a record date of 24 September 2004 and payment was made on 29 October 2004.

Telstra Corporation Limited and controlled entities

Preliminary final report

Telstra Corporation Limited and controlled entities

Australian Business Number (ABN): 33 051 775 556

Contents and reference page


Appendix 4E Requirements		Reference

1. Reporting period and the previous corresponding period.		Refer to the 30 June 2005 financial report lodged with this document.

2. Results for announcement to the market.		Refer page 2 for “results for announcement to the market”.

3. Statement of financial performance with notes to the statement.		Refer to the statement of financial performance on page 5 of this report.

4. Statement of financial position with notes to the statement.		Refer to the statement of financial position on page 6 of this report.

5. Statement of cash flows with notes to the statement.		Refer to the statement of cash flows on page 7 of this report.

6. 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 7: Dividends and note 28: Events after balance date in the 30 June 2005 financial report lodged with this document for additional information, including discussion on franking credits.

7. Details of dividend or distribution reinvestment plans in operation and the last date for the receipt of an election notice for participation in any dividend or distribution reinvestment plan.		Refer item 1 on page 9 of this report.

8. Statement of retained earnings.		Refer statement of changes in shareholders’ equity on page 8 of this report.

9. Net tangible assets per security.		Refer item 2 on page 9 of this report.

10. Details of entities over which control has been gained or lost during the period.		Refer item 3 on page 9 of this report.

11. Details of joint venture entities and associated entities.		Refer item 4 on page 10 of this report.

12. Any other significant information needed by an investor to make an informed assessment of the entity’s financial performance and financial position.		Refer item 5 on page 12 of this report.

13. Accounting standards used in compiling reports by foreign entities (e.g. International Accounting Standards).		Not applicable.

14. A commentary on the results for the period.		Refer item 6 on page 13 of this report. Also refer to item 8 on page 16 of this report for other factors likely to effect results in the future.

15. A statement as to whether the report is based on accounts which have been audited or subject to review, are in the process of being audited or reviewed, or have not yet been audited or reviewed.		Refer item 7 on page 16 of this report.

16. If the accounts have not yet been audited or subject to review and are likely to be subject to dispute or qualification, a description of the likely dispute or qualification.		Not applicable.

17. If the accounts have been audited or subject to review and are subject to dispute or qualification, a description of the dispute or qualification.		Not applicable.


Telstra Corporation Limited and controlled entities		Preliminary final report

Statement of Financial Performance

for the year ended 30 June 2005


		Telstra Group
	Year ended 30 June
	2005			2004
	$m			$m

Ordinary activities
Revenue
Sales revenue		22,161			20,737
Other revenue (excluding interest revenue)		496			543

		22,657			21,280


Expenses
Labour		3,693			3,218
Goods and services purchased		4,147			3,554
Other expenses		4,055			4,255

		11,895			11,027

Share of net (profit)/loss from joint venture entities and associated entities		(9	)		78

		11,886			11,105


Earnings before interest, income tax expense, depreciation and amortisation (EBITDA)		10,771			10,175
Depreciation and amortisation		3,766			3,615

Earnings before interest and income tax expense (EBIT)		7,005			6,560


Interest revenue		103			55
Borrowing costs		839			767

Net borrowing costs		736			712


Profit before income tax expense		6,269			5,848


Income tax expense		1,822			1,731


Net profit		4,447			4,117
Outside equity interests in net loss		—			1

Net profit available to Telstra Entity shareholders		4,447			4,118

Other valuation adjustments to equity
Net exchange differences on translation of financial statements of non-Australian controlled entities		(43	)		21
Reserves recognised on equity accounting our interest in joint venture entities and associated entities		3			(5	)

Valuation adjustments attributable to Telstra Entity shareholders and recognised directly in equity		(40	)		16


Total changes in equity other than those resulting from transactions with Telstra
Entity shareholders as owners		4,407			4,134

		¢			¢


Basic and diluted earnings per share (cents per share)		35.5			32.4

Total dividends paid/declared (cents per share)		40.0			26.0

The above statement of financial performance is an extract from our full financial report. Refer to the 30 June 2005 financial report lodged with this document for the detailed notes to this statement.


Telstra Corporation Limited and controlled entities		Preliminary final report

Statement of Financial Position

as at 30 June 2005


		Telstra Group
	As at 30 June
	2005			2004
	$m			$m

Current assets
Cash assets		1,540			687
Receivables		3,609			3,608
Inventories		232			229
Other assets		796			803

Total current assets		6,177			5,327

Non current assets
Receivables		240			740
Inventories		15			10
Investments — accounted for using the equity method		49			40
Investments — other		—			80
Property, plant and equipment		23,351			22,863
Intangibles — goodwill		2,287			2,104
Intangibles — other		1,581			1,501
Other assets		2,610			2,328

Total non current assets		30,133			29,666

Total assets		36,310			34,993


Current liabilities
Payables		2,809			2,338
Interest-bearing liabilities		1,518			3,246
Income tax payable		534			539
Provisions		389			358
Revenue received in advance		1,132			1,095

Total current liabilities		6,382			7,576

Non current liabilities
Payables		122			49
Interest-bearing liabilities		11,816			9,014
Provision for deferred income tax		1,885			1,807
Provisions		836			778
Revenue received in advance		388			408

Total non current liabilities		15,047			12,056

Total liabilities		21,429			19,632

Net assets		14,881			15,361

Shareholders’ equity
Telstra Entity
Contributed equity		5,793			6,073
Reserves		(157	)		(105	)
Retained profits		9,243			9,391

Shareholders’ equity available to Telstra Entity shareholders		14,879			15,359
Outside equity interests
Contributed equity		2			2

Total outside equity interests		2			2

Total shareholders’ equity		14,881			15,361

The above statement of financial position is an extract from our full financial report. Refer to the 30 June 2005 financial report lodged with this document for the detailed notes to this statement.


Telstra Corporation Limited and controlled entities		Preliminary final report

Statement of Cash Flows

for the year ended 30 June 2005


		Telstra Group
	Year ended 30 June
	2005			2004
	$m			$m

Cash flows from operating activities
Receipts from trade and other receivables		24,526			23,205
Payments of accounts payable and to employees		(12,754	)		(12,067	)
Interest received		80			51
Borrowing costs paid		(879	)		(846	)
Dividends received		2			2
Income taxes paid		(1,718	)		(1,856	)
GST remitted to the Australian Taxation Office (ATO)		(1,094	)		(1,056	)

Net cash provided by operating activities		8,163			7,433


Cash flows from investing activities
Payments for:
- property, plant and equipment		(2,995	)		(2,572	)
- internal use software assets		(523	)		(435	)
- intangibles		(6	)		(2	)
- deferred expenditure		(15	)		(6	)

Capital expenditure (before investments)		(3,539	)		(3,015	)

- shares in controlled entities		(574	)		(667	)
- investment in joint venture entities		(10	)		(1	)
- investment in associated entities (including share buy-back)		(4	)		1
- shares in listed securities and other investments		(2	)		(1	)

Investment expenditure		(590	)		(668	)

Total capital expenditure		(4,129	)		(3,683	)
Proceeds from:
- sale of property, plant and equipment		68			168
- sale of joint venture entities and associated entities		30			221
- sale of listed securities and other investments		146			24
- redemption of PCCW converting note		76			—

Net cash used in investing activities		(3,809	)		(3,270	)

Operating cash flows less investing cash flows		4,354			4,163


Cash flows from financing activities
Proceeds from borrowings		6,433			4,119
Proceeds from Telstra bonds		983			—
Repayment of borrowings		(5,735	)		(4,274	)
Repayment of Telstra bonds		(272	)		(211	)
Repayment of finance leases principal amount		(16	)		(13	)
Employee share loans		19			24
Loan to joint venture entities and associated entities		(37	)		(226	)
Dividends paid		(4,131	)		(3,186	)
Share buy-back		(756	)		(1,009	)

Net cash used in financing activities		(3,512	)		(4,776	)


Net increase/(decrease) in cash		842			(613	)
Foreign currency conversion		(3	)		—
Cash at the beginning of the year		687			1,300

Cash at the end of the year		1,526			687

The above statement of cash flows is an extract from our full financial report. Refer to the 30 June 2005 financial report lodged with this document for the detailed notes to this statement.


Telstra Corporation Limited and controlled entities		Preliminary final report

Statement of Changes in Shareholders’ Equity

for the year ended 30 June 2005

Telstra Group


						Reserves
						Foreign						Consolid-						Outside
	Contributed			Asset		currency						ation			Retained			equity
	equity			revaluation		translation			General			fair value			profits			interests			Total
	$m			$m		$m			$m			$m			$m			$m			$m

Balance at 30 June 2003		6,433			32		(240	)		8			50			9,137			2			15,422
- change in outside equity interests’ capital, reserves and accumulated losses (apart from interests in net loss)		—			—		—			—			—			—			1			1
- net profit/(loss)		—			—		—			—			—			4,118			(1	)		4,117
- reserves recognised on equity accounting our interest in joint venture entities and associated entities		—			—		(5	)		—			—			—			—			(5	)
- adjustment on translation of financial statements of non-Australian controlled entities		—			—		21			—			—			—			—			21
- fair value adjustment on acquisition of controlling interest in joint venture entity		—			—		—			—			(6	)		6			—			—
- transfer of foreign currency translation reserve and general reserve on sale of controlled entities and associates		—			—		38			(3	)		—			(35	)		—			—
- share buy-back		(360	)		—		—			—			—			(649	)		—			(1,009	)
- dividends		—			—		—			—			—			(3,186	)		—			(3,186	)

Balance at 30 June 2004		6,073			32		(186	)		5			44			9,391			2			15,361
- net profit		—			—		—			—			—			4,447			—			4,447
- reserves recognised on equity accounting our interest in joint venture entities and associated entities		—			—		(2	)		5			—			—			—			3
- adjustment on translation of financial statements of non-Australian controlled entities		—			—		(43	)		—			—			—			—			(43	)
- fair value adjustment on acquisition of controlling interest in joint venture entity		—			—		—			—			(6	)		6			—			—
- transfer of general reserve on sale of associates		—			—		—			(6	)		—			6			—			—
- share buy-back		(280	)		—		—			—			—			(476	)		—			(756	)
- dividends		—			—		—			—			—			(4,131	)		—			(4,131	)

Balance at 30 June 2005		5,793			32		(231	)		4			38			9,243			2			14,881

The above statement of changes in shareholders’ equity is an extract from our full financial report. Refer to the 30 June 2005 financial report lodged with this document for the detailed notes to this statement.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

1. Details of dividend or distribution plans in operation

During fiscal 2005 and fiscal 2004, we had no dividend or distribution reinvestment plans in operation.

2. Net tangible assets per security


	Telstra Group
	As at 30 June
	2005		2004
	¢		¢

Net tangible assets per security before providing for estimated tax on unrealised gains and losses		103.6		107.4

Net tangible assets per security after providing for estimated tax on unrealised gains and losses		88.5		93.1

3. Details of entities which control has been gained or lost during the period

Entities which control has been gained during the period

During fiscal 2005, we gained control of the following significant entities:

KAZ Group Limited

On 19 July 2004, we acquired 100% of the issued share capital of KAZ Group Limited and its controlled entities (KAZ Group) for a total consideration of $340 million, including acquisition costs.

The KAZ Group is a provider of business process outsourcing, systems integration, consulting, applications development and information technology management services. It operates mainly in Australia, but also conducts business in the United States and Asia.

PSINet UK Limited

On 25 August 2004, we acquired 100% of the issued share capital of PSINet UK Limited and its controlled entities (PSINet Group) for a total consideration of $124 million, including acquisition costs. Subsequent to acquisition, PSINet UK Limited changed its name to Telstra (PSINet) Limited.

The PSINet Group is a provider of e-business infrastructure solutions and corporate internet protocol based communication services.

ESA Holding Pty Ltd

On 17 September 2004, we acquired 100% of the issued share capital of ESA Holding Pty Ltd and its controlled entity, Damovo (Australia) Pty Ltd, and Damovo HK Limited (Damovo Group) for a total consideration of $66 million, including acquisition costs. Subsequent to acquisition Damovo (Australia) Pty Ltd changed its name to Telstra Business Systems Pty Ltd.

The Damovo Group provides advanced voice and data business communication solutions and services to large enterprises and government departments.

Universal Publishers Pty Ltd

On 20 December 2004, we acquired 100% of the issued share capital of Universal Publishers Pty Ltd for a total consideration of $46 million, including acquisition costs.

Universal Publishers is a publisher of mapping and travel related products. Its publishing program includes street directories, guides, maps and road atlases.

Please refer to note 23: Investments in controlled entities in our 30 June 2005 financial report lodged with this document for additional details regarding our investments in controlled entities.

Other acquisitions

During fiscal 2005, we also acquired control of the following entities:

•		Sytec Resources Limited and its controlled entities;

•		Chief Entertainment Pty Ltd; and

•		1300 Australia Pty Ltd.

The impact of these acquisitions on our financial results and position has not been significant.

Contribution by new acquisitions

In fiscal 2005, the contribution to our net profit (including all consolidation adjustments) of our recently acquired significant controlled entities was $19 million. No individual recently acquired controlled entity made a significant contribution to our overall net profit in fiscal 2005.

Entities which control has been lost during the period

We did not lose control of any significant entities during the year ended 30 June 2005 that would materially affect users’ understanding of the financial report as at 30 June 2005.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

4. Details of investments in joint ventures and associated entities


Our investment in joint venture entities are listed below:		Telstra Group
		Ownership interest
		As at 30 June
		2005		2004
Name of joint venture entity	Principal activities	%		%

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)	International connectivity services		50.0		50.0
Stellar Call Centres Pty Ltd.	Call centre services and solutions		—		50.0
Xantic B.V. (incorporated in Netherlands)	Global satellite communications		35.0		35.0
TNAS Limited (incorporated in New Zealand)	Toll free number portability in New Zealand		33.3		33.3
1300 Australia Pty Ltd	Acquisition and marketing of 1300 "phone words"		—		50.0
Money Solutions Pty Ltd	Financial advice and education services		50.0		—
HelpYouPay Systems Pty Ltd (formerly Red2Black Systems Pty Ltd)	Debt management services		50.0		—
HelpYouPay Pty Ltd (formerly Red2Black Payment Services Pty Ltd)	Debt management services		50.0		—
Enhanced Processing Technologies Pty Ltd	Business process outsourcing		60.0		—
Enhanced Processing Technologies Inc (incorporated in United States)	Software sales		60.0		—
Adstream (Aust) Pty Ltd	Digital advertising and asset management		33.3		—
3GIS Pty Ltd (1)	Management services		50.0		—
3GIS Partnership (1)	3G network services		50.0		—
Bridge Mobile Pte Ltd (incorporated in Singapore)	Regional roaming provider		12.5		—
m.Net Corporation Limited	Mobile phone content provider		39.5		8.3


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

		Unless noted above, all investments are incorporated in Australia.

		During fiscal 2005, we invested in the following significant joint venture entity:

(1)		On 6 December 2004, we signed agreements with Hutchison 3G Australia Pty Ltd (H3GA), a subsidiary of Hutchison Telecommunications (Australia) Limited, to jointly own and operate H3GA’s existing third generation (3G) radio access network and fund future network development.

		The 3GIS Partnership has been established to operate this network. 3GIS Pty Ltd was established to act as agent for the 3GIS Partnership.

		During fiscal 2005, we have had no significant disposals of our joint venture entities.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

4. Details of investments in joint ventures and associated entities (continued)


Our investments in associated entities are listed below:		Telstra Group
		Ownership interest
		As at 30 June
		2005		2004
Name of associated entity	Principal activities	%		%

Australia-Japan Cable Holdings Limited (incorporated in Bermuda)	Network cable provider		39.9		39.9
ECard Pty Ltd	Smart card transaction processing		—		50.0
Telstra Super Pty Ltd	Superannuation trustee		100.0		100.0
Keycorp Limited	Electronic transactions solutions		47.8		47.9
Telstra Foundation Limited	Charitable trustee organisation		100.0		100.0
LinkMe Pty Ltd	Internet recruitment provider		40.0		—

Unless noted above, all investments are incorporated in Australia.

During fiscal 2005, we have had no significant acquisitions or significant disposals of associated entities.

Share of joint venture entities’ and associated entities’ net losses/ (profits)


	Year ended 30 June
	2005			2004
	$m			$m

Our net loss/(profit) from joint venture entities and associated entities has been contributed by the following entities:

Joint venture entities
- FOXTEL Partnerships (#)		5			44
- Stellar Call Centres Pty Ltd.		(3	)		(2	)
- Xantic B.V.		(3	)		43

		(1	)		85


Associated entities
- IBM Global Services Australia Limited		—			(3	)
- ECard Pty Ltd		—			2
- Keycorp Limited		(8	)		—
- PT Mitra Global Telekomunikasi Indonesia		—			(6	)

		(8	)		(7	)

		(9	)		78


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

		Refer note 24 in our financial statements lodged with this document for further details on our joint venture and associated entities.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

5. Any other significant information needed by an investor to make an informed assessment of the entity’s financial performance

Statement of financial position

We continued to maintain a strong financial position with net assets of $14,881 million, compared with net assets of $15,361 million as at 30 June 2004. The decrease in net assets by $480 million comprised an increase in total liabilities of $1,797 million, offset by an increase in our total assets of $1,317 million.

The increase in total liabilities of $1,797 million was primarily due to a $1,074 million increase in total interest-bearing liabilities in order to fund the special dividend and share buy-back during fiscal 2005. The increase was facilitated by bond issues in Europe, Switzerland, New Zealand and Australia. A stronger Australian dollar has also contributed to increased interest-bearing liabilities as our cross currency swap position has moved from a net receivable to a net payable. In addition, our payables have increased by $544 million due to deferred payment terms on our acquisition of the 3G radio access network assets described below.

The increase in total assets of $1,317 million was primarily due to the following movements during the year:

•		Cash assets increased by $853 million partially due to the proceeds on our EUR€1 billion Eurobond issue being received just prior to 30 June 2005, which was invested in the short term money market at balance date;

•		Our property, plant and equipment increased by $488 million, largely due to the recognition of our share of third generation (3G) radio access network assets acquired as part of the formation of a partnership with Hutchison 3G Australia Pty Ltd;

•		Intangibles — goodwill increased by $183 million to $2,287 million (2004: $2,104 million) as a result of goodwill acquired on our investment acquisitions in the KAZ Group (KAZ), the Damovo Group (Damovo) and the PSINet Group (PSINet);

•		Non current — other assets increased by $282 million to $2,610 million, mainly due to an arrangement where our joint venture entity, Reach Ltd (Reach), allocated its international cable capacity between us and our joint venture partner, PCCW Limited (PCCW), as an indefeasible right of use agreement with a value of $216 million. As consideration, we discharged Reach’s liability to us under the capacity prepayment, previously recognised within non current receivables; and

•		Non-current receivables decreased by $500 million to $240 million (2004: $740 million) due to the termination of the capacity prepayment and the movement in our cross currency swaps portfolio to a net payable position.

Share buy-back

On 15 November 2004, we completed an off-market share buy-back 185,284,669 ordinary shares as part of our ongoing capital management program. The ordinary shares were bought back at $4.05 per share, comprising a fully franked dividend component of $2.55 per share and a capital component of $1.50 per share. The Commonwealth of Australia did not participate in the share buy-back

The shares bought back were subsequently cancelled, reducing the number of fully paid ordinary shares on issue. In total, 1.47% of our total issued ordinary shares, or 2.87% of our non Commonwealth owned ordinary shares, were bought back.

Statement of Cash Flows

The group reported a strong free cash flow position, which enabled the company to increase declared dividends, fund the acquisition of number of new entities and complete an off market share buy-back We have sourced our cash through continued strong company operating activities and careful capital and cash management.

Our cash flows from operating activities grew by 9.8% to $8,163 million (2004: $7,433 million). This position was the result of higher sales revenues and continued tight control of expenditure and working capital management.

Cash used in investing activities was $3,809 million, representing an increase of $539 million over the prior year. These cash flows include consideration paid for the acquisition of KAZ, Damovo, PSINet, and various other controlled entities amounting to $574 million and substantial capital expenditure to upgrade our telecommunications networks, eliminate components that are no longer useful and improve the systems used to operate our networks.

Total cash flow before financing activities (free cash flow) increased by 4.6% to $4,354 million (2004: $4,163 million).

Our cash used in financing activities was $3,512 million (2004: $4,776 million) due mainly to dividend payments of $4,131 million (2004: $3,186 million) and a share buy-back of $756 million (2004: $1,009 million). These outflows were partially offset by net proceeds from borrowings of $1,375 million sourced from a number of bond issues during the year (2004: net repayment $581 million).


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

6. Commentary on the results for the period

Statement of Financial Performance

Our net profit for the year was $4,447 million, representing an increase of 8.0% on the prior year’s net profit of $4,118 million. Earnings before interest and income tax expense (EBIT) for fiscal 2005 was $7,005 million representing an increase of 6.8% on the prior year of $6,560 million.

Total revenue (excluding interest revenue) for the year increased by 6.5% to $22,657 million (2004: $21,280 million). Sales revenue was $22,161 million, representing a 6.9% increase on the prior year sales revenue of $20,737 million. Sales and total revenues included $548 million of revenue generated by controlled entities we acquired during the year. The entities acquired included the KAZ, Damovo and the PSINet. The acquisition of KAZ expands our IT services capability, complementing our core strength in telecommunications. Damovo improves our ability to provide advanced voice and data communication solutions, and PSINet assists us in providing converged communication and technology services internationally.

Excluding the impact of our newly acquired entities, revenue growth was mainly attributable to:

•		mobile goods and services growth of $319 million or 8.3%;

•		an increase in internet and IP solutions revenue of $364 million or 35.9%;

•		advertising and directories revenue growth of $244 million or 18.2%; and

•		an increase in pay TV bundling of $109 million or 70.8%.

These increases have been partially offset by a decline in PSTN revenues of $275 million or 3.4%. While PSTN remains a significant contributor to our revenue, it is declining as the market continues to move towards new technologies to satisfy its telecommunications requirements.

Mobile goods and services revenue increased largely due to the performance of mobile’s data revenue and international roaming. We continue to experience growth in the number of mobiles in operation as well as increased revenue from mobile handset sales.

Internet and IP solutions revenue experienced significant growth, driven by increased numbers of broadband subscribers for both our retail and wholesale offerings. Our advertising and directories revenue increased over the prior year due to the inclusion of a full year of trading activity for the Trading Post Group in fiscal 2005. In addition, further growth was experienced due to the continued take up of our new advertising offerings.

Pay TV bundling increased due to the launch of FOXTEL digital, an increase in the number of services provided and the average spend per subscriber.

Other revenue decreased by $47 million to $496 million, due primarily to the inclusion of proceeds on sale of our shareholding in IBM Global Services Aust Limited (IBMGSA) of $154 million in fiscal 2004. Our other revenue in fiscal 2005 was primarily made up of the redemption of our PCCW converting note realising $76 million and investment sales of our interests in Infonet and Intelsat amounting to $146 million.

Total expenses (before borrowing costs and income tax expense) increased by 6.3% to $15,652 million from $14,720 million in the prior year. A significant portion of this increase ($566 million) was attributable to our newly acquired controlled entities.

Labour expenses increased by 14.8% to $3,693 million (2004: $3,218 million). This increase was largely attributable to staff taken on as a result of the acquisition of controlled entities, annual salary increases due to enterprise agreements and annual reviews, and increased use of overtime and contract and agency payments to improve our front of house service and meet increased field volumes across broadband, pay TV and PSTN. We have also increased staff numbers and the use of casual staff to improve customer service and account management.

Goods and services purchased increased by 16.7% to $4,147 million in fiscal 2005 (2004: $3,554 million) due to higher handset sales and increased usage commissions due to higher prepaid mobile recharge commissions. Other increases resulted from higher handset subsidies due to the promotions offered in prior periods, growth in broadband volumes, increased bundling of pay TV services and higher network payments as a result of increased international roaming.

Depreciation and amortisation expense increased by 4.2% to $3,766 million (2004: $3,615 million), due mainly to the growth in communications plant and software asset additions required to support the increasing demand for broadband ADSL services.

Other expenses decreased by 4.7% to $4,055 million (2004: $4,255 million) mainly due to fiscal 2004 including a write down of additional funding to Reach of $226 million and $130 million to exit our contracts for information technology services with IBMGSA, corresponding with the sale of our interest in this business. In fiscal 2005 other expenses included costs from our recently acquired controlled entities and an increase in the book value of property sold and investment sales.

Income tax expense increased by 5.3% to $1,822 million in fiscal 2005, giving an overall effective tax rate of 29.1%. The increase in tax expense was primarily due to the higher profit and the fact that the prior year tax expense included a benefit of $58 million associated with the adoption of tax consolidation.

Investor return and other key ratios

Our earnings per share increased to 35.5 cents per share in fiscal 2005 from 32.4 cents per share in the prior year. This increase is due to improved earnings and a reduction in the number of shares on issue as a result of the off market share buy-back completed during fiscal 2005.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

6. Commentary on the results for the period (continued)

Investor return and other key ratios (continued)

We have declared a final fully franked dividend of 14 cents per share ($1,742 million) and a fully franked special dividend of 6 cents per share ($747 million) to be paid with the final dividend, bringing dividends per share for fiscal 2005 to 40 cents per share (including special dividends of 12 cents per share). The prior year dividends amounted to 26 cents per share. We also returned $750 million to shareholders through an off market share buy-back during fiscal 2005. Other relevant measures of return to investors include the following:

•

Return on average assets — 2005: 20.4% (2004: 19.4%)

•

Return on average equity — 2005: 29.4% (2004: 26.8%)

Return on average assets is higher in fiscal 2005 primarily due to the increased profit as previously discussed. The increase in return on average equity is also attributable to higher profits and to the reduced shareholders’ equity, resulting from the share buy-back and increased dividend payments in fiscal 2005.

Segment information

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

•		Telstra Consumer and Marketing;

•		Telstra Country Wide;

•		Telstra Business and Government;

•		Telstra International;

•		Infrastructure Services;

•		Telstra Wholesale;

•		Telstra Technology, Innovation and Products; and

•		Other (including Telstra Bigpond, Telstra Media, Sensis and our corporate areas).

Refer note 5 to our financial statements for details on the nature of the products and services provided by these segments.

The majority of our sales revenue from ordinary activities is derived from Telstra Consumer and Marketing, Telstra Business and Government, Telstra Country Wide and Telstra Wholesale.

Telstra Consumer and Marketing sales revenue increased to $5,030 million in fiscal 2005 compared with $4,956 million in fiscal 2004. This increase was driven by the continued strong performance in mobile services, led by growth in international roaming, mobile data usage and handset sales. In addition, continued strong growth in BigPond broadband and Pay TV services was also experienced due to increased marketing activities and the improved retention of existing customers through bundling initiatives. Total PSTN revenue declined as a result of competition and decreased consumer usage.

Telstra Consumer and Marketing earnings before interest and tax (EBIT) decreased by 2.3% to $2,493 million in fiscal 2005 mainly due to expense growth in dealer remuneration negotiation costs, the resolution of historical issues including dealer claims, and increased labour costs in line with this segments priority on customer focus. In addition, all business expenditure associated with mobile services for our Company is incurred by Telstra Consumer and Marketing. This expenditure includes subsidies and dealer commissions. In fiscal 2005, $205 million of our subsidy expense related to the amortisation of activities that commenced in fiscal 2004 across the business.

Telstra Country Wide sales revenue increased to $5,751 million in fiscal 2005 compared with $5,508 million in fiscal 2004. This increase was primarily due to continued strong growth in services in operation for broadband, ISDN, CDMA mobiles and bundled Pay TV. This segment has also experienced increased volumes for fixed to mobile calling and various mobile products such as mobile calls, mobile data and international roaming. The growth was partially offset by reductions in local and international direct revenues resulting from product substitution and competitor activity. In addition, basic access revenue increased in fiscal 2005 mainly as a result of a price increase in June 2004.

Telstra Country Wide EBIT increased by 3.3% to $4,944 million in fiscal 2005 predominantly due to the continued strong growth in sales revenue, which was partially offset by an increase in expenses. The expense growth was attributable to higher cost of goods sold and service fees associated with the growth in broadband and bundled Pay TV revenue.

Telstra Business and Government sales revenue increased by 8.9% to $5,214 million in fiscal 2005, primarily due to additional revenues from the acquisition of KAZ, Damovo and PSINet. The increase was partially offset by a reduction in sales revenue from the underlying business, mainly due to the decline in total PSTN revenue.

Telstra Business and Government EBIT decreased by 9.7% to $3,263 million in fiscal 2005 predominantly due to the reduction in PSTN revenue, and from the inclusion in fiscal 2004 of profit arising from the sale of our investment in IBMGSA and Commander Communications Limited. In fiscal 2005, this segment had no significant asset and investment sales.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

6. Commentary on the results for the period (continued)

Segment information (continued)

Telstra Wholesale sales revenue increased by 11.7% to $2,940 million in fiscal 2005 driven by the growth in the number of local service customers and the demand for broadband services. In fiscal 2005, Telstra Wholesale experienced a continuation of re-balancing initiatives and commercial negotiations, which generally reduced prices across wholesale PSTN call revenue categories, while increasing basic access revenues. Intercarrier service revenue was impacted by continued growth in SMS interconnect revenue and mobile interconnection volumes, driven by mobile substitution and growth in the overall mobile market. However this growth was offset by reduced yields for these products. In fiscal 2005, data and internet service revenues showed solid growth, which was mainly driven by wholesale broadband offerings that led to a significant increase in the number of wholesale broadband subscribers.

Telstra Wholesale EBIT increased by 9.7% to $2,973 million in fiscal 2005 driven by sales revenue growth, partly offset by an increase in expenses. The expense growth consisted of increases in Telstra Wholesale’s allocated share of domestic outpayments, offset by a significant reduction in volumes and costs for international voice traffic, which was also assisted by an appreciating Australian dollar. Increases in labour expense were attributable to the increase in staff numbers required to support the significantly higher than planned volumes of access and broadband customers, as well as further development in, and the expansion of, the wholesale market. In addition, total IT professional services costs increased due to the revised contract conditions for system support and increased program of work to support the revenue growth and operational efficiency.

Other information

No significant events have occurred after balance date for the year ended 30 June 2005, other than:

Dividend declaration

On 11 August 2005, we declared a fully franked final dividend of 14 cents per ordinary share and a fully franked special dividend of 6 cents per ordinary share. The record date for the final and special dividends will be 30 September 2005 with payment being made on 31 October 2005. Shares will trade excluding the entitlement to the dividends on 26 September 2005.

A provision for dividend payable has been raised as at the date of declaration, amounting to $2,489 million. The financial effect of the dividend declaration was not brought to account as at 30 June 2005.

On 11 August 2005, we also disclosed the intention to pay a fully franked special dividend of 6 cents per ordinary share with the interim dividend in respect of fiscal 2006. The proposed special dividend is part of the execution of our capital management program, whereby it is our intention to return approximately $1,500 million to shareholders each year through to fiscal 2007. The financial effect of the special dividend will be reflected in the fiscal 2006 financial statements.

Business acquisition

On 28 June 2005, we announced the acquisition of 100% of the issued share capital of Keycorp Solutions Limited for a cash consideration of $55 million plus transaction costs. This acquisition is subject to approval by the shareholders of Keycorp Solutions Limited’s parent company, Keycorp Limited, and if approved, will be effective from 1 July 2005.

In conjunction with and conditional upon our purchase of Keycorp Solutions Limited, Keycorp Limited announced, subject to shareholder approval, it would use the proceeds from the sale to enable a pro-rata return of capital to shareholders of 41 cents per share. As a shareholder of Keycorp Limited, we are expecting to receive approximately $16 million in returned capital.

Keycorp Solutions Limited is a subsidiary of Keycorp Limited, an associated entity of ours, in which we hold 47.8% of the issued share capital. Keycorp Solutions Limited has previously partnered with us to provide payment transaction network carriage services to customers. In acquiring this entity, we will now provide the services in our own right.

As at 30 June 2005 neither the acquisition nor the return of capital has been recognised in our financial statements.

Appointment of CEO

We have appointed Sol Trujillo as our new Chief Executive Officer (CEO), effective 1 July 2005. The new CEO is undertaking an operational and strategic review to be completed within 3 to 4 months of his appointment.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

7. Statement about the audit status

Our preliminary final report is based on the Telstra Corporation Limited and controlled entities financial report as at 30 June 2005, which has been audited by the Australian National Audit Office (ANAO). Refer to the 30 June 2005 financial report for the independent audit report to the members of Telstra Corporation Limited.

8. Other factors likely to affect results in the future

Adoption of International Financial Reporting Standards

Australian entities reporting under the Corporations Act 2001 must prepare their financial statements for financial years commencing on or after 1 January 2005 under the Australian equivalents of International Financial Reporting Standards (A-IFRS) as adopted by the Australian Accounting Standards Board (AASB). This will involve preparing our first set of financial statements applying A-IFRS for the half-year ending 31 December 2005 and for the financial year ending 30 June 2006.

The transitional rules for first time adoption of A-IFRS require that we restate our comparative financial statements using A-IFRS, except for AASB 132: “Financial Instruments: Disclosure and Presentation” and AASB 139: “Financial Instruments: Recognition and Measurement” where comparative information is not required to be restated.

Currently we provide two years of comparative financial information in our year end financial statements to comply with applicable US Securities and Exchange Commission (SEC) requirements. The SEC has granted a one-time relief from this requirement for foreign registered companies preparing their first set of financial statements in compliance with International Financial Reporting Standards. We have elected to apply this relief and will only provide one year of comparative information in our 30 June 2006 financial statements.

For reporting in the 2006 fiscal year, comparatives will be remeasured and restated for the half-year ending 31 December 2004 and the financial year ending 30 June 2005. Most of the adjustments on transition are required to be made to opening retained profits at the beginning of the first comparative period (ie. at 1 July 2004).

We have a formal IFRS project team to manage the convergence to A-IFRS and enable us to be prepared to report for the first time in accordance with the timetable outlined above. The project team is monitored by a governance committee comprising senior members of management, which reports regularly on progress to the Audit Committee of the Telstra Board of Directors. The governance committee is monitoring our adoption of A-IFRS in accordance with an established project implementation plan. The committee has also been following the developments in IFRS and the potential impact for our transition to A-IFRS.

The IFRS project is comprised of dedicated workstreams with project teams responsible for evaluating the impact of a specific group of accounting changes resulting from the adoption of A-IFRS. The technical evaluation phase of each workstream is substantially complete and the project is in the implementation and review phases. The project is achieving its scheduled milestones and we expect to be in a position to fully comply with the requirements of A-IFRS for the 2006 fiscal year.

The following disclosures reflect the adjustments based on the work of our IFRS project team for both the Telstra Group and the Telstra Entity. The adjustments reported are based on the A-IFRS standards released as at 30 June 2005. These are subject to ongoing review and any amendments by the AASB, or by interpretative guidance from the IASB or AASB, could change the adjustments reported. The adjustments identified are our best judgements as at reporting date. The figures presented are our current best estimate of the consequences for the Company adopting A-IFRS and accordingly they remain subject to change.

There are certain items that still require resolution. We have not recognised a deferred tax liability in relation to indefinite lived intangibles as detailed in note 8 (c). Also, in respect of the Urgent Issues Group (UIG) release UIG 1042: “Subscriber Acquisition Costs in the Telecommunication Industry”, we have not changed the accounting for mobile phone handset subsidies as detailed in note 8 (j).

We set out below the key differences in accounting policy and our known estimable transitional differences from application of A-IFRS. In addition, we have included the likely impacts on the 2005 fiscal year result and financial position where known and the transitional adjustments for AASB 132/139 as at 1 July 2005.

(a) AASB 2: “Share-Based Payment” (AASB 2)

Under current AGAAP we recognise an expense for all restricted shares, performance rights, deferred shares, other like instruments and Telstra shares (consisting of “directshares” and “ownshares”) issued. This expense is equal to the funding provided to the Telstra Growthshare Trust to purchase Telstra shares on market to underpin these equity instruments, and is recognised in full in the statement of financial performance when the funding is provided. Under current AGAAP, we do not recognise an expense for options issued on the basis that instrument holders will be required to pay the option exercise price once the options vest and are exercised. We have not issued options subsequent to fiscal 2002.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(a) AASB 2: “Share-Based Payment” (AASB 2) (continued)

On adoption of AASB 2 we will recognise an expense for all share-based remuneration determined with reference to the fair value of the equity instruments issued. The fair value of our equity instruments will be calculated using an appropriate valuation technique to estimate the price of those equity instruments in an arm’s length transaction between knowledgeable, willing parties. The fair value calculated in accordance with AASB 2 will be charged against profit over the relevant vesting periods, and adjusted as required by the standard.

Under the transitional exemptions of AASB 1: “First-time Adoption of Australian Equivalents to International Financial Reporting Standards” (AASB 1) we have elected not to apply AASB 2 to equity instruments issued prior to 7 November 2002 (the effective date of IFRS 2). This approach gives rise to a positive transitional adjustment to retained profits.

A transitional adjustment to increase Telstra Group opening retained profits by $55 million (Telstra Entity: $55 million) represents the reversal of the expense previously recorded under AGAAP. We will also recognise a transitional expense in Telstra Group retained profits under AASB 2 of $4 million (Telstra Entity: $4 million) relating to the amortisation over the vesting period of issues subsequent to 7 November 2002. This transitional expense will increase share capital by $4 million.

We own 100% of the equity of Telstra Growthshare Pty Ltd, the corporate trustee for the Telstra Growthshare Trust, which administers our share based payment plans. Under current AGAAP we do not control or significantly influence the trust, as beneficial ownership and control remains with the employees who participate in the share plans, administered by the Trustee on their behalf.

Under A-IFRS, we believe that from transition date we will be required to include the results, financial position and cash flows of the Telstra Growthshare Trust within our financial statements. The following adjustments will be recorded on initial recognition within the Telstra Group and Telstra Entity:

•		elimination of the loan receivable from the Telstra Growthshare Trust ($65 million);

•		reduction in share capital to reflect the shares held in the Telstra Entity by the Telstra Growthshare Trust ($117 million); and

•		the recognition of cash assets held by the Telstra Growthshare Trust ($3 million).

Other assets and liabilities held by the Trust are insignificant to the Telstra Group and Telstra Entity.

Our interpretation of AASB 2 is that shares issued under the Telstra Employee Share Ownership Plans (TESOP 97 and TESOP 99), in conjunction with the non-recourse loans, are to be accounted for as options. As a result, the outstanding balance of the Telstra Group and Telstra Entity loans to employees under TESOP 97 and TESOP 99 amounting to $174 million (comprising $24 million current receivables and $150 million non-current receivables), will be deducted from share capital on transition to A-IFRS.

We own 100% of the equity of Telstra ESOP Trustee Pty Ltd, the corporate trustee for the Telstra Employee Share Ownership Plan Trust (TESOP97) and Telstra Employee Share Ownership Plan Trust II (TESOP99). Under current AGAAP, we do not control or significantly influence these trusts as beneficial ownership and control remains with the employees who participate in the share plans administered by the Trustee on their behalf.

Under A-IFRS we will also include TESOP 97 and TESOP 99 within our financial statements from transition date. The assets and liabilities held by these trusts are insignificant to the Telstra Group and Telstra Entity.

Comparative information

The cumulative effect on the Telstra Group and Telstra Entity financial position at 30 June 2005 will be to increase cash assets by $8 million, decrease current receivables by $24 million, non current receivables by $175 million, and share capital by $257 million. Telstra Group labour expense will decrease by $10 million, interest revenue will decrease by $2 million, and dividends will decrease by $7 million for the year ended 30 June 2005.

(b) AASB 3: “Business Combinations” (AASB 3)

Our current accounting policy is to amortise goodwill over the period of expected benefit. Under A-IFRS goodwill acquired in a business combination will no longer be amortised, but instead will be subject to impairment testing at each reporting date, or upon the occurrence of triggers that may indicate a potential impairment. If there is an indication of impairment resulting in an impairment loss, it will be recognised immediately in the statement of financial performance.

Under the transitional arrangements of AASB 1 we have the option of applying AASB 3 prospectively from the transition date to A-IFRS. We have chosen this option rather than to restate all previous business combinations. The impact of AASB 3 and associated transitional arrangements will be as follows:

•		all prior business combination accounting will be frozen as at 1 July 2004; and

•		the value of goodwill will be frozen as at transition date, with any amortisation that has been, or will be, reported under AGAAP subsequent to transition date reversed for A-IFRS restatements.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(b) AASB 3: “Business Combinations” (AASB 3) (continued)

Comparative information

The prohibition of amortisation of goodwill will have the effect of reducing expenses and therefore improving reported profits, subject to any impairment charges that may be required from time to time. This change in policy under A-IFRS may result in increased volatility of future earnings where impairment losses are incurred. The cumulative effect on the Telstra Group financial position at 30 June 2005 will be to increase intangibles - goodwill by $145 million (Telstra Entity: $4 million). The AGAAP amortisation charge for the Telstra Group for the year ended 30 June 2005 was $145 million (Telstra Entity: $4 million), which will be reversed for A-IFRS purposes.

In addition, the amortisation charge for notional goodwill that has previously been included in the share of net loss from joint venture entities and associated entities will cease. The cumulative effect on the Telstra Group financial position at 30 June 2005 will be to increase investments accounted for using the equity method by $2 million. The AGAAP notional amortisation charge for the Telstra Group for the year ended 30 June 2005 was $2 million and will be reversed for A-IFRS purposes. There is no impact on the Telstra Entity.

The adoption of AASB 3 results in adjustments being recognised for acquisitions completed subsequent to transition date in the 12 months to 30 June 2005. This means that deferred tax balances related to assets and liabilities acquired are to be recognised as part of an acquisition, subsequently resulting in adjusted goodwill balances. The effect on the Telstra Group financial position at 30 June 2005 will be to increase intangibles - goodwill by $68 million and deferred tax liabilities by $68 million. There is no impact on the Telstra Entity.

On transition to A-IFRS, a new method of accounting for income taxes, known as the “balance sheet approach”, will be adopted, replacing the “income statement approach” currently used by Australian companies. Under the new method we will generally recognise deferred tax balances in the statement of financial position when there is a difference between the carrying value of an asset or liability and its tax base.

The identified tax adjustments to Telstra Group deferred tax liabilities that arise on transition to other A-IFRS standards, comprise an increase of $137 million associated with the pension asset as detailed in note 8 (e), and a decrease of $138 million for the tax effect of the transitional adjustment relating to borrowing costs as detailed in note 8 (g). Opening retained earnings increase by $1 million as a result of these entries.

The identified tax adjustments to Telstra Entity deferred tax liabilities that arise on transition to other A-IFRS standards, comprise an increase of $135 million associated with the pension asset as detailed in note 8 (e), and a decrease of $129 million for the tax effect of the transitional adjustment relating to borrowing costs as detailed in note 8 (g). Opening retained earnings decrease by $6 million as a result of these entries.

In addition, a net transitional increase to Telstra Group deferred tax liabilities of $234 million will arise from the change in method of accounting for income taxes from an income statement approach to a balance sheet approach, for items not previously required to be recognised. For the Telstra Group, this comprises $93 million for the tax effect of fair value adjustments on entities acquired by us and tax base differences on buildings of $169 million, partially offset by tax losses of $28 million. Opening retained earnings decrease by $202 million and the asset revaluation reserve reduces by $32 million as a result of these entries.

In June 2005, the Urgent Issues Group released UIG 1052: “Tax Consolidation Accounting”. This interpretation does not result in a change to reporting by the Telstra Group, but will impact on reporting for the Telstra Entity. The interpretation must be applied for the year ending 30 June 2006. Due to the timing of this release, it has not been possible to ascertain the impact on the Telstra Entity. As a result, the net transitional adjustment that will arise from the change in method of accounting for income taxes from an income statement approach to a balance sheet approach has not been finalised for the Telstra Entity.

The tax consequences of some aspects of the adoption of A-IFRS are still unclear. The Australian Taxation Office has established a national tax liaison group IFRS sub-committee to identify, calculate and manage the consequences arising from IFRS adoption. There are also some technical aspects of AASB 112 that are the subject of further clarification as to how they will apply to us. Finalisation of these matters could give rise to further transitional adjustments from the adoption of AASB 112.

We have not recognised a deferred tax liability in relation to indefinite lived intangibles as we do not believe that this asset balance gives rise to a future tax consequence. The AASB has referred this matter to the International Financial Reporting Interpretations Committee (IFRIC), who has added this to their August 2005 agenda for consideration. The IFRIC interpretation of this issue could increase the transitional deferred tax liability adjustment by $135 million in the event that our interpretation is not supported. Subsequent to transition date another indefinite lived intangible has been acquired. Resolution of this issue could give rise to an increase in intangibles — goodwill by $2 million and deferred tax liabilities by $2 million.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(d) AASB 112: “Income Taxes” (AASB 112) (continued)

Comparative information

The likely impact on the Telstra Group and Telstra Entity financial position at 30 June 2005, and for the financial performance for the year then ended, has not currently been determined.

(e) AASB 116: “Property, Plant and Equipment” (AASB 116)

Under A-IFRS, we will deem the carrying value of our property, plant and equipment to be cost from the date of transition.

Comparative information

On 6 December 2004, we acquired a 50% interest in the 3G Radio Access Network (RAN) assets of Hutchison 3G Australia Pty Ltd (H3GA) for $450 million, payable over 2 years. Due to the deferred payment terms, under current AGAAP our property, plant and equipment balance increased by $428 million, representing the present value of the purchase price calculated using our incremental borrowing rate. AASB 116 requires that a discount rate specific to the asset be used, rather than our incremental borrowing rate.

Under AGAAP, the release of interest associated with the unwinding of the present value discount is being capitalised as part of property, plant and equipment until the assets are installed ready for use. Under A-IFRS the release of interest will be expensed as incurred.

For the Telstra Group, this change in the discount rate and capitalisation of interest will result in a decrease in our property, plant and equipment of $38 million, decrease in current and non current deferred liabilities of $10 million, and decrease in deferred tax liability of $12 million as at 30 June 2005. Interest expense of the Telstra Group for the year ended 30 June 2005 will increase by $28 million, and income tax expense will decrease by $12 million. There will be no impact on the Telstra Entity.

(f) AASB 119: “Employee Benefits” (AASB 119)

Under current AGAAP, we do not recognise an asset or liability in our statement of financial position for the net position of the defined benefit schemes we sponsor in Australia and Hong Kong.

On adoption of A-IFRS, AASB 119 requires us to recognise the net position of each scheme as a transitional adjustment in the statement of financial position, with a corresponding entry to retained profits. The transitional adjustment is based on an actuarial valuation of each scheme at transition date determined in accordance with AASB 119. This Telstra Group adjustment will result in a $537 million defined benefit pension asset, an increase to opening retained profits of $400 million, and a $137 million increase to the deferred tax liability, as detailed in note 8 (c). The Telstra Entity adjustment will result in a $528 million defined benefit pension asset, an increase to opening retained profits of $393 million, and a $135 million increase to the deferred tax liability.

We have elected to early adopt the revised AASB 119. This revised version permits a number of options for recognising actuarial gains and losses on an ongoing basis. We have elected to apply the option to recognise actuarial gains and losses directly in retained profits. Other components of pension costs will be recognised in the statement of financial performance.

Comparative information

The cumulative effect on the Telstra Group financial position at 30 June 2005 will be to increase the defined benefit pension asset by $247 million, increase property, plant and equipment by $24 million, representing the capitalised portion of the additional labour cost, increase deferred tax liabilities by $63 million, and decrease retained earnings for actuarial losses by $67 million. Telstra Group labour expense will increase by $174 million, depreciation expense will increase by $2 million, and income tax expense will decrease by $51 million for the year ended 30 June 2005.

The cumulative effect on the Telstra Entity financial position at 30 June 2005 will be to increase the defined benefit pension asset by $241 million, increase property, plant and equipment by $24 million, increase deferred tax liabilities by $61 million, and decrease retained earnings for actuarial losses by $64 million. Telstra Entity labour expense will increase by $175 million, depreciation expense will increase by $2 million, and income tax expense will decrease by $52 million for the year ended 30 June 2005.

(f) AASB 121: “The Effects of Changes in Foreign Exchange Rates” (AASB 121)

The Telstra Group transitional adjustments to reset the goodwill and fair value adjustments of foreign controlled entities will result in a decrease to the foreign currency translation reserve (FCTR) of $297 million, corresponding with an increase to property, plant and equipment of $3 million, an increase of $14 million to intangible assets, and a decrease in goodwill of $314 million. The FCTR will be reset to nil following these adjustments.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(f) AASB 121: “The Effects of Changes in Foreign Exchange Rates” (AASB 121) (continued)

On an ongoing basis, AASB 121 requires goodwill and fair value adjustments arising on the acquisition of a foreign controlled entity to be expressed in the functional currency of the foreign operation. In conjunction with the transitional adjustments, this may result in additional fluctuations in our FCTR on an ongoing basis.

Under the transitional rules of AASB 1 we will be taking advantage of an exemption that permits the resetting of the FCTR to nil as at the date of transition to A-IFRS. The A-IFRS FCTR balance prior to reset is $343 million. The decision to reset will give rise to a decrease to opening retained profits of this amount. There will be no adjustment related to the Telstra Entity.

Translation differences in relation to our foreign controlled entities subsequent to transition to A-IFRS will continue to be recorded in the FCTR. The gain or loss on a future disposal of a foreign controlled entity will exclude the translation differences that arose before the date of transition to A-IFRS and the resetting of the FCTR.

Under the transitional rules of AASB 1 we will be taking advantage of an exemption that permits goodwill and fair value adjustments related to foreign controlled entities to be reset to the functional currency of the foreign operations at the original date of acquisition. The financial impact of restating goodwill and fair value adjustments not denominated in functional currencies of that entity are primarily attributable to our investments in the Telstra CSL Group (HKCSL) and TelstraClear Limited (TelstraClear).

Comparative information

The cumulative effect on the Telstra Group financial position at 30 June 2005 will be to decrease intangibles - goodwill by $447 million, increase intangibles — other by $11 million, increase property, plant and equipment by $3 million and decrease FCTR by $90 million. The impact on financial performance for the year ended 30 June 2005 will be insignificant. In addition, there will be no adjustment related to the Telstra Entity.

(g) AASB 123: “Borrowing Costs” (AASB 123)

In accordance with AGAAP, we capitalise borrowing costs incurred in respect of internally constructed property, plant and equipment and software assets that meet the criteria of qualifying assets. The benchmark treatment required under A-IFRS is to expense borrowing costs. AASB 123 does however permit the alternative treatment of capitalising these costs where they relate to qualifying assets. We have elected to change our policy in line with the benchmark treatment and expense our borrowing costs.

On transition to A-IFRS we will transfer the unamortised capitalised borrowing costs included in property, plant and equipment and software assets to retained profits. This will give rise to a reduction in Telstra Group property, plant and equipment of $396 million, a reduction in software assets of $63 million, a decrease to opening retained profits of $321 million and a $138 million decrease to deferred tax liabilities.

In relation to the Telstra Entity, this will give rise to a reduction in property, plant and equipment of $368 million, a reduction in software assets of $63 million, a decrease to opening retained profits of $302 million and a $129 million decrease to deferred tax liabilities. This election will have the impact of reducing depreciation and increasing our interest expense in subsequent reporting periods.

Comparative information

The cumulative effect on the Telstra Group financial position at 30 June 2005 will be to decrease property, plant and equipment by $399 million, reduce software assets by $57 million, and increase deferred tax liabilities by $138 million. Telstra Group depreciation expense will decrease by $93 million and borrowing costs will increase by $90 million for the year ended 30 June 2005.

The cumulative effect on the Telstra Entity financial position at 30 June 2005 will be to decrease property, plant and equipment by $374 million, a reduction in software assets of $57 million and increase deferred tax liabilities by $129 million. Telstra Entity depreciation expense will decrease by $90 million, and borrowing costs will increase by $90 million for the year ended 30 June 2005.

(h) AASB 128: “Investments in Associates” (AASB 128) and AASB 131: “Interests in Joint Ventures” (AASB 131)

AASB 128/131 requires amounts that are in substance part of the net investment in associates or joint venture entities to be accounted for as part of the carrying value of the investment for the purposes of equity accounting the results of the associate or joint venture entity. Accordingly, we have reclassified amounts that are not currently recorded in the carrying value of our investment in associates or joint venture entities to now be treated as an extension of our equity investment. This treatment gives rise to the continuation of equity accounting of our share of the operating losses in respect of those associates and joint venture entities that are incurring losses and have balances as described above.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(h) AASB 128: “Investments in Associates” (AASB 128) and AASB 131: “Interests in Joint Ventures” (AASB 131) (continued)

On transition to AASB 128/131, there will be a decrease to Telstra Group non current receivables of $208 million representing a capacity prepayment with our joint venture entity Reach Ltd (Reach). This non current asset will be deemed to be an extension of our investment in Reach under A-IFRS. This will result in equity accounting being reinstated against the capacity prepayment as part of the transition to A-IFRS. The increase in our deemed investment balance in Reach will, however, be absorbed by the carried forward losses in Reach not previously recognised. The impact of this change on the Telstra Group will be to decrease opening retained profits by $348 million for our share of the accumulated losses, offset by an increase of $140 million to the FCTR for the translation differences on our investment in Reach. The FCTR attributable to Reach will be reset to nil as detailed in the adjustment outlined in note 8 (f). There will be no adjustment related to the Telstra Entity.

During the 2005 fiscal year we swapped our capacity prepayment with Reach for an Indefeasible Right of Use (IRU). This IRU is recorded as a deferred expense under AGAAP and is being amortised over the term of the IRU being 15 years. Refer to note 14 of our 2005 full financial report lodged with this document for further information. Under A-IFRS, this IRU will be deemed to be an extension of our investment in Reach, similar to the capacity prepayment. As such, we will continue to record the equity accounted losses in Reach against this IRU in the Telstra Group.

Comparative information

The cumulative effect on the Telstra Group financial position at 30 June 2005 will be to decrease intangibles - other by $216 million. The Telstra Group share of net profit from joint venture entities and associated entities will reduce by $14 million, amortisation expense will decrease by $3 million, interest revenue will decrease by $18 million and exchange losses will decrease by $21 million for the year ended 30 June 2005. There will be no adjustment related to the Telstra Entity.

(i) AASB 136: “Impairment of Assets” (AASB 136)

Our current accounting policy under AGAAP is to assess our current and non current assets for impairment by determining the recoverable amount of those assets. We then write down the value of the non current asset where the carrying amount exceeds recoverable amount. Current AGAAP enables us to assess recoverable amount for a group of non current assets where those assets are considered to work together as one.

On adoption of AASB 136, impairment of assets will be assessed on the basis of individual cash generating units. We have assessed our Australian telecommunications network to be a single cash generating unit for the purpose of this standard. This approach has been adopted as we consider that, in the generation of our revenue streams, the delivery of our end products or services is heavily reliant on the use of one core of commonly shared communication assets, encompassing the customer access network and the core network. This ubiquitous network carries all our telecommunications traffic throughout Australia.

Under current AGAAP, we assess recoverable amount on this same ubiquitous network basis, and as a result, there will be no initial adjustments to the value of our assets under A-IFRS.

Each of our controlled entities, joint venture entities and associated entities have also been assessed, and generally each significant entity will have at least one separate cash generating unit in their own right. Under current AGAAP, we generally assess recoverable amount on a similar basis, and there is not expected to be an initial adjustment to the value of our assets. In accordance with AASB 1, the carrying amount of goodwill at transition date has been tested for impairment and no initial impairment losses are to be recognised on transition to A-IFRS.

(j) AASB 138: “Intangible Assets” (AASB 138)

As part of the IFRS project, intangibles recognised under AGAAP, including software assets developed for internal use and deferred expenditure, were reviewed to confirm that the criteria in AASB 138 have been met. Software assets developed for internal use, net deferred mobile phone handset subsidies and other deferred expenditure will be reclassified from other current and non current assets to intangible assets on transition to AASB 138. This reclassification adjustment for the Telstra Group amounts to $2,817 million (Telstra Entity: $2,614 million) as at transition date.

UIG 1042: “Subscriber Acquisition Costs in the Telecommunication Industry”, was released in December 2004 and is applicable to us from 1 July 2005. It requires the costs of telephones provided to subscribers to be excluded from subscriber acquisition costs, with the provision of the telephone being accounted for as a separate sale under AASB 118: “Revenue” (AASB 118). However, neither UIG 1042 nor AASB 118 specifies how to account for the separately identifiable component.

We have previously applied US GAAP to these transactions, which also require the provision of a handset to be accounted for as a separately identifiable component. However, the detailed guidance contained under US GAAP allows us to defer these handset subsidies as the revenue allocated to a subsidised mobile handset is contingent on the delivery of the contracted services. As a result, our current accounting policy is to defer handset subsidies and amortise them over the term of the contract.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(j) AASB 138: “Intangible Assets” (AASB 138) (continued)

We have written to the UIG expressing the view that our handset subsidies do represent our subscriber acquisition costs. As a result we have not adjusted our deferred handset subsidies at transition date. As at transition date, the Telstra Group deferred handset subsidies balance was $264 million (Telstra Entity: $264 million). Resolution of this issue may give rise to an additional transition adjustment, reducing retained earnings by $264 million and could also impact the financial performance and position for the year ended 30 June 2005. At this stage we are yet to quantify the potential impact on the financial performance and position in the 2005 fiscal year.

Comparative information

The cumulative effect on the Telstra Group financial position at 30 June 2005 will be to increase intangibles — other by $3,154 million (Telstra Entity: $2,837 million). There will be no impact on financial performance for the year ended 30 June 2005.

(k) AASB 132: “Financial Instruments: Disclosure and Presentation” (AASB 132) and AASB 139: “Financial Instruments: Recognition and Measurement” (AASB 139)

Under AASB 132/139, our accounting policy will change to recognise our financial instruments in the statement of financial position and to record all derivatives and some financial assets and financial liabilities at fair market value. Those financial assets and financial liabilities which are not at fair value will be carried at cost or amortised cost.

AASB 139 recognises fair value hedge accounting, cash flow hedge accounting and hedges of investments in foreign operations. Fair value hedges are used to hedge against changes in fair values, whereas cash flow hedges are used to hedge against variability in cash flows. Hedge accounting can only be utilised where effectiveness tests are met on both a prospective and retrospective basis. Ineffectiveness outside the prescribed range precludes the use of hedge accounting, which may result in significant volatility in the statement of financial performance.

Our major exposure to interest rate risk and foreign currency risk arises from our foreign currency borrowings. We expect to use a combination of fair value and cash flow hedges to hedge against these risks. Cash flow hedges will hedge foreign exchange risk arising from payments on our foreign currency borrowings. Fair value hedges will hedge exposure to changes in the fair value of foreign borrowings attributable to foreign currency and interest rate risk.

Exposure to foreign currency risk also arises through our ongoing business activities, predominantly where we have purchase or settlement commitments in foreign currencies. Cash flow hedges are used to hedge foreign currency exposures of anticipated foreign currency transactions that are considered to be highly probable.

In addition, we hedge our exposure to foreign currency risk as a result of our investments in foreign operations, including our investments in TelstraClear and HKCSL. This risk is created by the translation of the net assets of these entities from their functional currency to Australian dollars.

The use of hedging instruments is governed by the guidelines set by our Board of Directors. These guidelines are currently being reviewed for potential changes from the adoption of A-IFRS.

We are required to comply with AASB 132/139 from 1 July 2005. An exemption is available under AASB 1 such that comparative information does not need to be restated under these standards. We have elected to apply the exemption and accordingly, there will be no impact on the 30 June 2005 financial statements.

However, it is expected that the application of the recognition and measurement criteria of AASB 139 at 1 July 2005 on the Telstra Group financial assets and financial liabilities, including derivatives, will give rise to an increase in borrowings of $220 million, a decrease in net cross currency and interest rate swap liability of $343 million, an increase in reserves of $151 million and a decrease in retained earnings of $31 million. There will also be an increase in forward foreign exchange contract liabilities of $3 million.

It is expected that the application of the recognition and measurement criteria of AASB 139 at 1 July 2005 on the Telstra Entity financial assets and financial liabilities, including derivatives will give rise to an increase in borrowings of $220 million, a decrease in net cross currency and interest rate swap liability of $343 million, an increase in reserves of $154 million and a decrease in retained earnings of $31 million.

The gains and losses on hedging instruments that arise from the use of fair value hedges will be recognised in the statement of financial performance and increase volatility in reported profits. The increase in volatility of reported profits will include some ineffectiveness arising from the application of hedge accounting. The gains and losses on hedging instruments that arise from the use of cash flow hedges, to the extent they are considered effective, will be deferred to equity until the hedged item is recognised in the statement of financial performance. This will create some volatility in equity reserve balances. Gains and losses on hedging instruments used in hedges of net investments in foreign operations will be recognised in the foreign currency translation reserve in equity.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(k) AASB 132: “Financial Instruments: Disclosure and Presentation” (AASB 132) and AASB 139: “Financial Instruments: Recognition and Measurement” (AASB 139)

Under existing AGAAP, the gain or loss arising from our hedge activities is treated consistently with the gain or loss arising on the original hedged transaction or balance. This results in the majority of movements being recognised in the statement of financial performance, with the majority of hedging activities of net investments in foreign operations taken to the FCTR.

In addition to the above, AASB 139 requires that we recognise certain embedded derivatives that exist within contracts to which we are a party. Based on the work- in- progress of our IFRS project team we are not aware of any significant embedded derivatives that require separate measurement and reporting as at the transition date of 1 July 2005. This may be subject to change following finalisation of our review of all our contracts as at the transition date.


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(l) Summary of transitional adjustments

The following provides a summary of the known estimable transitional adjustments from AGAAP to A-IFRS for the Telstra Group as at 1 July 2004, based on the A-IFRS’s as currently issued and interpreted.

The transitional impacts disclosed below do not include any adjustments from applying AASB 132/139, on the basis that these standards are to be applied prospectively, with the transition only required to be recognised at 1 July 2005. Refer to note 8 (k) for further information.

Any transitional adjustments identified are based on the work-in-progress of our IFRS project team and our best judgements at reporting date and may be subject to change.

There are certain items that still require resolution. We have not recognised a deferred tax liability in relation to indefinite lived intangibles or determined the impact on the Telstra Entity of UIG 1052: “Tax Consolidation Accounting” as detailed in note 8 (c). Also, in respect of UIG 1042 “Subscriber Acquisition Costs in the Telecommunications Industry”, we have not changed the accounting for mobile phone handset subsidies as detailed in note 8 (j).


						Telstra Group

						1 July 2004
						Effect of transition to A-IFRS						Australian
						Presentation			Accounting			equivalent
				AGAAP		adjustments			adjustments			of IFRS
	Note			$m		$m			$m			$m


Current assets
Cash and cash equivalents		8	(a)		687		—			3			690
Trade and other receivables		8	(a)		3,608		(24	)		—			3,584
Inventories					229		—			—			229
Other assets		8	(j)		803		(491	)		—			312

Total current assets					5,327		(515	)		3			4,815

Non current assets
Trade and other receivables		8 (a),	(h)		740		(150	)		(273	)		317
Inventories					10		—			—			10
Investments — accounted for using the equity method					40		—			—			40
Investments — available for sale					80		—			—			80
Property, plant and equipment		8 (f),	(g)		22,863		—			(393	)		22,470
Intangibles — goodwill		8	(f)		2,104		—			(314	)		1,790
Intangibles — other		8 (f),	(j)		1,501		2,817			(49	)		4,269
Defined benefit pension asset		8	(e)		—		—			537			537
Other assets		8 (g),	(j)		2,328		(2,326	)		—			2

Total non current assets					29,666		341			(492	)		29,515

Total assets					34,993		(174	)		(489	)		34,330


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(l) Summary of transitional adjustments (continued)


							Telstra Group

							1 July 2004
							Effect of transition to A-IFRS						Australian
							Presentation			Accounting			equivalent
				AGAAP			adjustments			adjustments			of IFRS
	Note			$m			$m			$m			$m


Current liabilities
Trade and other payables					2,338			—			—			2,338
Borrowings					3,246			—			—			3,246
Current tax payable					539			—			—			539
Provisions					358			—			—			358
Revenue received in advance					1,095			—			—			1,095

Total current liabilities					7,576			—			—			7,576

Non current liabilities
Trade and other payables					49			—			—			49
Borrowings					9,014			—			—			9,014
Deferred tax liabilities		8 (c),(e),	(g)		1,807			—			233			2,040
Provisions					778			—			—			778
Revenue received in advance					408			—			—			408

Total non current liabilities					12,056			—			233			12,289

Total liabilities					19,632			—			233			19,865

Net assets					15,361			(174	)		(722	)		14,465

Shareholders’ equity
Telstra Entity
Share capital					6,073			(174	)		(113	)		5,786
Reserves					(105	)		—			154			49
Retained profits					9,391			—			(763	)		8,628

Equity available to Telstra Entity shareholders					15,359			(174	)		(722	)		14,463

Minority interests					2			—			—			2

Total shareholders’ equity					15,361			(174	)		(722	)		14,465


Telstra Corporation Limited and controlled entities		Preliminary final report

Appendix 4E		Year ended 30 June 2005

8. Other factors likely to affect results in the future (continued)

Adoption of International Financial Reporting Standards (continued)

(m) Statement of changes in shareholders’ equity

The following statement of changes in shareholders’ equity provides a summary of the known estimable transitional adjustments from AGAAP to A-IFRS for the Telstra Group as at 1 July 2004, based on the A-IFRS’s as currently issued and interpreted. The transitional impacts disclosed below do not include any adjustments from applying AASB 132/139, on the basis that these standards are to be applied prospectively, with the transition only required to be recognised at 1 July 2005. Refer to note 8 (k) for further information.

Any transitional adjustments identified are based on the work-in-progress of our IFRS project team and our best judgements at reporting date, and may be subject to change.

There are certain items that still require resolution. We have not recognised a deferred tax liability in relation to indefinite lived intangibles as detailed in note 8 (c). Also, in respect of UIG 1042 “Subscriber Acquisition Costs in the Telecommunications Industry”, we have not changed the accounting for mobile phone handset subsidies as detailed in note 8 (j).


													Telstra Group

				Share			Reserves
				capital/						Foreign					Consoli-					Outside
				Contributed			Asset			currency					dation		Retained			equity
				equity			revaluation			translation			General		fair value		profits			interests		Total
	Note			$m			$m			$m			$m		$m		$m			$m		$m

Balance at 1 July 2004 under AGAAP					6,073			32			(186	)		5		44		9,391			2		15,361
Share loans to employees		8	(a)		(174	)		—			—			—		—		—			—		(174	)
Shares held by employee share plan trusts		8	(a)		(117	)		—			—			—		—		—			—		(117	)
Services received under employee share plans		8	(a)		4			—			—			—		—		(4	)		—		—
Share-based payments		8	(a)		—			—			—			—		—		55			—		55
Carrying value differences from the tax base		8	(c)		—			(32	)		—			—		—		(202	)		—		(234	)
Net defined benefit pension asset		8	(e)		—			—			—			—		—		400			—		400
Retranslation of overseas goodwill balances		8	(f)		—			—			(297	)		—		—		—			—		(297	)
Resetting the foreign currency translation reserve to zero		8	(f)		—			—			343			—		—		(343	)		—		—
Expensing of borrowing costs previously capitalised		8	(g)		—			—			—			—		—		(321	)		—		(321	)
Equity accounting for Reach Ltd		8	(h)		—			—			140			—		—		(348	)		—		(208	)

Balance at 1 July 2004 under A-IFRS for known estimable transitional adjustments					5,786			—			—			5		44		8,628			2		14,465

Telstra Corporation Limited
Full year end results and operations review
Year ended 30 June 2005

Strong result with revenue growth, earnings growth and cash growth

Highlights

•		Reported total revenue grew by 6.5%. Reported EBIT increased by 6.8%.

•		Reported net profit grew by 8.0%. Reported EPS was up by 9.6% to 35.5 cents.

•		Growth in underlying sales revenue of 3.7% and domestic sales revenue of 3.5%.

•		Underlying EBITDA grew by 2.9% and EBITDA margin was 49.4% down 0.4%.

•		Underlying EBIT grew by 3.0% and EBIT margin was 32.1 % down 0.2%.

•		Underlying net profit after tax increased by 4.6%.

•		A special dividend of 6 cents per share has been declared, along with an ordinary final dividend of 14 cents per share

•		Free cashflow grew by 4.6%

Telstra Corporation Limited and controlled entities

Financial Highlights

Year ended 30 June 2005

Telstra Corporation Limited reported a profit after tax (PAT) of $4,447 million for the year ended 30 June 2005, an increase of $329 million or 8.0% on the prior year. Earnings per share (EPS) grew by 9.6% to 35.5 cents. Reported earnings before interest and tax (EBIT) grew by 6.8% or $445 million to $7.0 billion.

After adjusting to allow like for like comparisons with the prior year ended 30 June 2004, as detailed on the normalisation schedule, underlying¹ PAT increased by 4.6% or $193 million to $4,349 million, and underlying¹ EPS grew by 6.7% to 34.8 cents. Underlying¹ EBIT increased by 3.0% or $198 million to $6,888 million, and underlying¹ earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 2.9% or $295 million to $10,596 million. Underlying¹ margins declined slightly with a decrease in underlying¹ EBIT margin of 0.2% to 32.1% and an underlying¹ EBITDA margin decrease of 0.4% to 49.4%.

Revenue

Reported total revenue grew by 6.5% or $1.4 billion in the current year to $22.7 billion, which included revenue of $700 million generated in the year from recently acquired entities.

Underlying¹ total revenue increased by 3.5% or $723 million. Underlying¹ sales revenue increased by 3.7% or $770 million, due mainly to growth in broadband, mobiles, advertising and directories, pay TV bundling, and offshore services revenue, offset by a decline in PSTN calling products as migration to other products continued. Underlying¹ domestic sales revenue increased by 3.5% or $666 million to $19,914 million.

Expenses

Reported total expenses (before interest and tax) grew by 6.3% or $932 million to $15.7 billion, which included expenses incurred by the newly acquired entities of $666 million in the current year. The prior year included the provision for non-recoverability of the Reach loan of $226 million.

Underlying¹ operating expenses (before depreciation, amortisation and interest) rose by 4.0% or $428 million due to increased goods and services purchased and labour costs supporting revenue growth and improved customer service, partly offset by cost reduction programs. Underlying¹ total expenses (before interest and tax) increased by 3.7% or $525 million which included depreciation and amortisation growth of 2.7%.

Reported net borrowing costs grew by 3.4% from $712 million to $736 million due to an increase in net debt following the share buy back, acquisitions and higher levels of capital expenditure.

Reported tax expense increased by 5.3% from $1,731 million to $1,822 million due to the growth in net profit of 7.2% and the prior year inclusion of the $58 million benefit from the adoption of tax consolidation, offset


2004/05 Financial Highlights 11 August 2005

Telstra Corporation Limited and controlled entities

by the tax impact of the non-deductible provision against the Reach loan of $65 million and lower under provision adjustments of $22 million. Underlying¹ tax expense has decreased by 0.8% or $15 million.

Cash flow

Free cash flow (operating cash flow less cash flow used in investing activities) of $4.4 billion increased by 4.6% or $191 million due to higher cash provided by operating activities of $730 million from higher cash profits, lower tax payments and working capital improvements. This growth was partially offset by higher cash flows used in investing activities of $539 million due to higher operating capital expenditure.

Capital Expenditure

Domestic core operating capital expenditure increased by 16% or $449 million to $3.3 billion mainly due to growth in demand for broadband ADSL services.

Treasury operations

Telstra’s financial position remained strong with current long-term credit ratings of A+, A1 and A+ from S&P, Moody’s and Fitch respectively. Both S&P and Moody’s have Telstra on a negative outlook due to uncertainty surrounding T3. The net debt position was $11.8 billion, an increase of $623 million or 5.6%, following the share buyback, acquisitions and higher capital expenditure during the year. The statement of financial position (Balance Sheet) was maintained with strong capital settings.

Dividend

A fully franked final ordinary dividend of 14 cents per share has been declared and is payable on 31 October 2005. This was an increase of 8% on the final ordinary dividend declared in the corresponding prior period bringing the full year ordinary dividend to 28 cents per share.

Capital Management

A 6 cents per share fully franked special dividend has been declared and will be paid in conjunction with the ordinary dividend. The special dividend is part of the second tranche of our three year, $1.5 billion per annum, capital management program. We have also disclosed the intention to pay a fully franked special dividend of 6 cents per share as part of the interim dividend in fiscal 2006.

Customer Service

Customer Service performance continued at a high level across Australia as evident in the recent Australian Communications Authority report for the March 2005 quarter. National Customer Service Guarantee (CSG) performance for connections was 93% and for fault repairs was 91%. During the March quarter 99.07% of customers did not experience a fault.

Outlook

A full scale strategic review of the business is being conducted under the leadership of Sol Trujillo. The outlook may change once the review is finalised and plans are implemented.

As things currently stand:

The core commercial focus is the customer — this will not change post completion of the review. Knowing the customer by accurate market segmentation and tailoring services to meet customer needs is core to any business’s success.

In terms of the current revenue outlook, the PSTN voice decline will continue to put pressure on the company’s top line and margins. Total PSTN voice revenue is expected to fall again this year at an accelerated rate.

On the positive side our growth drivers of broadband and Sensis are each expected to be strong in the year ahead, but there is increasing aggressive pricing in the mobiles segment.

Cashflow will be impacted in fiscal 2006 by the payments to Hutchison, higher capital expenditure to meet broadband demand and investment in a number of business improvement projects, such as a broadband management system, customer access network rehabilitation and new billing platforms.


2004/05 Financial Highlights 11 August 2005

Telstra Corporation Limited and controlled entities

Margin pressure is expected to continue as our revenue mix changes. Earnings will likely decline in 05/06 at the EBITDA and EBIT lines. EBITDA will be impacted by the accelerating decline in high margin PSTN product revenue. EBIT will be impacted by both the accelerating PSTN revenue decline, and an increase in depreciation and amortisation with the effect of 3G network and spectrum amortisation. In this environment, new sources of revenue and further cost reductions will be necessary for earnings growth in the future. This is a focus of the strategic review.

For enquiries on these results contact:


John Stanhope		David Anderson
Chief Financial Officer		General Manager, Investor Relations
Telstra Corporation Limited		Telstra Corporation Limited
		Phone: 61 3 9634 2410
		Email: Investor.relations@team.telstra.com

All results stated in $A unless otherwise indicated.

N/M refers to not meaningful.

All statistical data represents management’s best estimates and excludes all Telstra internal usage statistics.

Footnotes:

1.		Underlying results are produced to allow like for like comparison by removing those items which are either not of a comparable nature owing to structural changes to the business e.g. acquisitions/consolidations, significant and non recurring or not part of the core operations of the business.

		The years ended 30 June 2005 and 2004 underlying results EXCLUDE:

		The impact of the acquisitions of Trading Post, Kaz Group, PSINet Group, Telstra Business Systems (formerly Damovo) and Universal Publishers, proceeds from and book value of property and investment sales, the diminution in value of investments, prior year IBMGSA contract exit costs and the tax benefit from the accounting impact of tax consolidation.

2.		Domestic core operating capital expenditure is operating capital expenditure excluding HKCSL & TelstraClear operating capital expenditure and capital expenditure on international capacity.


2004/05 Financial Highlights 11 August 2005

Telstra Corporation Limited and controlled entities

Index


Statement of financial performance			6
Cash flow summary			7
Statement of financial position summary			7
Statistical data summary			8
Operating and financial review
Results of Operation			9
Operating revenues			10
Mobiles			11-12
Internet & IP solutions			13-14
PSTN Products			15-16
Specialised Data			17
ISDN			18
Adverstising and Directories			18
Intercarrier services			19
Solutions management			19
Hong Kong CSL			20
TelstraClear			20
Offshore revenue			21
Inbound calling products			21
Pay TV bundling			22
Customer premises equipment			22
Payphones			22
Other sales and services			23
Other revenue			24
Operating expenses			25
Labour expense			26
Goods and services purchased			27-28
Other expenses			29-30
Share of net (profit) loss from associates and joint venture entities			31
Depreciation and Amortisation			31
International
Hong Kong CSL financial summary			32
TelstraClear financial summary			33
Net borrowing costs			34
Income tax expense			34
Cash flow			35-37
Statement of financial position — detail			38
Normalisation schedule			39-40
Quarterly data			41
Product Reconciliation			42


2004/05 Financial Highlights 11 August 2005

Telstra Corporation Limited and controlled entities

Statement of financial performance
for the year ended 30 June 2005


							Year Ended 30 June 2005
	2005						2004						Reported			Underlying¹			Reported			Underlying¹
	Reported			Underlying¹			Reported			Underlying¹			Change			Change			Change			Change
				(in $ millions)									$m			$m			%			%
Mobiles
Mobile services		3,760			3,760			3,470			3,470			290			290			8.4			8.4
Mobile handsets		381			381			352			352			29			29			8.2			8.2

Total Mobiles		4,141			4,141			3,822			3,822			319			319			8.3			8.3
Internet and IP solutions
BigPond narrowband		275			275			295			295			(20	)		(20	)		(6.8	)		(6.8	)
BigPond broadband		463			463			274			274			189			189			69.0			69.0
Wholesale broadband		261			261			143			143			118			118			82.5			82.5
Wholesale internet direct and data		31			31			16			16			15			15			93.8			93.8
Internet direct		123			123			117			117			6			6			5.1			5.1
IP solutions		207			207			160			160			47			47			29.4			29.4
Other		17			17			8			8			9			9			112.5			112.5

Internet and IP solutions		1,377			1,377			1,013			1,013			364			364			35.9			35.9
PSTN Products
Basic access		3,362			3,362			3,237			3,237			125			125			3.9			3.9
Local calls		1,284			1,284			1,504			1,504			(220	)		(220	)		(14.6	)		(14.6	)
PSTN value added services		250			250			259			259			(9	)		(9	)		(3.5	)		(3.5	)
National long distance calls		1,013			1,013			1,121			1,121			(108	)		(108	)		(9.6	)		(9.6	)
Fixed to mobile		1,566			1,566			1,597			1,597			(31	)		(31	)		(1.9	)		(1.9	)
International direct		234			234			266			266			(32	)		(32	)		(12.0	)		(12.0	)

Total PSTN		7,709			7,709			7,984			7,984			(275	)		(275	)		(3.4	)		(3.4	)
Specialised Data		966			966			1,035			1,035			(69	)		(69	)		(6.7	)		(6.7	)
ISDN Products		890			890			927			927			(37	)		(37	)		(4.0	)		(4.0	)
Advertising and Directories		1,585			1,419			1,341			1,297			244			122			18.2			9.4
Intercarrier services		1,146			1,146			1,103			1,103			43			43			3.9			3.9
Solutions management		931			537			508			508			423			29			83.3			5.7
HK CSL		734			734			726			726			8			8			1.1			1.1
TelstraClear		625			625			574			574			51			51			8.9			8.9
Offshore Services Revenue		252			181			131			131			121			50			92.4			38.2
Inbound calling products		449			449			476			476			(27	)		(27	)		(5.7	)		(5.7	)
Pay TV Bundling		263			263			154			154			109			109			70.8			70.8
Customer premises equipment		229			172			184			184			45			(12	)		24.5			(6.5	)
Payphones		121			121			141			141			(20	)		(20	)		(14.2	)		(14.2	)
Other sales & service		743			733			618			618			125			115			20.2			18.6

Sales revenue		22,161			21,463			20,737			20,693			1,424			770			6.9			3.7
Other revenue		496			207			543			254			(47	)		(47	)		(8.7	)		(18.5	)

Total revenue		22,657			21,670			21,280			20,947			1,377			723			6.5			3.5

Expenses:
Labour		3,693			3,363			3,218			3,204			475			159			14.8			5.0
Goods and services purchased		4,147			3,941			3,554			3,543			593			398			16.7			11.2
Other expenses		4,055			3,779			4,255			3,821			(200	)		(42	)		(4.7	)		(1.1	)

Expenses before equity acc/depn/amort/interest		11,895			11,083			11,027			10,568			868			515			7.9			4.9

Share of net (profit) loss from associates and joint venture entities		(9	)		(9	)		78			78			(87	)		(87	)		(111.5	)		(111.5	)


Total operating expenses before depn/amort/interest		11,886			11,074			11,105			10,646			781			428			7.0			4.0

EBITDA		10,771			10,596			10,175			10,301			596			295			5.9			2.9

Depreciation		2,946			2,931			2,873			2,872			73			59			2.5			2.1
Amortisation (excl goodwill)		675			655			619			619			56			36			9.0			5.8
Goodwill amortisation		145			122			123			120			22			2			17.9			1.7

Total depreciation/amortisation		3,766			3,708			3,615			3,611			151			97			4.2			2.7


Total operating expenses before interest		15,652			14,782			14,720			14,257			932			525			6.3			3.7

EBIT		7,005			6,888			6,560			6,690			445			198			6.8			3.0

Net borrowing costs		736			731			712			712			24			19			3.4			2.7

Profit before income tax		6,269			6,157			5,848			5,978			421			179			7.2			3.0
Tax⁽ⁱ⁾		1,822			1,808			1,731			1,823			91			(15	)		5.3			(0.8	)

Profit after tax (bef. Outside equity interests)		4,447			4,349			4,117			4,155			330			194			8.0			4.7

Outside equity interests		0			0			1			1			(1	)		(1	)		(100.0	)		(100.0	)

Profit after tax		4,447			4,349			4,118			4,156			329			193			8.0			4.6

Effective tax rate ⁽ⁱⁱ⁾		29.1	%		29.4	%		29.6	%		30.5	%								(0.5	%)		(1.1	%)
EBITDA margin on sales revenue ⁽ⁱⁱ⁾		48.6	%		49.4	%		49.1	%		49.8	%								(0.5	%)		(0.4	%)
EBIT margin on sales revenue ⁽ⁱⁱ⁾		31.6	%		32.1	%		31.6	%		32.3	%								(0.0	%)		(0.2	%)
Earnings per share (cents)⁽ⁱⁱⁱ⁾		35.5			34.8			32.4			32.6			3.1			2.2			9.6	%		6.7	%


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

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

(iii)		2005 EPS uses a weighted average of 12,513 million shares following the share Buy Back, 2004 EPS was based on 12,581 million shares. Product definitions have been reviewed and where necessary in the Year Ended 30 June 2004, comparative figures have been adjusted to align with changes in presentation in the Year Ended 30 June 2005. (Refer reconciliation on page 42).


2004/05 Financial Highlights 11 August 2005

Page 6

Telstra Corporation Limited and controlled entities

Cash flow summary
For the year ended 30 June 2005


Cash Flow Summary
	Year Ended 30 June 2005
	2005			2004			Change			Change
		(in $ millions)								%

Receipts from Customers		24,526			22,954			1,572			6.8
Payments to Suppliers/Employees		(12,754	)		(11,816	)		(938	)		7.9
Net Interest and Finance Charges		(799	)		(795	)		(4	)		0.5
Income Tax Paid		(1,718	)		(1,856	)		138			(7.4	)
Dividends Received		2			2			—			0.0
GST Remitted to the ATO		(1,094	)		(1,056	)		(38	)		3.6

Operating Cash Flow		8,163			7,433			730			9.8


Operating Capital Expenditure		(3,623	)		(3,087	)		(536	)		17.4
Less Capitalised Interest		90			74			16			21.6

Operating Capital Expenditure		(3,533	)		(3,013	)		(520	)		17.3
Investment Expenditure		(590	)		(668	)		78			(11.7	)
Patents, Trademarks and Licences (including 3G spectrum)		(6	)		(2	)		(4	)		200.0

Capital Expenditure — excluding Capitalised Interest		(4,129	)		(3,683	)		(446	)		12.1
Receipts from Asset Sales/Other Proceeds		320			413			(93	)		(22.5	)

Cash flow used in Investing Activities		(3,809	)		(3,270	)		(539	)		16.5




Operating Cash Flow less Cash Flow used in Investing Activities		4,354			4,163			191			4.6


Movements in Borrowings/Finance Leases		1,393			(379	)		1,772			N/M
Employee Share Loans (Net)		19			24			(5	)		(20.8	)
Loan to associated Entity		(37	)		(226	)		189			(83.6	)
Dividends Paid		(4,131	)		(3,186	)		(945	)		29.7
Share Buy Back		(756	)		(1,009	)		253			(25.1	)

Net Financing Activities		(3,512	)		(4,776	)		1,264			(26.5	)


Net Cash Flow		842			(613	)		1,455			(237.4	)

Statement of financial position summary
As at 30 June 2005


Statement of Financial Position — Summary
	As at 30 June 2005
	2005			2004			Change			Change
		(in $ millions)								%

Current Assets		6,177			5,327			850			16.0
Intangibles		3,868			3,605			263			7.3
Property, Plant and Equipment		23,351			22,863			488			2.1
Total Non-Current Assets		30,133			29,666			467			1.6
Net Debt		11,790			11,167			623			5.6
Total Liabilities		21,429			19,632			1,797			9.2
Gross Debt		13,330			11,854			1,476			12.5
Net Assets/Shareholders’ Equity		14,881			15,361			(480	)		(3.1	)

Ratios
EBITDA Interest Cover (times)		13.0			12.9			0.10			0.8
Net Debt to EBITDA		1.1			1.1			0			0.0
Return on average assets (i)		20.4	%		19.4	%					1.0	%
Return on average equity (i)		29.4	%		26.8	%					2.6	%
Net debt to capitalisation (i)		44.2	%		42.1	%					2.1	%

(i) The percentage growth represents the percentage movement from the prior corresponding period.



2004/05 Financial Highlights 11 August 2005

Page 7

Telstra Corporation Limited and controlled entities

Statistical data summary
For the year ended 30 June 2005


Statistical Summary
	Year Ended 30 June 2005
	2005		2004		Change			Change
								%

Billable traffic data (in millions)
Local calls (number of calls)		8,469		9,397		(928	)		(9.9	)
National long distance minutes ⁽ⁱ⁾		7,743		8,520		(777	)		(9.1	)
Fixed-to-mobile minutes		4,375		4,226		149			3.5
International direct minutes		580		651		(71	)		(10.9	)
Mobile voice telephone minutes ⁽ⁱⁱ⁾		6,746		6,145		601			9.8
Number of SMS sent ⁽ⁱⁱⁱ⁾		2,289		1,944		345			17.7

Network and operations data
Basic access lines in service ^(iv)
Residential		5.60		5.87		(0.27	)		(4.6	)
Business		2.45		2.57		(0.12	)		(4.7	)

Total retail customers		8.05		8.44		(0.39	)		(4.6	)
Domestic wholesale		2.07		1.84		0.23			12.5

Total basic access lines in services (in millions)		10.12		10.28		(0.16	)		(1.6	)

ISDN access (basic lines equivalents) (in thousands) ^(v)		1,327		1,288		39			3.0

Mobile services in operation (SIO) (in thousands) ^(vi)
GSM		6,894		6,653		241			3.6
CDMA		1,333		951		382			40.2

Mobile services in operations		8,227		7,604		623			8.2


Total Wholesale mobile SIO (in thousands)		83		61		22			36.1

Online subscribers (in thousands)
Narrowband subscribers		1,205		1,194		11			0.9
Broadband subscribers — Retail ^(vii)		856		427		429			100.5
Broadband subscribers — Wholesale ^(viii)		888		379		509			134.3

Total Broadband subscribers ^(vii)		1,744		806		938			116.4

Total online subscribers		2,949		2,000		949			47.5


Total FOXTEL subscribers		1,023		904		119			13.2

Employee data
Domestic full-time staff — reported ^(ix)		39,657		36,159		3,498			9.7
Domestic full-time staff — underlying ^(ix)		36,406		35,823		583			1.6
Full-time staff and equivalents — reported ^(x)		46,336		41,941		4,395			10.5
Full-time staff and equivalents — underlying ^(x)		42,739		41,343		1,396			3.4


⁽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.

⁽ⁱⁱ⁾		Includes all calls made from mobile telephones including long distance and international calls, excludes Data, messagebank, international roaming and Hong Kong CSL.

⁽ⁱⁱⁱ⁾		SMS numbers have been restated for 02/03, 03/04 and 04/05 to include up to 20 million messages per quarter of business access manager and online sms previously excluded in error.

^(iv)		Excludes Incontact services (a free service with restrictive calling access) and advanced access services, such as ISDN services

^(v)		Expressed in equivalent number of clear voice channels.

^(vi)		Excludes Hong Kong CSL SIOs

^(vii)		Broadband subscriber numbers for 03/04 and 04/05 have been restated to include up to 5000 business subscribers previously overlooked in error

^(viii)		Within Broadband, retail products include cable, satellite, HyperConnect, ADSL and Business DSL, while wholesale products include DSL Layer 1, DSL Layer 2, DSL layer 3, Spectrum Sharing and vISP Broadband.

^(ix)		Excludes offshore, casual and part time employees

^(x)		Includes all domestic and offshore employees, including controlled entities.



2004/05 Financial Highlights 11 August 2005

Page 8

Telstra Corporation Limited and controlled entities

Operating and Financial Review

Results of operation

The following table illustrates reported and underlying¹ results for the years ended 30 June 2005 and 2004.


Results of operations
	Year Ended 30 June 2005
	2005						2004				Reported			Underlying¹
	Reported			Underlying¹			Reported		Underlying¹		Change			Change
											%			%
	(in $ millions)

Sales revenue		22,161			21,463			20,737		20,693		6.9			3.7
Other revenue		496			207			543		254		(8.7	)		(18.5	)

Total revenue		22,657			21,670			21,280		20,947		6.5			3.5


Expenses before equity acc/depn/amort/interest		11,895			11,083			11,027		10,568		7.9			4.9

Share of net loss from associates and joint venture entities		(9	)		(9	)		78		78		(111.5	)		(111.5	)


Total operating expenses before depn/amort/interest		11,886			11,074			11,105		10,646		7.0			4.0
Total depreciation/amortisation		3,766			3,708			3,615		3,611		4.2			2.7

Total operating expenses before interest		15,652			14,782			14,720		14,257		6.3			3.7



Earnings before interest & tax (EBIT)		7,005			6,888			6,560		6,690		6.8			3.0

Reported earnings before interest and tax (EBIT) grew by 6.8% or $445 million, however some transactions occurred in the current and previous years that do not allow like for like comparisons. After excluding the impact of these transactions, underlying¹ EBIT increased by 3.0% or $198 million.

The non-comparable items excluded from the underlying¹ results are reflected on the normalisation schedule on page 39, and consist of:

•		Trading Post EBIT $52 million and prior year EBIT of $9 million, acquired in March 2004;

•		Kaz Group EBIT loss of $13 million, acquired in July 2004;

•		PSINet Group EBIT of $6 million, acquired in August 2004;

•		Telstra Business Systems (formerly Damovo) EBIT loss of $11 million, acquired in September 2004;

•		Universal Publishers EBIT of nil, acquired December 2004;

•		Diminution of investments of $6 million in the current year and $227m in the prior year attributable to the provision for non-recoverability of the Reach loan;

•		EBIT from the sale of property and investments and other costs of $89 million in the current year and $88 million in the prior year.



2004/05 Financial Highlights 11 August 2005

Page 9

Telstra Corporation Limited and controlled entities

Operating revenues

The following table includes reported and underlying¹ operating revenues for the years ended 30 June 2005 and 2004.


Operating revenue by major product and service category
	Year Ended 30 June 2005
	2005				2004				Reported			Underlying¹
	Reported		Underlying¹		Reported		Underlying¹		Change			Change
									%			%
	(in $ millions)

Mobiles
Mobile services		3,760		3,760		3,470		3,470		8.4			8.4
Mobile handsets		381		381		352		352		8.2			8.2

Total Mobiles		4,141		4,141		3,822		3,822		8.3			8.3
Internet & IP Solutions
BigPond narrowband		275		275		295		295		(6.8	)		(6.8	)
BigPond broadband		463		463		274		274		69.0			69.0
Wholesale broadband		261		261		143		143		82.5			82.5
Wholesale internet direct		31		31		16		16		93.8			93.8
Internet direct		123		123		117		117		5.1			5.1
IP solutions		207		207		160		160		29.4			29.4
Other		17		17		8		8		112.5			112.5

Total Internet and IP solutions		1,377		1,377		1,013		1,013		35.9			35.9
PSTN Products
Basic access		3,362		3,362		3,237		3,237		3.9			3.9
Local calls		1,284		1,284		1,504		1,504		(14.6	)		(14.6	)
PSTN value added services		250		250		259		259		(3.5	)		(3.5	)
National long distance calls		1,013		1,013		1,121		1,121		(9.6	)		(9.6	)
Fixed to mobile		1,566		1,566		1,597		1,597		(1.9	)		(1.9	)
International direct		234		234		266		266		(12.0	)		(12.0	)

Total PSTN		7,709		7,709		7,984		7,984		(3.4	)		(3.4	)
Specialised Data		966		966		1,035		1,035		(6.7	)		(6.7	)
ISDN Products		890		890		927		927		(4.0	)		(4.0	)
Advertising and Directories		1,585		1,419		1,341		1,297		18.2			9.4
Intercarrier services		1,146		1,146		1,103		1,103		3.9			3.9
Solutions management		931		537		508		508		83.3			5.7
HK CSL		734		734		726		726		1.1			1.1
TelstraClear		625		625		574		574		8.9			8.9
Offshore Services Revenue		252		181		131		131		92.4			38.2
Inbound calling products		449		449		476		476		(5.7	)		(5.7	)
Pay TV Bundling		263		263		154		154		70.8			70.8
Customer premises equipment		229		172		184		184		24.5			(6.5	)
Payphones		121		121		141		141		(14.2	)		(14.2	)
Other sales & service		743		733		618		618		20.2			18.6

Sales revenue		22,161		21,463		20,737		20,693		6.9			3.7
Other revenue		496		207		543		254		(8.7	)		(18.5	)

Total revenue		22,657		21,670		21,280		20,947		6.5			3.5



Domestic sales revenue				19,914				19,248					3.5

Reported total revenue increased by 6.5% or $1,377 million which included proceeds from property and investment sales of $287 million in the current year, compared with $289 million in the prior year, and revenue generated from recently acquired entities of $700 million in the current year and $44 million in the prior year.

Underlying¹total revenue increased by 3.5% or $723 million for the year.

Revenue growth was attributable to increases in broadband, mobiles, advertising and directories, pay TV bundling, offshore revenue and other sales & service, partially offset by a decline in revenues from PSTN calling products.

Underlying¹ domestic sales revenue grew by 3.5% in the year.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Mobiles


Mobiles
	Year Ended 30 June 2005
	2005			2004			Change			Change
	(in $ millions except for statistical data)									%

Access fees and call charges		2,765			2,649			116			4.4
Value added services
International roaming		243			174			69			39.7
Mobile messagebank		187			178			9			5.1
Mobile data		541			454			87			19.2

Total value added services		971			806			165			20.5

Mobile services revenue — Retail		3,736			3,455			281			8.1
Mobile services revenue — Wholesale		24			15			9			60.0

Total mobile services revenue		3,760			3,470			290			8.4
Mobile handset sales		381			352			29			8.2

Total mobiles goods and services revenue ⁽ⁱ⁾		4,141			3,822			319			8.3


GSM mobile SIO (in thousands)		6,894			6,653			241			3.6
CDMA mobile SIO (in thousands)		1,333			951			382			40.2

Total mobile SIO (in thousands)		8,227			7,604			623			8.2


Prepaid mobile SIO (in thousands)		3,570			3,102			468			15.1
Postpaid mobile SIO (in thousands)		4,657			4,502			155			3.4

Total mobile SIO (in thousands)		8,227			7,604			623			8.2


GSM wholesale mobile SIO (in thousands)		21			6			15			250.0
CDMA wholesale mobile SIO (in thousands)		62			55			7			12.7

Total wholesale mobile SIO (in thousands)		83			61			22			36.1


Number of SMS sent (in millions) ⁽ⁱⁱ⁾		2,289			1,944			345			17.7

Deactivation rate		19.2	%		17.1	%		2.1	%
Mobile retail voice telephone minutes (in millions)		6,746			6,145			601			9.8

Average retail revenue per user per month ⁽ⁱⁱⁱ⁾		39.33			40.62			(1.29	)		(3.2	)
Average retail prepaid revenue per user per month ⁽ⁱⁱⁱ⁾		12.24			13.84			(1.60	)		(11.6	)
Average retail postpaid revenue per user per month ⁽ⁱⁱⁱ⁾		59.06			57.05			2.01			3.5

Average Mobile data revenue per user per month		5.70			5.34			0.36			6.7


⁽ⁱ⁾		Excludes revenue from:

-		call termination charges, including calls from our fixed network which we categorise as fixed to mobile;

-		Hong Kong CSL which is recognised as HK CSL

⁽ⁱⁱ⁾		Includes retail SMS numbers which have been restated for 02/03, 03/04 and 04/05 to include up to 20 million messages per quarter of business access manager and online sms previously excluded in error.

⁽ⁱⁱⁱ⁾		Average revenue per user per month is calculated using average SIOs and includes mobile data, messagebank and roaming revenues.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Mobile services revenue, including wholesale mobiles, grew by 8.4% or $290 million. Including growth in mobile handset revenue of 8.2% or $29 million, total mobile revenue achieved growth of 8.3% or $319 million to $4.1 billion.

Access fees and call revenue increased by 4.4% or $116 million due to the growth in the number of services in operation of 8.2% to 8.23 million, with the number of calling minutes increasing by 9.8%, offset by yield reductions due to the various chat promotions on the Bonus Options offers. The increase comprised:

•		growth in postpaid revenues of 3.8% or $88 million resulting from a 3.4% increase in the number of postpaid services in operation and an increase in calling minutes of 8.9%. Yield reductions from increases in customer usage of the included call allowance, together with Bonus Options, Telstra Rewards and T-Time have offset the growth;

•		growth in prepaid revenues of 9.9% or $28 million due to the increase in services in operation of 15% and prepaid calling minutes of 20%. Yield reductions due to offers such as 1c per minute and double recharge offers on Telstra prepaid plus has offset the volume growth.

Value added services increased by 21% or $165 million and comprised:

•		international roaming revenue growth of 40% or $69 million due to a 19% increase in outbound roaming minutes due to the continuing growth in international travel. Contributing to this growth was the increase in inbound roaming prices charged to wholesale partners to align Telstra’s charging structure with international standards.

•		mobile data revenue increases of 19% or $87 million due to growth in:

	§		Short Message Service (SMS) revenue of 12% or $48 million, with 2.3 billion messages sent for the year. The 18% increase in the number of messages was attributable to the growth in the total subscriber base as well as increased SMS usage. Revenue growth was offset by increased discounting initiatives, such as Telstra Rewards and Bonus Options, which provide free text and picture messaging or 15c text messaging;

	§		other mobile data growth of 87% or $39 million due to the continuing growth in the corporate segment from higher usage of General Packet Radio Service (GPRS) products, including Blackberry and Telstra Mobile Broadband™ on the CDMA network;

	§		Messagebank revenue increases of 5.1% or $9 million attributable to the 8.9% increase in minutes, offset by a slight reduction in yield as a result of discounting initiatives.

Wholesale mobiles grew by 60% or $9 million due to increased resale of services and minutes of use.

Blended average revenue per user (ARPU) fell by 3.2%, due to the continuing growth of prepaid services. Postpaid ARPU increased by 3.5% due to increases in SMS and international roaming revenue, but prepaid ARPU declined by 12% due to the myriad of discounting initiatives on offer for prepaid customers. Mobile data ARPU continued to grow, representing 14% of retail mobile services revenue.

Mobile handset revenue grew by 8.2% or $29 million, which was attributable to the increase in the number of prepaid phones sold, driven by growth in the number of CDMA prepaid customers taking advantage of the CDMA double recharge offers.



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Telstra Corporation Limited and controlled entities

Internet and IP solutions


Internet and IP solutions
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions except for statistical data)							%

Internet & IP solutions revenue
BigPond narrowband		275		295		(20	)		(6.8	)
BigPond broadband		463		274		189			69.0
Wholesale broadband		261		143		118			82.5
Wholesale internet direct		31		16		15			93.8
Internet direct		123		117		6			5.1
IP solutions		207		160		47			29.4
Other		17		8		9			112.5

Total Internet & IP solutions revenue		1,377		1,013		364			35.9


Broadband subscribers — Retail (in thousands)⁽ⁱ⁾		856		427		429			100.5
Broadband subscribers — Wholesale (in thousands)		888		379		509			134.3

Total Broadband subscribers (in thousands)		1,744		806		938			116.4

Narowband subscribers — Retail (in thousands)		1,205		1,194		11			0.9

Total online subscribers (in thousands)		2,949		2,000		949			47.5


⁽ⁱ⁾		Broadband subscriber numbers for 03/04 and 04/05 have been restated to include up to 5000 business subscribers previously overlooked in error.



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Telstra Corporation Limited and controlled entities

Total Broadband revenue growth of $307 million is the major component of Internet and IP solutions revenue growth of $364m or 36%.

Growth in BigPond^® broadband revenue of $189 million was driven by subscriber growth of 101%, with significant growth in both ADSL and cable subscribers. The high growth of this product was attributable to increased internet usage, self install kits and successful broadband marketing campaigns accompanied by new pricing plans. Business DSL has also contributed to the revenue growth after being launched in August 2003 with key customer contracts driving physicals growth and the migration of customers from premium data services.

Wholesale broadband growth of 83% or $118 million was driven by subscriber growth of 134%. However, this level of growth has been partially offset by a decline in yields per service in operation due to significant price competition.

IP solutions revenue grew by 29% or $47 million. IP MAN/Ethernet grew by $30 million as a result of major government contract wins and expansions of existing services. IP WAN grew by $14 million, driven by the implementation of large corporate contracts as customers migrate from older product technologies such as frame relay and ISDN.

Wholesale internet direct increased due to wins with larger internet service providers, growth in traffic driven by broadband uptake and customer migration to high-speed global internet direct connectivity.

Other internet products increased due to BigPond^® Movies, BigPond^® Music and BigPond^® webhosting.

Internet direct increased due to a new VISP product launch, which saw an increase in customers, and the growing demand for highspeed global internet direct connectivity.

Offset by:

Narrowband revenue declined by 6.8% or $20 million due to competitive price reductions and the migration of high yield users to broadband services to be replaced by lower yielding customers.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

PSTN products

Total PSTN products revenue declined by 3.4% or $275 million.

An increase in basic access revenue was due to previous rebalancing initiatives, offset by a decline in basic access lines and volume reductions across local calls, international direct^® and national long distance products. The local calls yield has also declined due to competitive pricing pressures and package discounts. Continued growth in fixed to mobile volumes has been offset by competitive pricing pressures, particularly in the business market.


PSTN Products
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions except for statistical data)							%

Basic access revenue
Retail		2,725		2,717		8			0.3
Domestic wholesale		637		520		117			22.5

Total basic access revenue		3,362		3,237		125			3.9

Local call revenue		1,284		1,504		(220	)		(14.6	)
PSTN value added services revenue		250		259		(9	)		(3.5	)
National long distance call revenue		1,013		1,121		(108	)		(9.6	)
Fixed to mobile revenue		1,566		1,597		(31	)		(1.9	)
International direct revenue		234		266		(32	)		(12.0	)

Total PSTN revenue		7,709		7,984		(275	)		(3.4	)


Basic access lines in service (in millions)⁽ⁱ⁾
Residential		5.60		5.87		(0.27	)		(4.6	)
Business		2.45		2.57		(0.12	)		(4.7	)

Retail		8.05		8.44		(0.39	)		(4.6	)
Domestic wholesale		2.07		1.84		0.23			12.5

Total access lines in service (in millions)		10.12		10.28		(0.16	)		(1.6	)

Number of local calls (in millions)		8,469		9,397		(928	)		(9.9	)
National long distance minutes (in millions)		7,743		8,520		(777	)		(9.1	)
Fixed to mobile minutes (in millions)		4,375		4,226		149			3.5
International direct minutes (in millions)		580		651		(71	)		(10.9	)


⁽ⁱ⁾	Retail basic access lines in service have been restated to exclude incontact services in the prior period.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Basic access retail revenue has increased due to a price increase in June 2004 as part of the rebalancing initiatives, offset by a decline in the number of basic access lines due to competition and migration to other products such as ISDN, broadband and mobiles.

Basic access wholesale revenue growth was due to an increase in the number of access lines due to churn from retail as well as price increases as part of rebalancing initiatives.

Local call revenue declined mainly as a result of the 9.9% reduction in the number of calls due to product substitution to mobiles, fixed to mobile and internet products. The yield has declined in the consumer market as a result of higher package discounts and free call offers, with an acceleration of these discounts in the second half of the year. The yield has also declined in the business market due to competitive pricing pressures and in the wholesale market due to increased volume discounts. Customer churn to wholesale has also contributed to a lower yield.

The reduction in revenue for PSTN value added services included a decline in Messagebank^® due to discounts offered as part of feature packaging and a lower number of Messagebank^® users because of continued migration to the free product offering Telstra Home Message 101^TM. Call Return (*10#) usage has declined after a steady increase in calling number display subscriptions and higher call completion rates. Also products such as PABX indial and siteline are at the end of their lifecycle, resulting in customer migration to other products such as ISDN and customnet.

The reduction in national long distance revenue was attributable to the 9.1% decline in call minutes due to shorter call durations and product substitution to mobiles, fixed to mobile and internet products. Yield also declined slightly due to increased use of capped calling rates and competitive pricing pressures, partly offset by flagfall increases.

Fixed to mobile yield has decreased due to increased competitive pricing pressures in the business sector, offset by a higher yield in the consumer market due to flagfall increases. This was offset by a 3.5% increase in volumes due to the continued growth in the number of mobile services in the Australian market.

The International direct^® revenue decline was mostly due to the reduction in minutes of 11%. This reduction was due to the continued migration to aggressively priced prepaid calling cards and customers using other products such as e-mail and internet chat facilities.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Specialised Data


Specialised Data
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions except for statistical data)							%

Data revenue
Frame relay		351		371		(20	)		(5.4	)
ATM		90		79		11			13.9
Digital data services		226		256		(30	)		(11.7	)
Leased lines		236		258		(22	)		(8.5	)
International private lines		26		32		(6	)		(18.8	)
Other specialised data		37		39		(2	)		(5.1	)

Total data revenue		966		1,035		(69	)		(6.7	)


Domestic Frame access ports (in thousands)		34		30		4			13.3

Data revenue declined by 6.7% reflecting a decline in mature products such as leased lines and digital data services (DDS), where customers have migrated to IP and DSL based product options.

Frame relay revenue declined by 5.4% due to customer migration to new technologies and discounting to retain existing business.

ATM revenue growth of 14% was due to new Government contracts, new global ATM contracts and the introduction of a new Ethernet MAN product.

DDS revenue declined by 12% due to customers migrating to new technologies such as DSL and competitive pricing pressures.

Leased lines declined due to Austpac customers migrating off Austpac to Internet, Dial IP or BDSL.

International private lines revenue declined by 19% due to intense competition and excess capacity in the market driving prices down in the Asian region.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

ISDN


ISDN Products
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions except for statistical data)							%

ISDN revenue
Access		421		401		20			5.0
Calls
Data		165		221		(56	)		(25.3	)
Voice		304		305		(1	)		(0.3	)

Total calls		469		526		(57	)		(10.8	)

Total ISDN revenue		890		927		(37	)		(4.0	)


ISDN access lines (basic access line equivalents) (in thousands)		1,327		1,288		39			3.0

ISDN access revenue increased by 5.0% due to growth within the SME and consumer market, as corporate customers migrate to new advanced data products. Services in operation increased by 3.0% due to campaign activity in the SME and consumer market.

The 11% reduction in calling revenue includes a 25% decline in data call revenue as the customer mix changes.

Voice call revenue declined slightly due to a reduction in yield as a result of competitive pricing pressure.

Advertising and Directories


Advertising and Directories
	Year Ended 30 June 2005
	2005		2004		Change		Change
	(in $ millions)						%

Advertising and Directories — Reported		1,585		1,341		244		18.2
Less Adjustments		166		44		122		N/M

Advertising and Directories — Underlying		1,419		1,297		122		9.4

Reported advertising and directories revenue grew by 18%. After excluding Trading Post and Universal Publishers revenue, underlying advertising and directories revenue increased by 9.4%.

White Pages revenue increased by 14% or $33 million due to the introduction of new initiatives, such as additional colour listing options and quarter page listing advertisements. Yellow Pages revenue grew by 4.9% or $48 million which was attributable to the introduction of full-page advertising options into additional categories and guide panel display enhancements. Other directory products grew by 48% or $39 million, mainly in the area of Yellow Pages Online advertising from customer and yield growth, and increase in location and navigation products such as Where is and Citysearch.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Intercarrier Services

Intercarrier services

Year Ended 30 June 2005

2005

2004

Change

(in $ millions)

Intercarrier services revenue

1,146

1,103

3.9

The 3.9% or $43 million increase in intercarrier services revenue was driven by:

Increased wholesale mobile solutions of $24 million, due to higher SMS interconnect revenue of 29% or $18 million from growth in mobiles services and the continued popularity of the text messaging, and higher mobile domestic roaming as a result of Hutchison roaming on to the Telstra network.

Higher wholesale transmission solutions of $23 million driven by an increase in international revenue due to higher volumes resulting from special rate offers on international carriage and the introduction of the Global Links “Lite” product pitched at the calling card market and high yield Global Linx “Premium” product taken up by Vodafone. In addition, domestic wholesale leased transmission increased by 6.1% due to growth in services of 30%, partially offset by lower yields from oversupply of capacity in the market over recent years.

Growth in facilities access revenue of 28% or $13 million from increased demand for exchange and associated equipment, as well as mobile tower access as other carriers seek to expand their infrastructure over time.

Growth in mobiles terminating access revenue of 1.8% or $8 million due to higher volumes of 13% from increased mobile services including non-Telstra mobiles, offset by yield reductions arising from regulatory pricing pressures on mobile terminating rates.

Offset by:

Reductions in PSTN/ISDN interconnect access of 8% or $27 million due to yield reduction arising from price rebalancing initiatives.

Solutions Management


Solutions management
	Year Ended 30 June 2005
	2005		2004		Change		Change
	(in $ millions)						%

Solutions management revenue — Reported		931		508		423		83.3
Less Adjustments		394		0		394		N/M

Solutions management revenue — Underlying		537		508		29		5.7

Reported solutions management revenue increased by 83% and included revenue from Kaz Group and Telstra Business Systems (formerly Damovo), acquired by Telstra in July and September 2004 respectively.

Underlying solutions management revenue increased by 5.7%. Managed services revenue increased due to major corporate contract activity. Radio Services revenue increased due to the construction of government radio sites.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Hong Kong CSL

HK CSL

Year Ended 30 June 2005

2005

2004

Change

(in $ millions)

HKCSL revenue

734

726

1.1

Hong Kong CSL increased sales revenues by 1.1% or $8 million. In Hong Kong dollars, revenue growth of 7.0% was achieved, partially offset by unfavourable currency fluctuations. Increases in international voice, data and prepaid revenues were achieved as well as growth in mobile handset sales due to the move into new markets and the launch of new models with advanced features. Continued aggressive price competition has caused a decline in local voice revenue.

TelstraClear

Year Ended 30 June 2005

2005

2004

Change

(in $ millions)

TelstraClear revenue

625

574

8.9

TelstraClear achieved revenue growth of 8.9% or $51 million from continued strong retail revenue growth and favourable foreign currency movements. In New Zealand dollars, TelstraClear revenue increased by 3.7% which was attributable to retail growth in the consumer and small-medium enterprise sector with the introduction of HomePlan into the mass market. Revenue for the year included the acquisition of Sytec in November 2004.



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Telstra Corporation Limited and controlled entities

Offshore services revenue


Offshore services revenue
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions)							%

Total offshore services revenue — Reported		252		131		121			92.4
Less Adjustments		71		0		71			N/M

Total offshore services revenue — Underlying		181		131		50			38.2

Comprising:
Telstra Europe		130		88		42			47.7
Telstra Inc		33		35		(2	)		(5.7	)
Other CE		18		8		10			N/M

		181		131		50			38.2

Reported offshore revenue has increased by 92% or $121 million for the year. This increase included revenue generated by PSINet Group, acquired by Telstra in August 2004, of $71 million.

Excluding PSINet Group revenue, underlying offshore services revenue grew by 38% or $50 million, attributable to:

•		Growth achieved by Telstra Europe of $42 million due to the development of the Voice Reseller sales channel and the acquisition of customer and network bases from Powergen and Cable Telecom in the UK in October 2003 and February 2004 respectively; and

•		Other offshore services revenue of $10 million, which was generated by new business operations of Telstra Singapore and Telstra Hong Kong in providing international connectivity to multinational corporations.

Inbound calling products


Inbound calling products
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions except for statistical data)							%

Inbound calling products revenue		449		476		(27	)		(5.7	)


B party minutes (in millions)		2,773		2,708		65			2.4
A party calls (in millions)		940		938		2			0.2

Inbound calling products revenue has declined by 5.7% or $27 million due to:

§		Reduction in Freecall™ 1800 of $10 million from intense pricing competition leading to a yield reduction offset by higher call minutes.

§		B Party revenue declined by $8 million due to competitive market pressures resulting in lower yields offset by higher call minutes.

§		Other Inbound product revenue including Infocall (190) decreased $8 million due to product substitution and lower usage.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Pay TV Bundling


Pay TV Bundling
	Year Ended 30 June 2005
	2005		2004		Change		Change
	(in $ millions)						%

Pay TV Bundling revenue		263		154		109		70.8


FOXTEL Pay TV Bundling subscribers (thousands)		280		235		45		19.1
Austar Pay TV Bundling subscribers (thousands)		55		23		32		139.1

Bundled Pay TV subscribers (thousands)		335		258		77		29.8

Pay TV bundling has continued to grow rapidly with the launch of FOXTEL Digital and the free installation/upgrade campaigns run through the year. Revenue increased by 71% or $109 million in the year due to an increase in the number of services provided and the spend per subscriber for both FOXTEL and Austar. Subscribers on Foxtel bundles increased by 19% and Austar bundles have more than doubled, increasing by 32,000 subscribers.

Customer premises equipment


Customer premises equipment
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions)							%

Customer premises equipment revenue — Reported		229		184		45			24.5
Less Adjustments		57		0		57			N/M

Customer premises equipment revenue — Underlying		172		184		(12	)		(6.5	)

Reported customer premises equipment revenue increased by 25%. This includes the acquisition of Telstra Business Systems (formerly Damovo), which was acquired in the current year to accelerate Telstra’s access into the fast growing IP customer premises equipment sector.

After adjusting for PABX equipment sales for Telstra Business Systems (formerly Damovo) underlying customer premises equipment revenue decreased by 6.5%. This decline was due to product substitution by mobile phones and retail competition for fixed line handset sales.

Payphones


Payphones
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions except for statistical data)							%

Payphones revenue		121		141		(20	)		(14.2	)


Payphones (in thousands)		61		64		(3	)		(4.7	)

Payphone revenue declined by 14%, due to the combined effect of lower usage from product substitution to prepaid calling cards and mobile phones and the increased competition from private payphone operators.

The reduction of payphone services in operation was due to the loss of some privately operated payphones and the reduction of low usage public payphones.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Other Sales & Services


Other sales and services
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions)							%

Total other sales and services revenue — Reported		743		618		125			20.2
Less Adjustments		10		0		10			N/M

Total other sales and services revenue — Underlying		733		618		115			18.6


Total other sales and services
Telstra information and connection services		134		128		6			4.7
Customnet & spectrum		112		113		(1	)		(0.9	)
Card services		59		64		(5	)		(7.8	)
Virtual private network		15		21		(6	)		(28.6	)
Security Products		33		51		(18	)		(35.3	)
HFC Cable		65		44		21			47.7
Conferlink		47		46		1			2.2
Commercial & recoverable works		58		41		17			41.5
External Construction		85		70		15			21.4
Other		125		40		85			212.5

Total other sales and services		733		618		115			18.6

Reported other sales and services revenue grew by $125 million. After excluding other sales and services from the KAZ Group, underlying other sales and services grew by $115 million.

Telstra information and connection services revenue has grown by 4.7% as the result of the launch of Sensis 1234 Call Connect at the end of April 2004.

Security Products revenue has declined by $18 million due to a change in accounting treatment, with a revenue reduction for revenue shared with security companies reclassified from goods and services purchased expense .

HFC Cable usage revenue increased due to higher activity associated with increased product demand mainly associated with pay TV digitalisation.

Commercial & recoverable works growth was due to infrastructure revenue associated with upgrading existing Foxtel analogue customers to digital and increased commercial work requests, as customers are more aware of the available services.

External construction revenue increased by 21%, due to new projects and the commencement of the Hutchison asset sharing agreement in December 2004 relating to the maintenance and build out of the 3G network.

Other represents growth in overdue account fees, payment processing fees, which were introduced in July 2004 and release of pensioner discount provision no longer required. The previous year result included a negative prior period accounting adjustment.



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Telstra Corporation Limited and controlled entities

Other Revenue


Other revenue
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions)							%

Total other revenue — Reported		496		543		(47	)		(8.7	)
Less Adjustments		289		289		0			0.0

Total other revenue — Underlying		207		254		(47	)		(18.5	)

Comprising:
Sale of plant and equipment		13		41		(28	)		(68.3	)
USO Levy Receipts		63		71		(8	)		(11.3	)
Government subsidies		71		69		2			2.9
Rental/Leases		20		23		(3	)		(13.0	)
Miscellaneous revenue		40		50		(10	)		(20.0	)

		207		254		(47	)		(18.5	)


Where adjustments comprise:
Proceeds from sale of:
Listed securities and other corporations		74		24		50			208.3
Associates		0		204		(204	)		(100.0	)
Investments		148		0		148			N/M
Joint Venture Entities		30		0		30			N/M

Sale of investments		252		228		24			10.5
Sale of PP&E in acquired entities		2		0		2			N/M
Land and Buildings		35		61		(26	)		(42.6	)

Total adjustments		289		289		0			0.0

Reported other revenue of $496 million included proceeds from the sale of Infonet, Intelstat, Stellar and redemption of the PCCW convertible note. In the prior corresponding period, investment sales included IBMGSA, PT Mitra and Commander Communications.

The reduction in reported other revenue was due to:

•		Lower proceeds from the sale of land and buildings due to the sale of North Sydney exchange in the prior year;

•		Lower sales of plant and equipment due to the prior year sale of midrange equipment;

•		Lower USO levy subsidies received from the government;

•		Lower rental and lease revenue due to reduction of vehicle fleet leases in the current year;

•		Reduction in miscellaneous revenue due to prior year refund of sales tax and settlement of a damages claim;

Offset by:

•

Higher government subsidies due to the initiative providing higher bandwidth services to rural and remote communities (HIBis), offset by a reduction in subsidies due to the completion of the untimed local calls and Besley initiatives;

Excluding sales for land, buildings and investments, underlying other revenue decreased by $47 million.



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Telstra Corporation Limited and controlled entities

Operating expenses


Operating expenses
	Year Ended 30 June 2005
	2005						2004				Reported			Underlying¹
	Reported			Underlying¹			Reported		Underlying1		Change			Change
											%			%
	(in $ millions)

Expenses
Labour		3,693			3,363			3,218		3,204		14.8			5.0
Goods and services purchased		4,147			3,941			3,554		3,543		16.7			11.2
Other expenses		4,055			3,779			4,255		3,821		(4.7	)		(1.1	)


Expenses before equity acc/depn/amort/interest		11,895			11,083			11,027		10,568		7.9			4.9

Share of net loss from associates and joint venture entities		(9	)		(9	)		78		78		(111.5	)		(111.5	)


Total operating expenses before depn/amort/interest		11,886			11,074			11,105		10,646		7.0			4.0

Total depreciation/amortisation		3,766			3,708			3,615		3,611		4.2			2.7


Total operating expenses before interest		15,652			14,782			14,720		14,257		6.3			3.7

Reported operating expenses increased by 6.3%. Operating expenses in the current year included expenses incurred by newly acquired entities of $666 million and costs of property and investments sold of $198 million. The prior year included provision for non-recoverability of the Reach loan of $226 million, IBMGSA contract exit costs of $130 million, costs of property and investments sold of $71 million and Trading Post expenses of $35 million.

After excluding these items, underlying operating expenses increased by 3.7%. Excluding depreciation and amortisation, underlying operating expenses grew by 4.0%.

The increase in expenses was due to higher cost of sales, including network payments, pay TV service fees, mobile handset subsidies and cost of handsets sold; higher service contracts from volume increases in broadband and PSTN activations, fault rectifications, Bigpond and directory assistance call centres; additional staff to meet customer service improvements and salary increases. These increases were offset by cost reduction initiatives of $303 million and lower redundancy costs.



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Telstra Corporation Limited and controlled entities

Labour expense


Labour expense
	Year Ended 30 June 2005
	2005		2004		Change		Change
	(in $ millions except for statistical data)						%

Total labour expense — Reported		3,693		3,218		475		14.8
Less Adjustments		330		14		316		N/M

Labour expense — Underlying		3,363		3,204		159		5.0


Full time staff & equivalents — Reported ⁽ⁱ⁾		46,336		41,941		4,395		10.5
Less Adjustments		3,597		598		2,999		N/M

Full time staff & equivalents — Underlying⁽ⁱ⁾		42,739		41,343		1,396		3.4


⁽ⁱ⁾		Includes NDC full time & equivalents. Corresponding labour expense for NDC was recorded in costs of external contracting and cost of sales prior to integration in September 2003.

Reported Labour expenses increased by 15% mainly due to the acquisition of new entities, such as Trading Post and Kaz Group. After excluding acquisitions underlying labour expenses increased by 5.0% due to:

•		Salary increases of $93 million or 3.9% due to enterprise agreements and normal annual salary reviews;

•		Underlying full time staff and equivalents increased by 3.4%, resulting from increases in full time staff and the use of part time staff to provide improved customer service and account management, and flexibility to meet customer requirements;

•		Increase in the use of overtime and contract and agency payments to improve front of house service and meet increased field volumes across broadband and pay TV; and

•		A change in the NDC capitalised overhead process, from a reduction against labour costs to capitalised overheads in other expenses.

These increases were partially offset by:

•		A decrease in redundancy expense of $79 million; and

•		A higher number of staff working on capital projects.

An actuarial investigation of Telstra Super based on the fund’s position as at 30 June 2003 confirmed that a surplus continued to exist in the fund. As per the recommendations of the actuary we did not contribute to Telstra Super during 2004-05. The continuation of the holiday is, however, dependent on the performance of the fund and we will continue to closely monitor the situation in the light of the current financial market performance. As at 30 June 2005, the Vested Benefits Index (the ratio of fund assets to members’ vested benefits) of the defined benefits divisions was approximately 111%.



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Telstra Corporation Limited and controlled entities

Goods and services purchased


Goods and services purchased
	Year Ended 30 June 2005
	2005		2004		Change			Change
	(in $ millions)							%

Total goods and services purchased — Reported		4,147		3,554		593			16.7
Less Adjustments		206		11		195			N/M

Total goods and services purchased — Underlying		3,941		3,543		398			11.2

Comprising:
Goods and services purchased — underlying
Cost of goods sold		630		543		87			16.0
Usage commissions		289		241		48			19.9
Handset subsidies		361		286		75			26.2
Network payments		1,870		1,788		82			4.6
Commercial Project Payments		60		69		(9	)		(13.0	)
Service Fees		273		157		116			73.9
Managed Services		162		190		(28	)		(14.7	)
Other		296		269		27			10.0

		3,941		3,543		398			11.2


Note:		Effective 1st July 2004, new expenditure categories were created in “Goods and Services Purchased” to capture directly variable costs associated with the managed services customer contracts, where a direct relationship exists between the costs incurred and the revenues earned. Prior year costs of $134 million recorded against “Other Operating Expenses” have been restated.

Reported goods and services purchased increased by 17%. After adjusting for Trading Post, Kaz Group, Telstra Business Systems (formerly Damovo), PSINet Group and Universal Publishers in the current year, underlying goods and services purchased increased by 11% or $398 million.

Service Fees increased by $116 million due to increased bundling of pay TV services for both Foxtel and Austar and higher costs of digital content paid to Foxtel.

Cost of goods sold (COGS) increased by $87 million or 16 % due to:

	§		Reclassification of the subsidised cost of prepaid handsets from handset subsidies to cost of goods sold due to an accounting treatment change;

	§		Commencement of the 2-way satellite service for the HiBis scheme;

	§		Growth in handset volumes sold by Hong Kong CSL, partially offset by an exchange rate movement which had a favourable effect on reported cost;

	§		Growth in ADSL demand due to broadband growth; and

	§		Maintaining and building the 3G network under the asset sharing agreement with Hutchison.

Network payments grew by 4.6% due to increased international network payments driven by higher international mobile roaming volumes of 19%. The impact of incurring international network payments for a full 12 month period in relation to Telstra Europe acquisitions, resulted in an increase of $27 million. TelstraClear network payments increased due to foreign exchange impacts and growth in retail revenue. International network payments to Reach increased as a result of increased volumes.

Increased handset subsidies of $75 million was the result of increased levels of subsidy amortisation following the impact of subsidies on offer in the prior year and higher handset sales and related subsidies in Hong Kong CSL. This growth was partly offset by the reclassification of the subsidised portion of prepaid handsets to cost of goods sold.

Usage commissions increased by $48 million, due to increased commissions primarily due to dealer activity, with a small increase for marketing commissions.

Other goods and services rose by $27 million due to the impact of amortisation of dealer incentive payments deferred in 2003/04, partially offset by security product revenue sharing with security companies, which was reclassified to a revenue reduction in the current year.



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Telstra Corporation Limited and controlled entities

Offset by:

Managed services decreased by $28 million due to the completion of the defence contract, a reduction in major outsource contracts and lower costs in supporting major corporate customer contracts.

Commercial project payments decreased by $9 million due to a change in accounting treatment of external construction project work, which is now allocated directly against individual expense items.



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Telstra Corporation Limited and controlled entities

Other expenses


Other expenses
	Year Ended 30 June 2005
	2005			2004		Change			Change
	(in $ millions)								%

Total other expenses — Reported		4,055			4,255		(200	)		(4.7	)
Less Adjustments		276			434		(158	)		(36.4	)

Total other expenses — Underlying		3,779			3,821		(42	)		(1.1	)

Comprising:
Rental expense on operating leases		581			529		52			9.8
Bad debts/recovery costs/doubtful debts		149			182		(33	)		(18.1	)
Inventory Writedowns		11			5		6			120.0
Net foreign currency conversion losses/(gains)		(9	)		17		(26	)		(152.9	)
Audit fees		7			8		(1	)		(12.5	)
Service contracts and other agreements		1,550			1,473		77			5.2
Marketing		326			333		(7	)		(2.1	)
General administration		779			803		(24	)		(3.0	)
Other operating expense		371			428		(57	)		(13.3	)
Cost of Property plant & Equipment (exc. Land & Buildings)		14			43		(29	)		(67.4	)

Total other expenses — underlying		3,779			3,821		(42	)		(1.1	)


Where adjustments comprise:
Net book value of assets sold:
Cost of Land & Buildings		25			21		4			19.0
Investments in joint venture entities		14			0		14			N/M
Investments in associated entities		0			34		(34	)		(100.0	)
Investments in listed entities and other corporations		159			16		143			N/M

		198			71		127			178.9

Acquisitions		72			6		66			N/M
Reduction in value of investments		6			1		5			N/M
Reduction in value of amounts owed by Joint Venture		0			226		(226	)		(100.0	)
Other adjustments (IBMGSA Exit Costs)		0			130		(130	)		(100.0	)

Total Adjustment		276			434		(158	)		(36.4	)


Note:		Effective 1st July 2004, new expenditure categories were created in “Goods and Services Purchased” to capture directly variable costs associated with the managed services customer contracts, where a direct relationship exists between the costs incurred and the revenues earned. Prior year costs of $134 million recorded against “Other Operating Expenses” have been restated.

The reported other expenses decreased by 4.7% which reflected the impact in the prior year of the provision against the Reach loan, and the one-off payment made to exit the IBMGSA IT services contract. In the current year other expenses has increased as a result of the inclusion of recently acquired entities and an increase in the book value of property and investment sales.

After excluding these items, underlying other expenses decreased by 1.1% due to:

Lower other operating expenses because of:

	§		Higher capitalised overheads due to a change in the capitalised overhead process from direct allocation following the completion of NDC integration into Telstra; and

	§		Lower bank costs due to a shift in customer payment preferences away from payment options that incur a merchant service fee after a processing fee was introduced on credit card payments in July 2004; offset by

	§		Write-off of cancelled capital projects totalling $17 million.

A decrease in bad and doubtful debts due to proceeds from the sale of debt in the current year and improved credit management practices. There was no sale of debt in the prior year.

A decline in the book value of plant and equipment sales due a decline in the number of motor vehicles sold.

Currency gains in the current period are primarily related to hedging of the Reach loan.



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Telstra Corporation Limited and controlled entities

Lower general administration costs due to:

	§		Reduced IT costs, including a reclassification of contract payments to service contracts in the current year, savings achieved in IT repairs and maintenance through entering new arrangements, and lower project costs, offset by an increase in new licensing agreements; and

	§		Decreased legal expenses from bringing more legal work in-house and lower travel and fares due to our focus on discretionary costs; and

Reduced marketing costs from due to focussed and well-managed campaigns.

Offset by:

Higher service contracts and other agreements due to:

	§		Volume based increases, including activations and fault rectifications particularly for broadband, digital pay TV and the PSTN network and higher volumes in call centres for Bigpond and Sensis 1234;

	§		Increased network maintenance activation;

	§		A change in the NDC capitalised overhead process, from direct allocation against service contracts to capitalised overhead; and

	§		New contract for the shipment of goods from Telstra warehouses to dealers and retail shops;

	Offset by:

	§		Reduced IT services costs resulting from renegotiation of contracts and cost reduction initiatives; and

Increased rental expenses on operating leases due to a reclassification of costs following the completion of NDC integration into Telstra, a property lease termination payment in Hong Kong and increased rental rates and property requirements.



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Telstra Corporation Limited and controlled entities

Share of net (profit) loss from associates and joint venture entities


Share of net (profit) loss from associates and joint venture entities
	Year Ended 30 June 2005
	2005			2004		Change			Change
	(in $ millions)								%

Share of net (profit) loss from associates and joint venture entities		(9	)		78		(87	)		(111.5	)

The current year share of equity profits comes from Keycorp, Xantic and Stellar, offset by the write-off of the $5 million equity injection in Foxtel.

The prior year share of equity losses included Foxtel losses prior to equity accounting suspension and the impact of Xantic goodwill and intangible write-downs.

Depreciation and Amortisation


Depreciation and amortisation
	Year Ended 30 June 2005
	2005		2004		Change		Change
	(in $ millions)						%

Total depreciation and amortisation — Reported		3,766		3,615		151		4.2
Less Adjustments		58		4		54		N/M

Total depreciation and amortisation — Underlying		3,708		3,611		97		2.7

Comprising:
Depreciation		2,931		2,872		59		2.1
Amortisation (excl goodwill)		655		619		36		5.8
Goodwill amortisation		122		120		2		1.7

		3,708		3,611		97		2.7

Reported depreciation and amortisation increased by 4.2% or $151 million. This increase was mainly attributable to the growth in communications plant and software assets required to support the increasing demand for broadband ADSL services. In addition, an increase of $54 million was due to depreciation and amortisation attributable to acquired entities. These increases were offset by reductions from service life reviews for communications assets of $65 million.

Excluding the depreciation and amortisation from our recent acquisitions of $54m, underlying depreciation and amortisation increased by 2.7%.



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Telstra Corporation Limited and controlled entities

International

Hong Kong CSL financial summary


Hong Kong CSL Financial Summary
	Year Ended 30 June 2005
	2005			2004			2005			2004
	(in A$ millions)						(in HK$ millions)

Total revenue		735			726			4,308			4,022
Total operating expense		524			492			3,073			2,729
EBITDA		211			234			1,235			1,293
EBIT		(15	)		9			375			477
CAPEX		128			94			755			524

EBITDA margin		28.7	%		32.2	%		28.7	%		32.1	%

Amounts presented in HK$ have been prepared in accordance with AGAAP.

Amounts presented in A$ represent amounts included in Telstra’s consolidated result.

In HK$, CSL total revenue growth was 7.1%, with increases across all revenue streams, except local voice which continued to be impacted by pricing competition. However, despite declines in local voice revenue, CSL average revenue per user still remained well above the market average.

Over the past 12 months, significant revenue increases were achieved in data, international voice and prepaid revenues as well as in mobile handset sales due to the continued focus on the move into the mass market, as well as the launch of new models with advanced features.

The increase in total revenue has been offset by an increase in total operating expense of 13%, excluding exchange rate movements, mainly due to higher handset costs, including subsidies and commissions, as well as disbursement charges. The EBITDA margin has reduced by 3.4 percentage points to 28.7%.

Over the past 6 months, in addition to launching its Integrated 3G network, CSL has had a number of Asian and World first launches, including first Chinese language support for Blackberry. On mobile entertainment services and content, CSL launched Hong Kong’s first Full Song Download over 3G, MP3 Ringtone, Interactive Online Game and Mobile Drama.



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TelstraClear financial summary


TelstraClear Financial Summary
	Year Ended 30 June 2005
	2005			2004			2005			2004
	(in A$ millions)						(in NZ$ millions)

Total revenue		625			574			676			652
Total operating expense		512			469			554			533
EBITDA		113			105			122			119
EBIT		(35	)		(33	)		(36	)		(33	)
CAPEX		115			94			125			106

EBITDA margin		18.1	%		18.3	%		18.0	%		18.3	%

Amounts presented in NZ$ have been prepared in accordance with AGAAP.

Amounts presented in A$ represent amounts included in Telstra’s consolidated result.

Total revenue growth of 3.7% or NZ$24 million was achieved. On a stand-alone basis, including intercompany revenue, TelstraClear revenue increased by 3.5%. Revenue growth was achieved from continued strong retail revenue growth, particularly in the consumer and small-medium enterprise sector. Included in this was the acquisition of Sytec in November 2004, which added NZ$11 million in revenue. This was partially offset by a decrease in wholesale revenue due to rate reductions in the wholesale market.

Total operating expense has increased by 3.9% or NZ$21 million. The acquisition of Sytec contributed NZ$10 million in expense, with additional staff numbers increasing labour expense.

In Australian dollars, revenue increased by 8.9% to $625 million, which included the positive impact of a more favourable exchange rate.



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Net borrowing costs


Net borrowing costs
	Year Ended 30 June 2005
	2005			2004			Change			Change
	(in $ millions)									%

Gross borrowing costs — Reported		929			841			88			10.5
less capitalised interest		(90	)		(74	)		(16	)		21.6

Borrowing costs — Reported		839			767			72			9.4
Interest received/receivable		103			55			48			87.3

Net borrowing costs — Reported		736			712			24			3.4


less adjustment		5			0			5			N/M

Net borrowing costs — Underlying		731			712			19			2.7

The increase in reported gross borrowing costs of 11% was attributable to higher average borrowings following the share buy back, investment acquisitions and the increased levels of capital expenditure. There was a benefit from the impact of lower interest rates on the new and refinanced long-term debt.

The growth in borrowing costs was partially offset by an increase in capitalised interest of $16 million, attributable to higher work in progress associated with higher capital expenditure. In addition, the 87% increase in interest receivable was due to the increased holdings of short term liquid assets and recognition of interest earned on the Reach capacity prepayment and loan following the change in Reach’s operating model.

Net borrowing costs, excluding Kaz Group and PSINet Group, increased by 2.7% from $712 million to $731 million.

Income tax expense


Income Tax Expense
	Year Ended 30 June 2005
	2005		2004			Change			Change
	(in $ millions)								%

Income Tax Expense — Reported		1,822		1,731			91			5.3
Less adjustments		14		(92	)		106			(115.2	)

Income Tax Expense — Underlying		1,808		1,823			(15	)		(0.8	)

Reported income tax expense increased by 5.3% or $91 million attributable to increased reported profits, the impact in the prior year of a $58 million benefit arising from the adoption of the tax consolidation legislation and the tax effect for lower
non-assessable profits on sale of investments of $37 million. These increases are partially offset by reductions due to the tax effect on the non-deductible provision for the Reach loan in the prior year of $65 million, increased deductions for the partnership losses of $39 million and lower under provision adjustments of $22 million.

Excluding the income tax expense of acquisitions, the prior year tax consolidation benefit and tax effect on IBMGSA contract exit costs, underlying income tax expense decreased by 0.8% or $15 million.



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Telstra Corporation Limited and controlled entities

Cash flow


Cash flow data
	Year Ended 30 June 2005
	2005			2004			Change			Change
	(in $ millions)									%

Net cash provided by operating activities		8,163			7,433			730			9.8
Net cash used in investing activities		(3,809	)		(3,270	)		(539	)		16.5

Operating Cash Flow less Cash Flow used in Investing Activities		4,354			4,163			191			4.6
Net cash used in financing activities		(3,512	)		(4,776	)		1,264			(26.5	)

Net increase/(decrease) in cash		842			(613	)		1,455			237.4

Operating cash flow less cash flow used in investing activities (free cash flow) increased by 4.6% for the year ended 30 June 2005.

Net cash provided by operating activities of $8.2 billion increased by 9.8% due to higher cash profits, timing of payments to creditors resulting in higher creditor balances at 30 June 2005 and reductions in the amount of tax paid resulting from a significantly lower final payment for the 2003/2004 financial year.

Net cash used in investing activities of $3.8 billion increased by 17% or $539 million due to the growth in the operating capital program of 17%, attributable to increased spending to support growth in broadband ADSL services, 3G programs of work, Hong Kong CSL 3G programs and the purchase of international cable capacity. Cash proceeds from the sale of investments of $320 million was $93 million lower than the prior year. Acquisitions of $590 million was $78 million lower than the prior year.

Net cash used in financing activities of $3.5 billion decreased by $1.3 billion or 27% with $1.8 billion attributable to the refinancing of borrowings which matured during the year, including the EUR1.5 billion borrowing of $2.4 billion. The share buy back of $756 million was $253 million lower than the prior year with loans to associated entities $189m lower attributable to the Reach loan in the prior year. Dividend payments increased $945 million due to the special dividend and higher ordinary dividends.



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Net cash used in investing activities
	Year Ended 30 June 2005
	2005			2004			Change			Change
	(in $ millions)									%

Switching		344			298			46			15.4
Transmission		367			378			(11	)		(2.9	)
Customer access⁽ⁱ⁾		887			794			93			11.7
Mobile telecommunications networks		511			416			95			22.8
International assets		279			192			87			45.3
Capitalised software		543			452			91			20.1
Specialised Network Functions⁽ⁱⁱ⁾		307			221			86			38.9
Other ^{(i) (ii)}		385			336			49			14.6

Operating capital expenditure		3,623			3,087			536			17.4
Capitalised interest included in above		(90	)		(74	)		(16	)		(21.6	)

Capital expenditure excluding capitalised interest		3,533			3,013			520			17.3
Add: patents, trademarks and licences (including 3G spectrum)		6			2			4			200.0
Add: investments		590			668			(78	)		(11.7	)

Capitalised expenditure (excl. int.) and investments		4,129			3,683			446			12.1
Sale of capital equipment, investments and other		(320	)		(413	)		93			22.5

Net cash used in investing activities		3,809			3,270			539			16.5


Operating Capital expenditures		3,623			3,087			536			17.4
Less: offshore operating capital expenditure		237			192			45			23.4
Less: International Cable Capacity		42			0			42			0.0

Domestic core operating capital expenditure⁽ⁱⁱⁱ⁾		3,344			2,895			449			15.5


(i)		Correction of expenditure classification between customer access to other of $50m for 2004

(ii)		Specialised Network Functions — refers to specialised (ADP type) hardware and software dedicated to the telecommunications network that performs a network function associated with the provision of products, services or functionality. This expenditure was previously classified in “Other”.

(iii)		Domestic core operating capital expenditure is operating capital expenditure excluding HKCSL & TelstraClear operating capital expenditure and international cable capacity expenditure

Operating capital expenditure for the year ended 30 June 2005 increased by 17% or $536 million to $3.6 billion. Domestic core operating expenditure of $3.3 billion, increased by 16% or $449 million. The key areas of movement on capital expenditure for the period included:

Higher domestic switching expenditure of $46 million due to the impact of increased demand for broadband ADSL and specialised wideband service driven by new government and large corporate customer contracts.

Increased expenditure on the customer access network of $93 million was largely due to the significant increase in broadband ADSL demand.

Increased expenditure in the mobiles capital expenditure of $95 million was driven by 3G programs of work and improvements in depth of coverage in the GSM and CDMA mobile networks. The 3G program includes the $22 million cash payment associated with the asset sharing agreement with Hutchinson 3G Australia Pty Ltd, where Telstra acquired a 50% interest in the 3G assets for $450 million, payable over 2 calendar years. In addition $26 million of transaction costs have been paid in relation to the 3G asset purchase. Offsetting higher expenditure was a reduction in spending on the traditional 2G program along with 1XRTT and untimed local calls extended zone project.

Growth in international assets of $87 million was due to the purchase of international transmission capacity to satisfy additional demand following the change to the operating model for Reach and increased expenditure by Hong Kong CSL of $34 million, for developing its 3G infrastructure.

Increases in the software development program of $91 million due to the purchase of the long term Microsoft desktop and SAP licenses, 3G software development and other specialised IT programs such as billing rationalisation, privacy compliance and next generation cost reduction programs.

Increased capital expenditure of specialised network functions of $86 million for the provision of 3G mobile data solutions for
i-mode content and development of a new Bigpond infranet for management and product billing as well as increased broadband content development; and



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Increases in other of $49 million included higher expenditure on internet data centres to accommodate commercial hosting products, systems and platforms as well as growth in telepower programs due to increased ADSL broadband demand. Offsetting the increase in this category was a reduction in capital expenditure on land and buildings following the completed rollout of associated programs.

Partially offset by:

Reduction in expenditure on transmission assets of $11 million due to the prior year acquisition of the IP1 transmission system of $44 million offset by increases in broadband and programs supporting specialised wideband services following the winning of new government and large corporate customer contracts.

Investment capital expenditure for the year ended 30 June 2005 of $590 million due to:

The acquisitions of controlled entities of $574 million for Kaz Group $340 million, PSINet Group $112 million, Telstra Business Systems (formally Damovo) $65 million, Universal Publishers $46 million, Sytec $11 million and 1300 Australia $4 million and payments of $8 million related to acquisitions made in the prior year offset by cash balances acquired of $13 million; and

Acquisitions of shares in joint ventures and partnerships, associates and listed entities of $16 million for Foxtel equity injection $5 million, Linkme $4 million, Adstream $3 million and other acquisitions of $4 million.

Contributing to the increase in cash used in investing activities was the receipt of lower cash proceeds in the current year of $320 million compared with $413 million in the prior year. Cash receipts from asset and investment sales include proceeds from the sale of investments in the current year of $252 million and land and buildings of $55 million, which includes the cash settlement from the prior year sale of the North Sydney exchange.



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited and controlled entities

Statement of Financial Position — detail


Statement of Financial Position — detail
	As at 30 June 2005
	2005			2004			Change			Change
	(in $ millions)									%

Current Assets
Cash Assets		1,540			687			853			124.2
Receivables		3,609			3,608			1			0.0
Inventories		232			229			3			1.3
Other Assets		796			803			(7	)		(0.9	)

Total Current Assets		6,177			5,327			850			16.0

Non-Current Assets
Receivables		240			740			(500	)		(67.6	)
Inventories		15			10			5			50.0
Investments — accounted for using the equity method		49			40			9			22.5
Investments — other		0			80			(80	)		(100.0	)
Property, Plant and Equipment		23,351			22,863			488			2.1
Intangibles — goodwill		2,287			2,104			183			8.7
Intangibles — other		1,581			1,501			80			5.3
Other Assets		2,610			2,328			282			12.1

Total Non-Current Assets		30,133			29,666			467			1.6


Total Assets		36,310			34,993			1,317			3.8


Current Liabilities
Payables		2,809			2,338			471			20.1
Interest-bearing liabilities (borrowings)		1,518			3,246			(1,728	)		(53.2	)
Income Tax Payable		534			539			(5	)		(0.9	)
Provisions		389			358			31			8.7
Revenue Received in Advance		1,132			1,095			37			3.4

Total Current Liabilities		6,382			7,576			(1,194	)		(15.8	)

Non-Current Liabilities
Payables		122			49			73			149.0
Interest-bearing liabilities (borrowings)		11,816			9,014			2,802			31.1
Provisions		836			778			58			7.5
Provision for Deferred Tax		1,885			1,807			78			4.3
Revenue Received in Advance		388			408			(20	)		(4.9	)

Total Non-Current Liabilities		15,047			12,056			2,991			24.8


Total Liabilities		21,429			19,632			1,797			9.2



Net Assets		14,881			15,361			(480	)		(3.1	)


Shareholders Equity
Contributed Equity		5,793			6,073			(280	)		(4.6	)
Reserves		(157	)		(105	)		(52	)		49.5
Retained Profits		9,243			9,391			(148	)		(1.6	)

Shareholders’ equity available to Telstra Entity Shareholders		14,879			15,359			(480	)		(3.1	)

Outside Equity Interest
Contributed Equity		2			2			—			0.0
Retained Profits		(0	)		0			—			N/M

Total Outside Equity Interest		2			2			—			0.0


Total Shareholders’ Equity		14,881			15,361			(480	)		(3.1	)



2004/05 Financial Highlights 11 August 2005

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Telstra Corporation Limited (ABN 033 051 775 556)

Normalisation
Schedule Year
Ended 30 June 2005

This schedule details the adjustments made to the reported results for the years ended 30 June 2005 and 2004 to arrive at the underlying business performance


																			Telstra
																			Business
				Asset /															Systems														Tax	Asset /														Reported			Underlying
	June 04/05			Investment							Trading								(formerly			Universal				Total		June 04/05			June 03/04		consolidation	Investment							Trading			Total		June 03/04		Growth			Growth			Underlying
$m	Reported (i)			Sales			Diminution			Post			KAZ			PSINet			Damovo)			Publishers			Adjust.			Underlying			Reported		benefit	Sales			Diminution			Post			Adjust.			Underlying		%			%			M/ment

Mobiles
Mobile services		3,760																											3,760			3,470															3,470		8.4	%		8.4	%		290
Mobile handsets		381																											381			352															352		8.2	%		8.2	%		29

Total Mobiles		4,141																											4,141			3,822															3,822		8.3	%		8.3	%		319
Internet and IP solutions		1,377																											1,377			1,013															1,013		35.9	%		35.9	%		364
PSTN Products
Basic access		3,362																											3,362			3,237															3,237		3.9	%		3.9	%		125
Local calls		1,284																											1,284			1,504															1,504		(14.6	%)		(14.6	%)		(220	)
PSTN value added services		250																											250			259															259		(3.5	%)		(3.5	%)		(9	)
National long distance calls		1,013																											1,013			1,121															1,121		(9.6	%)		(9.6	%)		(108	)
Fixed to mobile		1,566																											1,566			1,597															1,597		(1.9	%)		(1.9	%)		(31	)
International direct		234																											234			266															266		(12.0	%)		(12.0	%)		(32	)

Total PSTN		7,709																											7,709			7,984															7,984		(3.4	%)		(3.4	%)		(275	)
Specialised Data		966																											966			1,035															1,035		(6.7	%)		(6.7	%)		(69	)
ISDN (Access and calls)		890																											890			927															927		(4.0	%)		(4.0	%)		(37	)
Advertising and Directories		1,585									(152	)											(14	)		(166	)		1,419			1,341									(44	)		(44	)		1,297		18.2	%		9.4	%		122
Intercarrier services		1,146																											1,146			1,103															1,103		3.9	%		3.9	%		43
Solutions management		931												(380	)					(14	)					(394	)		537			508															508		83.3	%		5.7	%		29
HK CSL		734																											734			726															726		1.1	%		1.1	%		8
Telstra Clear		625																											625			574															574		8.9	%		8.9	%		51
Offshore Revenue		252															(71	)								(71	)		181			131															131		92.4	%		38.2	%		50
Inbound calling products		449																											449			476															476		(5.7	%)		(5.7	%)		(27	)
PayTV		263																											263			154															154		70.8	%		70.8	%		109
Customer premises equipment		229																		(57	)					(57	)		172			184															184		24.5	%		(6.5	%)		(12	)
Payphones		121																											121			141															141		(14.2	%)		(14.2	%)		(20	)
Other sales & service		743												(10	)											(10	)		733			618															618		20.2	%		18.6	%		115

Sales revenue		22,161									(152	)		(390	)		(71	)		(71	)		(14	)		(698	)		21,463			20,737									(44	)		(44	)		20,693		6.9	%		3.7	%		770

Other revenue		496			(287	)								(2	)											(289	)		207			543			(289	)								(289	)		254		(8.7	%)		(18.5	%)		(47	)

Total revenue		22,657			(287	)					(152	)		(392	)		(71	)		(71	)		(14	)		(987	)		21,670			21,280			(289	)					(44	)		(333	)		20,947		6.5	%		3.5	%		723

Expenses
Labour		3,693									(45	)		(229	)		(13	)		(38	)		(5	)		(330	)		3,363			3,218									(14	)		(14	)		3,204		14.8	%		5.0	%		159
Goods and services purchased (ii)		4,147									(29	)		(112	)		(34	)		(26	)		(5	)		(206	)		3,941			3,554									(11	)		(11	)		3,543		16.7	%		11.2	%		398
Other expenses (iii)		4,055			(198	)		(6	)		(14	)		(37	)		(8	)		(10	)		(3	)		(276	)		3,779			4,255			(201	)		(227	)		(6	)		(434	)		3,821		(4.7	%)		(1.1	%)		(42	)

Expenses before equity acc/depn/amort/interest		11,895			(198	)		(6	)		(88	)		(378	)		(55	)		(74	)		(13	)		(812	)		11,083			11,027			(201	)		(227	)		(31	)		(459	)		10,568		7.9	%		4.9	%		515

Share of net profit from associates and joint venture entities		(9	)																										(9	)		78															78		(111.5	%)		(111.5	%)		(87	)


Total operating expenses before depn/amort/interest		11,886			(198	)		(6	)		(88	)		(378	)		(55	)		(74	)		(13	)		(812	)		11,074			11,105			(201	)		(227	)		(31	)		(459	)		10,646		7.0	%		4.0	%		428

EBITDA		10,771			(89	)		6			(64	)		(14	)		(16	)		3			(1	)		(175	)		10,596			10,175			(88	)		227			(13	)		126			10,301		5.9	%		2.9	%		295

EBITDA excl share of net loss from associates & joint ventures entities		10,762			(89	)		6			(64	)		(14	)		(16	)		3			(1	)		(175	)		10587			10,253			(88	)		227			(13	)		126			10,379		5.0	%		2.0	%		208

Depreciation		2,946									(3	)		(7	)		(3	)		(2	)					(15	)		2,931			2,873									(1	)		(1	)		2,872		2.5	%		2.1	%		59
Amortisation (excl goodwill)		675												(10	)		(4	)		(5	)		(1	)		(20	)		655			619															619		9.0	%		5.8	%		36
Goodwill amortisation		145									(9	)		(10	)		(3	)		(1	)					(23	)		122			123									(3	)		(3	)		120		17.9	%		1.7	%		2

Total depreciation/amortisation		3,766									(12	)		(27	)		(10	)		(8	)		(1	)		(58	)		3,708			3,615									(4	)		(4	)		3,611		4.2	%		2.7	%		97

TELSTRA CORP LTD 6-K